Krugman, Rogoff-Reinhart and the Civility Trap

     Krugman did a good job on Fareed Zakaria about the whining from R-R about Krugman's 'remarkable incivility.'
   
     "Let me say it, by the way – who cares, right? I mean who cares about my feelings or Carmen Reinhart’s feelings or Ken Rogoff’s feelings? We’re having a global economic crisis which is not over, which we have handled abysmally. We have massive long-term unemployment in the United States. We have massive youth unemployment in Southern Europe."

     "I don’t think the question of how civil a bunch of comfortable academic economists who went to MIT in the mid-1970s…I don’t think that matters at all compared to the question of the substantive issues and are we doing this wrong, which I think we are."

    http://globalpublicsquare.blogs.cnn.com/2013/06/01/krugman-on-the-rogoff-reinhart-spat/?iref=allsearch

      If anything, I think Krugman lets them off the hook a little:    

     "It’s very unpleasant, because Ken is a magnificent economist.  He’s done fabulous work over the years. And then this one paper, which was thrown out hastily, unfortunately, is the one that has had the greatest impact on policy debate…The fact of the matter is this one result – claimed result – which is that growth falls off a cliff when debt exceeds 90 percent of GDP, that’s what the world picked up. And that result is false. That result is clearly not true. There is a mild negative correlation between debt and growth, but that cliff doesn't exist. It never existed in the data. It certainly isn’t anything anyone should believe now."

     "That paper of theirs did a lot of damage by giving people who didn't want stimulus, who didn't want any kind of expansionary policy, a way to scare their opponents, to say if we don't do it my way, we'll go over the 90 percent line and terrible things will happen."

     "And my problem now with Carmen and Ken is that while they’ve said a lot of things that indicate more flexibility, they have never, to my knowledge, said clearly, OK, there is no cliff at 90 percent. And we really need that from them. For them to say, look, you know, we think debt is dangerous, we think it’s a problem. But 90 percent, that was an artifact of some things in our original calculation that don’t appear in subsequent work."

     I think its worse than this even. It wasn't just that they failed to be clear enugh in arguing for "flexibility." Here's more from R-R

     "You particularly take aim at our 2010 paper on the long-term secular association between high debt and slow growth. That you disagree with our interpretation of the results is your prerogative.  Your thoroughly ignoring the subsequent literature, however, including the International Monetary Fund's work as well as our own deeper and more complete 2012 paper with Vincent Reinhart, is troubling.   Perhaps, acknowledging the updated literature-not to mention decades of theoretical, empirical, and historical contributions on drawbacks to high debt-would inconveniently undermine your attempt to make us a scapegoat for austerity.  You write "Indeed, Reinhart-Rogoff may have had more immediate influence on public debate than any previous paper in the history of economics."

     "Setting aside this wild hyperbole, you never seem to mention our other line of work that has surely been far more influential when it comes to responding to the financial crisis.  Specifically, our 2009 book (released before our growth and debt work) showed that recoveries from deep systemic financial crises are long, slow and painful.  This was not the common wisdom at all before us, as you yourself have acknowledged  on more than one occasion.  Over the course of the crisis, and certainly by 2010, policymakers around the world were using our research, alongside their assessments, to help justify sustained macroeconomic easing of both monetary and fiscal policy fronts. 

     It's not wild hyperbole. Krugman himself could make an even stronger case that they did more than simply not correct Republicans and austerity loving Eurocrats misusing their work. 

     Johnny Isakson, a Republican from Georgia and always a gentleman, stood up to ask his question: “Do we need to act this year? Is it better to act quickly?”

   “Absolutely,” Rogoff said. “Not acting moves the risk closer,” he explained, because every year of not acting adds another year of debt accumulation. “You have very few levers at this point,” he warned us.

   "Senator Kent Conrad, the chairman of the Senate Budget Comittee, said our current deficits were severe because we had very low revenues due to a slow economy combined with very high spending. He then  offered his own stern warning to the assembled senators. Turning around in his chair in the middle of the room, he explained to his colleagues that when our high debt burden causes our economy to slow by 1 point of GDP, as Reinhart and Rogoff estimate, that doesn’t slow our economy by 1 percent by 25 to 33 percentwhen we are growing at only 3 to 4 GDP points a year."

   "Reinhart echoed Conrad’s point and explained that countries rarely pass the 90 percent debt-to-GDP tipping point precisely because it is dangerous to let that much debt accumulate. She said, “If it is not risky to hit the 90 percent threshold, we would expect a higher incidence.”

     http://diaryofarepublicanhater.blogspot.com/2013/05/r-r-vs-r-r-on-austerity.html

     I guess the glass half full is that the climate has changed on austerity now-in 2011 all the cool kids were into austerity. Now if you say someone favors austerity they claim your distorting their position.