Wednesday, April 24, 2013

Rogaine and Braveheart on Austerity

More on the Reinhart and Rogoff debacle. It says a lot about the state of mainstream economics.


  1. Also check the interview to the hero.

  2. what does an excel mistake say about the state of macroeconomics?

    1. seriously dude?! did you watch the video. not just a mistake, but one that was used to justify austerity around the world. at best it says that lack of peer review and slopy standards are the norm at harvard, supposedly a serious place. but if you look deeper it says considerably more. lack of understanding of causality issues, serious lack of understanding of basic things that even neoclassical economists like Domar understood better about debt dynamics (read his 1944 paper). at worst it shows a certain disingenous behavior by mainstream academic economists. shameful. that's why rogaine and braveheart are the but of every joke, including colbert's.

    2. Hey, in one post Domar's a Keynesian, but here he's neoclassical. Did he have an evil twin? :-)

    3. Hi Calgacus. There is no contradiction. Yes Domar was both Keynesian and neoclassical. It was called neoclassical synthesis. Like modern New Keynesians, which are also neoclassical, the Keynesian features result from short run rigidities and imperfections. And neoclassical authors are not necessarily evil (some might be), what they are incoherent and at odds with the best evidence.

  3. Australia is in the midst of an extended election campaign. The report linked to below was released last Tuesday by the Grattan Institute (an Australian "non-partisan" think-tank).

    Quotes from the Grattan report:
    "Some argue that high debt reduces economic growth... Their successors and financial institutions can then find it difficult to borrow at reasonable costs, and economic growth is often slow for a long time". (page 8)

    I won't go into the detail of the recommendations: check by yourselves.

    Also, check References and footnotes in that page. Herndon et al, by the way, are actually mentioned... in the footnote.

    Wednesday morning, by sheer coincidence, S&P announced its concern about Australia's fiscal position: a downgrade from the triple A rating is mentioned.

    That Wednesday evening, again by sheer coincidence, opposition leader Tony Abbott, after months avoiding TV interviews (rumour has it he suffers from the foot-in-mouth disease) was on TV: in 13 minutes he mentioned "surplus" eight times. You know, because the ratings, this; competitiveness, that.

    I guess Jeff Cox (senior writer, CNBC Net, April 17) was right: is not that Reinhart and Rogoff are influential (??!!), it's that their "research" has been "hijacked" by politicians (??!!)

    Grattan Institute report

    Conclude from this what you must.


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