As Miles Kimball describes it, there is nothing more that scholars fear than a negative Rorty moment:
"Ken Rogoff is an economist who has always been kind to me, and for whom I have deep respect. And I have no animus toward Carmen Reinhart. Nevertheless, I hope there has been a nightmarish quality to the last few days of what Quartz writer Matt Phillips called a “bone-crunching social media pile-on that Harvard economists Ken Rogoff and Carmen Reinhart received in recent days after some other researchers questioned their influential findings that high government debt is a drag on economic growth.” I say this because I know from my own experience as a researcher how powerfully the hint of such an embarrassment motivates economists and other researchers to sweat the details to get things right. Some errors will always slip through the cracks, but a researcher ought to live in mortal fear of a contretemps like that Reinhart and Rogoff have found themselves in this week."
http://qz.com/76447/an-economists-mea-culpa-i-relied-on-rogoff-and-reinhart/
He uses the word "researchers" rather than "scholars" but this has been my sense since I became interested in economics as a layperson over the last few years: economists fear nothing more than the disrespect of other economists: that is to say they fear nothing more than the what Rorty called the disapproval of one's peer group.
R&R have been battered all over the place; Bob Murphy was sniffing about how many posts Krugman has written about the R-R implosion.
http://consultingbyrpm.com/blog/2013/04/no-pandering-from-krugman.html
Let me give you a hint what Bob's short post amounts to. He quotes Krugman saying that R-R gave into the temptation of pandering but that he avoids doing this. Murphy then provides three quotes where allegedly Krugman did pander. I find these fairly weak.
==> November 2012: “The truth is that the modern GOP is deeply anti-intellectual, and has as its fundamental goal not just a rollback of the welfare state but a rollback of the Enlightenment.”
"This is where so many smart people I know end up. You have to use mainstream models -- you can't move the profession or help shape policy (or get a good job) otherwise. But on many questions, using those models means, at best, contorting your argument into a forced and unnatural framework, with arbitrary-seeming assumptions doing a lot of the work; at worst it means wading head-deep into an intellectual swamp. So you do some mix of what my friend suggests here: find a version of the modern framework that is loose enough to cram your ideas into without too much buckling; or give up on telling a coherent story about the world and become a pure empiricist. (Or give up on economics.) But either way, your insights about the world have to come from somewhere else. And that's the problem, because insight isn't cheap. The line I hear so often -- let's master mainstream methods so we can better promote our ideas -- assumes you've already got all your ideas, so the only work left is publicity."
"Ken Rogoff is an economist who has always been kind to me, and for whom I have deep respect. And I have no animus toward Carmen Reinhart. Nevertheless, I hope there has been a nightmarish quality to the last few days of what Quartz writer Matt Phillips called a “bone-crunching social media pile-on that Harvard economists Ken Rogoff and Carmen Reinhart received in recent days after some other researchers questioned their influential findings that high government debt is a drag on economic growth.” I say this because I know from my own experience as a researcher how powerfully the hint of such an embarrassment motivates economists and other researchers to sweat the details to get things right. Some errors will always slip through the cracks, but a researcher ought to live in mortal fear of a contretemps like that Reinhart and Rogoff have found themselves in this week."
http://qz.com/76447/an-economists-mea-culpa-i-relied-on-rogoff-and-reinhart/
He uses the word "researchers" rather than "scholars" but this has been my sense since I became interested in economics as a layperson over the last few years: economists fear nothing more than the disrespect of other economists: that is to say they fear nothing more than the what Rorty called the disapproval of one's peer group.
R&R have been battered all over the place; Bob Murphy was sniffing about how many posts Krugman has written about the R-R implosion.
http://consultingbyrpm.com/blog/2013/04/no-pandering-from-krugman.html
Let me give you a hint what Bob's short post amounts to. He quotes Krugman saying that R-R gave into the temptation of pandering but that he avoids doing this. Murphy then provides three quotes where allegedly Krugman did pander. I find these fairly weak.
==> November 2012: “The truth is that the modern GOP is deeply anti-intellectual, and has as its fundamental goal not just a rollback of the welfare state but a rollback of the Enlightenment.”
==> May 2010: “A funny thing has been happening on Capitol Hill: lately, the Democrats have started exceeding expectations. Health reform, pronounced dead by all the usual suspects, happened (all hail Nancy Pelosi, arguably the greatest Speaker ever.)”
==> August 2009: “That said, Ben Bernanke’s performance over the past year deserves praise, and there’s nobody I’d rather have in his position. Congratulations, Ben.”
Get a life Bob. Sorry but if he's trying to be the world's pettiest economist he's well on his way. To be sure there's nothing surprising about Krugman knocking R-R-which is not to suggest Krugman isn't dead on in doing so.
While Murphy tries in the post-as he so often does-to make Krugman seem trifling and petty-it's he who is pettiest of them all.
Indeed, however, many posts Krugman has done about R-R, how many posts has Murphy-or for that matter, Stephen Williamson-done about Krugman? Who's petty and obsessive now?
In truth, Krugman's reason for "belaboring" R-R is not petty, or simply gloating. His real concern is Rortian: it's about the peer group that Krugman, R-R, Murphy, Kimball and Murphy himself are part of: economists and also impressionable policymakers who follow the lead of the econ guys.
Krugman knows that it's child's play to point out someone is dead wrong. For years he hammered the urban legend of the Serious Paul Ryan to no avail. However, over time the attacks had an effect. Then Ryan' had his gruesome RNC Convention performance where he took the Romneys contempt for "fact checkers" to new, unheard of heights. Finally the urban legend begun to unwind.
This is what Krugman is aiming at here. It's not just to point out that R-R did some sloppy work and were also dead wrong to boot. It's the hope that this will penetrate peer group of economists. The first few days, he was pessimistic that it would seriously damage R-R. However, he then became-very cautiously-optimistic:
"I’ve been cynical about the likelihood that the Reinhart-Rogoff fiasco would lead to any real change in policy, and I still have doubts. But reflecting on the debate so far, I’m wondering a bit if I have been too cynical — or at any rate, cynical in the wrong way. For my vague, unquantifiable sense is that the debacle is changing the conversation quite a lot, even among the guys in suits. And it was the coding error that did it."
"Now, the truth is that the coding error isn’t the biggest story; in terms of the economics, the real point is that R-R’s results were never at all robust, both because the apparent relationship between debt and growth is fairly weak and because the correlation clearly goes at least partly the other way. But economists have been making these points for years, to no avail. It took the shock of an outright, embarrassing error to shake the faith of the Very Serious People in a result they really wanted to believe."
"The point is that the next time Olli Rehn, or George Osborne, or Paul Ryan declares, sententiously, that we must have austerity because serious economists (i.e., not Krugman and friends) tell us that debt is a terrible thing, people in the audience will snicker — which they should have been doing all along, but now it has become socially acceptable."
"Will this translate into actual policy changes? Well, Keynes told us that ideas, not vested interests, are dangerous for good or evil; so maybe, just maybe, that coding error will turn out to have been a real force for good."
Still he remains a skeptic as a post yesterday shows:
"Henry Blodget says that the economic debate is over; the austerians have lost and whatshisname has won. And it’s definitely true that in sheer intellectual terms, this is looking like an epic rout. The main economic studies that supposedly justified the austerian position have imploded; inflation has stayed low; the bond vigilantes have failed to make an appearance; the actual economic effects of austerity have tracked almost exactly what Keynesians predicted."
"But will any of this make a difference? The story of the past three years, after all, is not that Alesina and Ardagna used a bad measure of fiscal policy, or that Reinhart and Rogoff mishandled their data. It is that important people’s will to believe trumped the already ample evidence that austerity would be a terrible mistake; A-A and R-R were just riders on the wave."
"The cynic in me therefore says that after a brief period of regrouping, the VSPs will be right back at it — they’ll find new studies to put on pedestals, new economists to tell them what they want to hear, and those who got it right will continue to be considered unsound and unserious."
"But maybe I’m wrong; maybe truth will prevail. Here’s hoping."
Again, we get the contrast: there's facts and then there's policy which is often won over by those without facts on their side, but the faith of the requisite peer groups.
In this sense, Miles' piece should be good news. After all, he's one who admits he was taken in by R-R and says very forthrightly that he has egg on his face too and deservedly so.
"Reinhart and Rogoff have not only caused embarrassment for themselves, but also for all those who have in any way relied on their results. Those who made their case by overinterpreting the particular results that have now been discredited should be the most embarrassed. Quartz’s Tim Fernholz gives a rundown of politicians and other policy makers who relied heavily on Reinhart and Rogoff’s results in “How influential was the Reinhart and Rogoff study warning that high debt kills growth?”
"But I, like many others, have relied on Reinhart and Rogoff’s results in smaller ways—and wish this embarrassment on myself as a warning for the future. No one is perfect, but it is important not to undercut the motivation to be careful by softening the penalty for error too much."
So far so great, right? However, Miles not only feels that these errors don't in anyway harm the argument that we should avoid fiscal stimulus as "debt hurts growth" but he wants to relitigate it here.
"I am lucky I can heal the damage; I have fully updated the argument I made based on Reinhart and Rogoff’s results in my column “What Paul Krugman got wrong about Italy’s economy” in a way that I think leaves the force of the overall argument in that column intact. Here in full, is the new passage, which also gives my view of the substantive issue that Reinhart and Rogoff have now occasioned so much confusion about:
And despite the recent revelation of errors in Carmen Reinhart and Ken Rogoff’s famous study of debt levels and economic growth, which I discuss here and which motivated the update you are reading (the original passage can be found here), there are reasons to think that high levels of debt are worth worrying about.First, for a country like Italy that does not have its own currency (since it shares the euro with many other countries), Paul Krugman’s own graph shows a correlation between national debt as a percentage of GDP and the interest rate that a country pays.Second, the paper by Thomas Herndon, Michael Ash and Robert Pollin that criticizes Reinhart and Rogoff finds that, on average, growth rates do decline with debt levels. Divide debt levels into medium high (60% to 90% of GDP), high (90% to 120% of GDP), and very high (above 120% of GDP). Then the growth rates are 3.2% with medium-high debt, 2.4% with high debt, and 1.4% with very high debt. (I got these numbers by combining the 4.2% growth rate for countries in the 0 to 30% debt-to-GDP ratio range from Table 3 with the estimates in Table 4 for how things are different at higher debt levels.) Moreover, contrary to the impression one would get from the column here, Herndon, Ash and Pollin’s Table 4 indicates that the differences between low levels of debt and high levels of debt are not just due to chance, though what Herndon, Ash and Pollin emphasize is that very low levels of debt, below 30% of GDP, have a strong association with higher growth rates. Overall, with the data we have, we don’t know what causes what, so there is no definitive answer to how much we should worry about debt, but ample reason not to treat debt as if it were a nothing.
"There is definitely a reasonable case to be made that if additional spending or tax cuts are the only way to stimulate the economy, then we should do it even at the cost of additional debt. But as I argue both in “What Paul Krugman got wrong about Italy’s economy” and in “Why austerity budgets won’t save your economy,” there are ways to stimulate the economy without adding to its debt burden, and stimulating the economy in a way that doesn’t add substantially to the national debt is better than stimulating the economy in a way that does."
So R-R's errors and lack of concern about them seems not to matter. Kimball feels that it doesn't effect the anti debt argument one iota. He also ignores the fact that correlation doesn't prove causation. The paper did not show that growth declines with debt. It showed that there is some correlation but in no way tries to show what causes what. Kimball's argument then amounts to: I should have been more circumspect about R-R but it doesn't matter as I'm still totally right. It seems to me that there's a need for much more rigorous analysis-figuring out which way causation runs first and foremost-to make the strong statements Miles makes that "debt hurts growth." So maybe Krugman was right to be so skeptical as Kimball is also trying to maintain the argument while disavowing R-R's errors.
It's also questionable why Kimball divides the above 90 debt level in half rather than pointing out that those above 90% debt level actually have 2.2% cumulative growth-not a big difference than the 60%-90% level.
P.S. The peer group of economists can be a force for good like in this case but they can also be a force for bad like when it leads people to ignore their own intellectual consciences rather than lost status in their social group.
This actually happens in economics every day according to J.W. Mason is many who now better put on the New Keynesian straitjacket.
"I had this conversation with a friend at a top department the other day:
what do you think? is this kind of critique valid/useful?
11:17 AM him: its totally true
11:18 AM and you wouldn't know what was getting baked into the cake unless you were trained in the literature
I only started understanding the New Keynsian models a little while ago
and just had the lazy "they are too complicated" criticism
11:19 AM now I understand that they are stupidly too complicated (as Noah's post points out)
11:20 AM me: so what is one supposed to do?
if this is the state of macro
him: i dunno. I think participating in this literature is a fucking horror show
me: but you don't like heterodox people either, so....?
11:21 AM him: maybe become a historian
or figure out some simple variant of the DSGEmodels that you can make your point and publish empirical stuff
"This is where so many smart people I know end up. You have to use mainstream models -- you can't move the profession or help shape policy (or get a good job) otherwise. But on many questions, using those models means, at best, contorting your argument into a forced and unnatural framework, with arbitrary-seeming assumptions doing a lot of the work; at worst it means wading head-deep into an intellectual swamp. So you do some mix of what my friend suggests here: find a version of the modern framework that is loose enough to cram your ideas into without too much buckling; or give up on telling a coherent story about the world and become a pure empiricist. (Or give up on economics.) But either way, your insights about the world have to come from somewhere else. And that's the problem, because insight isn't cheap. The line I hear so often -- let's master mainstream methods so we can better promote our ideas -- assumes you've already got all your ideas, so the only work left is publicity."
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