Reinhart and Rogoff played both sides of the debate

6/21/2013 08:56:00 AM
Paul Krugman has a column discussing Reinhart and Rogoff. Not just their infamous death-by-excel paper, but also their less famous book, This Time is Different. Now, Krugman has consistently said from the start that he thought Reinhart and Rogoff were smart economists who did good work in This Time is Different, even though their work in that infamous debt paper was unbelievably shoddy. I think that perhaps Krugman is giving them too much credit for This Time is Different, about which I'm less enthusiastic. See, Krugman is something of a history buff, and so I think he's naturally sympathetic to any economics that involves history. From his blog post about the column:
"I start by emphasizing the uses of history in the current crisis, and you can’t do that without giving credit to R&R for This Time Is Different."
Now Krugman has marshaled history--the great depression and Japan's "lost decade" in particular--to devastating effect, outperforming nearly all the other prognosticators and commentators in predicting the seriousness of this recession and the effects of various policies in response to it. But, we must keep in mind that Krugman (unlike myself...ahem) has no formal degree in History, and I think he sees too much in This Time is Different. I tend to share some of Noah Smith's suspicions about the thesis. What you need to know is that This Time is Different is not a scientific or statistical work. It did not uncover underlying structures of the universe, but rather simply listed qualitative, superficial similarities between a small number of historical events. This kind of "history" has a lot of appeal outside of academic history departments, but not so much appeal to historians themselves, and for good reason: you simply can't deny that, despite the supposed similarities, each time was different, perhaps in very important ways.

But the real thing I wanted to mention is something that hasn't really been said: Reinhart and Rogoff played both sides of the political debate. On the one hand, their "death-by-excel" paper (Actually titled "Growth in a time of debt," the paper floundered from the beginning but finally sank when Herndon et al discovered the result was largely caused by an excel error) was largely responsible for the "consensus view" among the right-wing that held that a gross debt-to-GDP ratio of 90% was a threshold above which growth would be irreparably harmed. And Reinhart and Rogoff did not restrain themselves from basking in their right-wing glories. But on the otherhand, their book This Time is Different and other works were largely responsible for spreading the conventional wisdom on the left--oft repeated by Krugman himself--that recoveries from "financial crises" tend to be excruciatingly slow and painful. Here's Krugman in his own words:
"The most famous study is by Harvard’s Carmen Reinhart and Kenneth Rogoff, who looked at past financial crises and found that such crises are typically followed by years of high unemployment and weak growth."
and here's Reinhart and Rogoff themselves, after Herndon et al. call them out for their death-by-excel paper:
"By the way, we are very careful in all our papers to speak of "association" and not "causality" since of course our 2009 book THIS TIME IS DIFFERENT showed that debt explodes in the immediate aftermath of financial crises."
So what actually happened was that Reinhart and Rogoff wanted to have it both ways. They wanted to be the heroes of the left and Obama-apologists by claiming Obama's not to blame, both the debt and slow growth are normal, unavoidable consequences of the financial crisis for which Obama was not responsible. Except that they also wanted to be heroes of the right by claiming that Obama, by increasing the debt above the 90% threshold, is personally responsible for all our current economic woes. 

So, shame on you Reinhart and Rogoff. This is deeply unethical. And shame on you, Paul Krugman, for partially falling for it.