Project Lever

Blog Posts Hits: 4274

Thomas Herndon is a graduate student at the University of Massachusetts Amherst working on a simple homework assignment - pick an economics paper and see if you can replicate the results. Thomas tried Growth in a Time of Debt, a famous manuscript of two Harvard Professors, and a paper that argues that economic growth slows dramatically when the size of a country's debt rises above 90% of Gross Domestic Product, the overall size of the economy.

No matter how hard Herndon was trying, he could not replicate the results. "My heart sank," he says. "I thought I had likely made a gross error. Because I'm a student the odds were I'd made the mistake, not the well-known Harvard professors."

He kept trying. "We had this puzzle that we were unable to replicate the results that Reinhart-Rogoff published," Prof Ash, says. "And that really got under our skin. That was really a mystery for us."

So Ash and his colleague Prof Robert Pollin encouraged Herndon to continue the project and to write to the Harvard professors. After some correspondence, Reinhart and Rogoff provided Thomas with the actual working spreadsheet they'd used to obtain their results.

"Everyone says seeing is believing, but I almost didn't believe my eyes," he says.

But no, he was correct - he'd spotted a basic error in the spreadsheet. The Harvard professors had accidentally only included 15 of the 20 countries under analysis in their key calculation (of average GDP growth in countries with high public debt).

Australia, Austria, Belgium, Canada and Denmark were missing.

Oops.

All these results were published by Thomas Herndon and his professors on 15 April, as a draft working paper. They find that high levels of debt are still correlated with lower growth - but the most spectacular results from the Reinhart and Rogoff paper disappear. High debt is correlated with somewhat lower growth, but the relationship is much gentler and there are lots of exceptions to the rule.

Reinhart and Rogoff weren't available to be interviewed, but they did provide the BBC with a statement.

In it, they said: "We are grateful to Herndon et al. for the careful attention to our original Growth in a Time of Debt AER paper and for pointing out an important correction to Figure 2 of that paper. It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful. We will redouble our efforts to avoid such errors in the future. We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work."

Read BBC News story about it here: http://www.bbc.co.uk/news/magazine-22223190 and say congratulations to Thomas Herndon, who is making a big difference with his research!

• < Prev
• Next >