CT Blue

My most humble apologies if I have used this title for a post in the past. But eternal verities tend to get repeated.

The New York Times reports this morning that some people are claiming that a little more inflation would be a good thing for the economy. I'm on the side of “some people” in this particular debate, this position being long advocated by the various blogging economists I read, including Dean Baker and Paul Krugman, who are nearly always right and are therefore universally ignored. I'm not arguing from authority here; to the best of my understanding the people I read make sense and their analysis and predictions are usually borne out by results in the real world.

Now in this particular article the Times consults with two “experts”, one on each side. So, of course, both can't be right. But what I found truly stunning was the choice of “experts” for each side.

On the pro-inflation side we have Kenneth Rogoff. For what, you should ask (in order to co-operate with the thrust of this piece) is Kenneth Rogoff best known? This:

In 2010, economists Carmen Reinhart and Kenneth Rogoff released a paper, “Growth in a Time of Debt." Their "main result is that…median growth rates for countries with public debt over 90 percent of GDP are roughly one percent lower than otherwise; average (mean) growth rates are several percent lower.” Countries with debt-to-GDP ratios above 90 percent have a slightly negative average growth rate, in fact.

This has been one of the most cited stats in the public debate during the Great Recession. Paul Ryan's Path to Prosperity budget states their study “found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth.” The Washington Post editorial board takes it as an economic consensus view, stating that “debt-to-GDP could keep rising — and stick dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth." 

via Next New Deal

Yes, Professor Rogoff is the guy who gave intellectual respectability to the austerians who have tanked the economies of almost every Western nation. Did I forget to say that it turns out that the work of Harvard Professor Rogoff and his sidekick has been demonstrated, by a UMass graduate student, to be, to put it mildly, total bullshit, and in part based on an error in the Excel spreadsheet they used:

In a new paper, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst successfully replicate the results. After trying to replicate the Reinhart-Rogoff results and failing, they reached out to Reinhart and Rogoff and they were willing to share their data spreadhseet. This allowed Herndon et al. to see how how Reinhart and Rogoff's data was constructed.

They find that three main issues stand out. First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don't get their controversial result.

So that's the guy that the Times chose as spokesman for what is probably the correct position. As to the spokesfailure for the anti-inflationistas: who else but Alan Greenspan, whose wrong calls are legend, and need not even be demonstrated here.

As I said, this time around one of these guys has to be right, and, based on what I've read, it's probably Rogoff. The mystery is why the Times goes to one guy whose most widely cited work was plagued by error, which he refuses to acknowledge, and who justified policies that caused and are causing untold suffering for millions of people, and to another guy, all of whose work was plagued by error, which he refuses to acknowledge, and who justified policies that caused and are causing untold suffering for millions of people. Is there no failure big enough to disqualify these people as sources of wisdom? And why are the guys like Baker and Krugman almost universally ignored? Krugman writes for the Times, yet I can't recall a single instance when he's been cited in one of its articles. Mind boggling.