Nobel laureate Paul Krugman refused to back down in a dispute with Harvard University economists Carmen Reinhart and Kenneth Rogoff over a 2010 paper they wrote that’s been used to justify austerity in the U.S. and Europe.
Reinhart and Rogoff, in a May 25 letter posted on Reinhart’s website, accused Krugman of “spectacularly uncivil behavior” for asserting in an article published in the New York Review of Books that they had withheld data from their research. A day later, Krugman said the two have done little to dispel what he called a misconception generated by their paper — that economies falter when debt levels exceed 90 percent of gross domestic product.
“If the authors ever made an effort to correct this misconception, or indeed if they have ever even acknowledged that it’s a misconception, it was done very quietly,” Krugman wrote in the May 26 article on the New York Times website. “I’m sorry, but the failure to clear up this misconception has done a great deal of harm.”
The Harvard economists acknowledged on April 17 that they had inadvertently left some data out of their calculations in the study, in response to a paper questioning their methods released on April 15 by researchers from the University of Massachusetts at Amherst. Still, the error didn’t change the basic findings of their research, the Harvard economists said.
“Growth in a Time of Debt” concluded that countries with public debt greater than 90 percent of GDP suffered measurably slower economic growth. It has been cited by U.S. House Budget Committee Chairman Paul Ryan and European Union Economic and Monetary Affairs Commissioner Olli Rehn in defense of their arguments against high budget deficits.
Reinhart and Rogoff, in their letter to Krugman, criticized him for asserting that the U.S. and U.K. have the “costless option” of engaging in an open-ended fiscal expansion.
The Harvard economists said while they hadn’t advocated austerity in the immediate wake of the subprime crisis that began in 2007, “waiting 10 to 15 more years to deal with a festering problem is an invitation for decay, if not necessarily an outright debt crisis.”
Krugman’s assertions constituted “sloppy neglect on your part to check the facts before charging us with a serious academic ethical infraction,” Reinhart and Rogoff wrote.
The data he said they refused to share has been on the Internet “for those doing research who care to look,” they wrote. “So to accuse us of not sharing our data is an unfounded attack on our academic and personal integrity.”
Krugman, a Princeton University economist, countered that they have continued to blur the distinction between growth that tends to be slower in countries with debt of more than 90 percent of GDP and growth that’s sharply lower when debt reaches that threshold.
“Austerity-minded policy makers, of course, seized on the latter claim,” he wrote.
The economists’ debate is playing out from Washington to Brussels as lawmakers and leaders clash over the need to rein in budget deficits without choking growth.
As much as $85 billion of spending cuts this year started on March 1 after Congress and President Barack Obama failed to agree on a deal to postpone the reductions or come up with a like amount of deficit reduction.
In the U.K., Prime Minister David Cameron says austerity will have to continue well beyond 2015 as the budget deficit has fallen by less than a third instead of the half the Conservative-led government projected when it took office three years ago. The International Monetary Fund, which had backed his handling of the economy, urged Britain last month to ease its budget-cutting drive with growth only now starting to show signs of revival.
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