Policy makers in the US and Europe seized on the paper as proof that cutting stimulus and social programs was a good idea, and proceeded to do so with abandon. Of course, right wingers wanted to cut money to social programs anyway, and would have done so regardless, but the paper was held out as scientific proof that it was a solid plan of action.
I won’t comment on how strange it was that Republicans were interested in science at all, given recent efforts to politicize the NSF and micromanage the grant decision process.
The trouble was that the results presented in RR were shown to be based on the selective use of data. Thomas Herndon, a 28-year-old graduate student, obtained the dataset from RR themselves and couldn’t reproduce the results.
In fact, he found that the only way to accurately reproduce the results in RR’s paper that showed that high debt restrained economic growth was to exclude important cases. When including the missing data, high debt was associated with consistently positive growth, though modestly slowed.
Originally, I took the view that this was a case of sloppy science. RR had a dataset, got some results which fit the narrative they were pushing and didn’t pursue the matter any further. Reading Herndon’s paper, however, I changed my mind.Herdon took the data and did what any analyst would do when starting exploratory analysis, he plotted it (see figure on the right). Debt to GDP ratios and growth are both continuous measures. We can do a simple scatterplot and see if there’s any evidence that would suggest that the two things are related.
To me, this is a pretty fuzzy result. Though the loess curve (an interpolation method to illustrate trend) suggest that there is *some* decline in growth overall, I’d still ding any intro stats student for trying to suggest that there’s any relationship at all. There is no way that RR, both trained PhD’s and likely having the help of a paid research assistant, didn’t produce such a plot.
Noting that the loess curve drops past approximately 120%, I calculated the median growth for each country represented. Only 7 countries have had debt to GDP ratios greater than 120% in the past 60+ years: Australia, Belgium, Canada, Japan, New Zealand, the UK and the United States. Out of these only two had (median) negative growth: Belgium (-.69%, effectively zero) and the United States (-10.94%), which has only had a debt to GDP greater than 120% one time. All other countries has positive growth under high debt, even beleaguered Japan. New Zealand can even claim a strong 9.8% growth under high debt. The US, then, is a major outlier, possibly bringing the entire curve down.
As this doesn’t fit their story, RR’s solution was to categorize debt to GDP ratios into five rough classifications, and calculate the mean growth within each group. This is a common trick to extract results from bad data. It’s highly tempting for researchers (and epidemiologists do it far too often), but a bad idea to present it without all the caveats and warnings that should go with it.
I’m not surprised that ideologues such as RR would be so keen to produce the result they did. After all, they published the popular economics work “This Time Is Different: Eight Centuries of Financial Folly” where they try to suggest that budget policy of the US in 2013 should somehow be informed by the economy of 14th century Spain.
I am, however, surprised that reviewers let this pass. If I would have been a reviewer, I would have:
1) pointed out the problems of categorization, where data doesn’t require it
2) noted that categorizing the data (or even plotting it) tears out temporal correlation. For example, one data point from 2008 (stimulus) may be put in the high debt category, but another from 2007 (crash) in the low debt category. While budgets of one year may have little to do with the budget of another, the economy of one year is likely related to the economy of the previous year.
3) questioned the causal mechanisms behind debt and growth. This is obviously a deep question for economists (and not epidemiologists), but of particular import. When does the economy start to react to debt? I’m pretty sure that there is a lag effect as spending bills tend to space disbursements over the course of the fiscal year.
The RR debacle should be a lesson, not only to economists, but to all scientists. While we may always be under pressure to produce results and hope that those results fit and support whatever position we take, shoddy methods don’t get us off the hook. In RR’s case, I would call this fabrication. A good many studies are merely guilty of wishful thinking, but the chance always exists that someone will come out of the woodwork and expose our flaws. After all, that’s what science is all about.
I was going to write a thoughtful post on Dzhokhar Tsarnaev and why it’s important to 1) not torture him, 2) give him a fair trial and 3) not kill him, but I lost my way. In lieu of my now aborted (though thoughtful) piece, I leave you the following piece of history.
While the Revolutionary War raged, a certain General George Washington left these very unambiguous instructions regarding the treatment of British prisoners of war:
“Treat them with humanity, and let them have no reason to complain of our copying the brutal example of the British Army in their treatment of our unfortunate brethren who have fallen into their hands,’ he wrote. In all respects the prisoners were to be treated no worse than American soldiers; and in some respects, better. Through this approach, Washington sought to shame his British adversaries, and to demonstrate the moral superiority of the American cause.”
Yet, Americans in 2013 don’t seem to share this sentiment. In fact, even our highest elected officials are calling to 1) torture him, 2) NOT give him a fair trial by denying him protections afforded under the Constitution, and 3) seek the death penalty.
Not to be insulting to insects, but it’s like turning over a rock and exposing the unpleasant for the world to see. Dzhokhar Tsarnaev and his brother may have killed several and injured many, but within a week they have exposed the awful underbelly of the United States and given it power.
Washington knew how the mistreatment of prisoners by the British galvanized the hatred of the colonies. In this respect, I’m sure that Washington was speaking practically. I suspect, however, that the General (who eventually freed his slaves even), considered human dignity to be essential to a free state. In fact, he had this to say about slavery:
Not only do I pray for it, on the score of human dignity, but I can clearly forsee that nothing but the rooting out of slavery can perpetuate the existence of our union, by consolidating it in a common bond of principle.
How unfortunate that Americans 200 plus years later may have forgotten this important lesson, preferring mob violence to order and vengeance to the preservation of human rights.
First, there is no such thing as a “Monsanto Protection Act” anymore than there is any such thing as “Obamacare.” This is a term created by the item’s opponents to rile up opposition, rather than foster critical analysis. I think that Liberals should be well aware of the political problems associated with demonizing and reductionist labeling of things they don’t like.
Second, though Presidents can veto any bill that comes across his desk, the veto of appropriations bills are rare, and have often been overridden by Congress in the past. It may be a shock to liberals, but Presidents aren’t kings. Conservatives often don’t seem to understand the three branches of Government. Liberals often appear to understand it even less.
Third, there was hardly “no debate.” A Google search will reveal that discussions of this particular item go back at least to June of 2012 and the “Famer’s Assurance Provision” as it is correctly known is part of another Ag Appropriations bill which passed last year. Anyone who tells you this is new, is either lying, or doesn’t know what they are talking about. (Even Snopes took this on.)
Fourth, there is no evidence (that I’m aware of) that GMO’s, which are already in our food supply, are having deleterious effects on human health or the environment. There have been some studies on mouse models that I know of, but it appears that no one can really agree on what a “GMO” really is. Until we can nail that down, and have more informed discussion of which GMOs are “bad” and which are “good”, I don’t think that screaming about GMO’s is any more productive than poorly informed discussion of complex issues such as climate change.
I’m not trying to suggest that there are no effects of “GMOs” whatever they may be. I am saying that lefties are accepting that there are broad effects without question and are relying on less-than-scientific and politically motivated sources such as Salon and the Huffington Post to inform them. That’s a very, very dangerous position to take.
Fifth, I think we should all know by now that rightists use issues like this to weaken Democratic Presidencies. I was of the opinion that much of the furor over controversial portions of the 2012 NDAA bill was stoked by right wingers hoping for a Achilles heel in the 2012 Obama campaign. When we buy into this type of sensationalist reporting without examining the evidence, we play right into their hands.
Sixth, well, I had a sixth, but lost it. But back to GMO’s: It’s interesting that discussions of GMO’s in Sub-Saharan Africa are opposite of what we hear in the US. People view the American and European opposition to GMOs, some of which have the potential to increase food yield while minimizing inputs, as an infringement on developing countries’ rights of self determination. It’s easy to dismiss their concerns as uninformed. However, people and policy makers in developing countries face competing issues of immediate economic needs and broad environmental concerns. Lots of things seem obvious to us, but then we have most of our basic needs already met.
I mean this not as a defense of the Farmer’s Assurance Provision or anything else having to do with GMO’s (so chill out). The endless (and perhaps deserved) vilification of Monsanto has reached a point where examination of the facts is secondary to screaming like a blithering idiot. To me, this is dangerous. When we reduce ourselves to merely accepting positions without criticism, we allow ourselves to be manipulated by just about anything. Not everyone has the time to read all that is required to create a truly informed and reasoned opinion on all subjects, I realize. Striving toward obtaining as much information as is reasonable, however, and acting critically should be a priority for everyone, however.
Liberals are the smart ones. We can do better.
Big day today: submitted dissertation draft then submitted paper for publication, getting ready to submit another.
I can’t wait to get back to reading about economics. Writing is fine, but retroactively creating a story that somehow some non-related things are related is unpleasant. Please don’t do it at home.
I’ve figured out, though, that this is what people who write books do. If you keep revising, eventually it all makes sense.
I had some time today to read the news. I learned that the Bank of Korea is headed by a lady, which is awesome in Korea/Japan. I CAN’T EVER IMAGINE JAPAN HAVING A FEMALE PRIME MINISTER let alone a female head of a central bank. Significantly less developed Thailand even has a female head of state.
In many ways Korea is behind, in many ways, they are way, way ahead. I believe, though, that women have given up on the establishment in Japan, and just go ahead and do their own thing.
This headline, though, was disconcerting:
“Bank of Korea’s Suh Shuns Schoolgirl Outfit to Tackle Contagion”
Huh?? I read the article, and it appears that it was an OL outfit, not a schoolgirl outfit, but the headline was like, “huh?” Yes, I’m losing IQ. Too much writing.
I’ll say it again: JAPAN WILL NEVER HAVE A FEMALE HEAD OF STATE OR HEAD OF ANYTHING ELSE. And that’s a miserable, depressing and embarrassing state of affairs for the second largest economy (we can ignore China) in the world and one of the most developed places on earth.
Better yet, was thsi article, “Is Paul Ryan an Inflation Nutter?” Of course, the answer is an emphatic YES along with the entire Tea Party/Libertarian (オバタリアン？）set (sorry Ralph, you know I love you). Despite ZERO evidence of runaway inflation, even in the worst economic crisis since the depression, doom and gloomers have been predicting it all along. We got 99 (million) problems, but inflation isn’t one.
It’s like waiting for the rapture. The US is stronger in reality than Americans would like to think.
OK, I’m going to go and stare into space for a while. This LaTeX infused Alzheimer’s has got to go.
There’s no doubt that the events in the article occurred and is worthy of reporting. The NYT, however, has been near silent on the subject of the Kenyan elections, arguably the most important political event in the world in early 2013. After months of nothing, we get a picture of a near decapitated infant.
The 2008 Kenyan elections were an absolute disaster. Such a disaster, in fact, that the entire country is proactively wishing that the next one (scheduled in March) passes peacefully and without incident. I am, of course, skeptical that the elections will proceed entirely without incident as Kenyans universally insist, but I think it unlikely that there will be near the extent of bloodshed.
ICC court proceedings are constantly broadcast live in every eating establishment and bar in the country, likely as a grim reminder as to how bad things can be, but also as a deterrent to further violence. The festering remains of IDP camps on the sides of Kenyan highways are even more grim, particularly when one realizes that a few people are still living in them.
As the article says, Kenya is an oasis of development in a highly troubled region (it borders Somalia). In 2013, Nairobi is no different than Houston, TX. I’m not a fan of either, but it’s telling when I can go into a Nairobi supermarket and be offered free, processed food samples, just as I would at Meijer back home. It’s telling when I can buy real coffee (not instant) at a local Starbucks analogue. Granted, the rest of the country has a lot of catching up to do, but there is light at the end of the tunnel.
I’ll take an aside from Kenya to write on an excellent article I found on Bloomberg on the subject of economic “uncertainty.” During the run up to the 2012 election and the subsequent debates on the now almost forgotten “fiscal cliff,” Republicans and their faithful believers spread wacky ideas that American business was crippled by not knowing what their tax rate would be in 2013.
Caroline Baum on Bloomberg claims, rightly, that this was a manufactured panic, though I would argue that our academically challenged politicians seriously believed what they were peddling.
Republicans in Congress claimed that businesses were sitting on cash, unwilling to invest until they knew what their tax rate would be next year (as if tax rates are ever set in stone). What’s more, raising taxes on “job creators” would bring the U.S. economy to its knees.
The premise behind this is fantastical. If businesses are sure that they’ll make a profit, they’ll invest the money today. I think it’s ridiculous to assume that single digit tax increases will somehow get in the way of moving ahead with business.
She points out, though, that the whole thing was fantasy:
– The private sector added 675,000 jobs, making it the second-best quarter since the recession ended in June 2009.
– Business spending on equipment and software rose 12.4 percent annualized, the biggest increase since the third
quarter of 2011.
– Business sales rose an annualized 4.2 percent (assuming no change for December), the strongest quarter of 2012.
The most perplexing part of the whole “kowtow to the American economic elite or else you’ll be unemployed” idea is the notion that somehow CEO’s hand out jobs like candy. “Job creators” don’t create jobs unless there is demand for products, either domestically or abroad (don’t forget that the US is an export giant). Republicans, so opposed to handouts, imply that somehow it is the responsibility of business to provide jobs without the expectation of return.
This is, of course, the government’s responsibility! It is exactly why we continue to invest in infrastructure improvement, have unemployment insurance, provide food stamps and bolster national defense. These expenditures are made knowing that returns are unlikely, but the infusing of cash into the economy keeps important sectors afloat and reduces overall volatility.
It’s ironic, given the anti-Keynesian bent of the Republican Party that prevents them from admitting it, that the US’s economic contraction in the last quarter of 2012 was due to defense cuts and had nothing to do with any type of fantastical “uncertainty.”
OK, back to bednets and Kenya.
I’m in a development mood right now, having had a conversation with someone over whether the American democratic model is portable to other cultures. Let me ramble on about democracy and development for a while.
I say yes, with caveats, of course. There are certainly things about American style democracy that are peculiarly American. Our intense emphasis on property rights being the main candidate. Outside of that, I can see no reason why the American model isn’t transferrable elsewhere, and would even argue that an American (or western style) democracy is not peculiarly Western, but rather a natural outcome of economic growth.
Benjamin Friedman, a Harvard economist, writes in “The Moral Consequences of Economic Growth“:
Economic growth—meaning a rising standard of living for the clear majority of citizens—more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy. Ever since the Enlightenment, Western thinking has regarded each of these tendencies positively, and in explicitly moral terms.
I tend to agree with this. Persons who participate in an economy also participate within a system that requires them to step outside their small circles of family and friends. They are forced to rely not merely on one another, but rather must negotiate and interact with persons they may not know, and may not even like. Old hierarchies become meaningless, as the nature of jobs and value become fluid. A King may be necessary today, but useless tomorrow. Most salient, violence and force, which are both wholly un-democratic, become less attractive when one has something to lose.
Interestingly, one researcher has found the same result, that GDP leads to democracy, but that these effects were weaker than that of primary education:
Over the last two centuries, many countries experienced regime transitions toward democracy. We document this democratic transition over a long time horizon. We use historical time series of income, education and democracy levels from 1870 to 2000 to explore the economic factors associated with rising levels of democracy. We nd that primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions. We find little evidence of causality running the other way, from democracy to income or education.
The interesting piece here is that, in most contexts, primary education is a state-provided service. Thus, using public funds (socialism!) to allow near universal education can actually enable the creation of democratic states. I would argue here, that the authors are taking a narrow view. I believe, though cannot test it, that it is not education, but rather women’s education that creates democratic states.
The development – democracy theory, however, can be countered when one considers mostly undeveloped India. India has a GDP lower than that of Ghana and Papua New Guinea, but is a functioning republic, with disparate, linguistically diverse and culturally heterogeneous states that don’t kill one another after elections. Amartya Sen, an Indian economist, is a devoted believer in democracy as a universal and essential system:
India, of course, was one of the major battlegrounds of this debate. In denying Indians independence, the British expressed anxiety over the Indians’ ability to govern themselves. India was indeed in some disarray in 1947, the year it became independent. It had an untried government, an undigested partition, and unclear political alignments, combined with widespread communal violence and social disorder. It was hard to have faith in the future of a united and democratic India. [End Page 5] And yet, half a century later, we find a democracy that has, taking the rough with the smooth, worked remarkably well. Political differences have been largely tackled within the constitutional guidelines, and governments have risen and fallen according to electoral and parliamentary rules. An ungainly, unlikely, inelegant combination of differences, India nonetheless survives and functions remarkably well as a political unit with a democratic system. Indeed, it is held together by its working democracy.
I’m reading the text of Obama’s inaugural speech, delivered yesterday on the steps of the US Capitol building. I’m tempted to consider this the defining moment of his Presidency for what’s he offers here is not just a laundry list of things that should be accomplished in the next four years, but rather an affirmation of the liberal (or progressive) vision for America’s future.
“Through blood drawn by lash and blood drawn by sword, we learned that no union founded on the principles of liberty and equality could survive half-slave and half-free. We made ourselves anew, and vowed to move forward together.
Together, we determined that a modern economy requires railroads and highways to speed travel and commerce, schools and colleges to train our workers.
Together, we discovered that a free market only thrives when there are rules to ensure competition and fair play.
Together, we resolved that a great nation must care for the vulnerable, and protect its people from life’s worst hazards and misfortune.”
The roles of government are clearly laid out here:
1) a responsibility to provide the means for commerce (and thus freedom)
2) that government must protect basic market freedoms so that no one has a monopoly on trade (and thus freedom itself)
3) insure a basic and fair standard of living and health (and thus preserve the most basic of freedoms).
Incredibly, he addresses that great stain on our history, slavery, salient given that the speech was given on MLK day by the first black President of the US. Better yet he mentions the rights’ struggles of women, African-Americans and gays explicitly:
We, the people, declare today that the most evident of truths –- that all of us are created equal –- is the star that guides us still; just as it guided our forebears through Seneca Falls, and Selma, and Stonewall; just as it guided all those men and women, sung and unsung, who left footprints along this great Mall, to hear a preacher say that we cannot walk alone; to hear a King proclaim that our individual freedom is inextricably bound to the freedom of every soul on Earth.
The first two, Seneca Falls and Selma, were to be expected. The inclusion of the Stonewall Riots was exceptional. Freedom is not preserved by exercising control, but rather by allowing the marginalized access to the same rights and responsibilities as everyone else.
Though I have no time to write more, I wanted to state that I considered Obama’s second inaugural speech to be a defining moment for Liberals. We needed a sitting President to stand up and proudly state who we are and what we want. Liberals for too long have cowered in a corner, losing to Conservatives who have, until this point, far better exploited the power of words. We have, in effect, let the enemy define us.
I can only imagine what Romney would have said today. I now understand Conservative outrage at Obama’s win last November because now this speech is in the history books. I’m glad we won.
- Timeline of the Saharan Crisis (NYT)
- To little fanfare, the United States recognizes the Goverment of Somalia for the first time since 1991. (NYT)
- The free market at work: Cerberus is having trouble dumping gun maker Freedom Group. No one wants to tarnish their image by owning the company. Looks like a fire sale is about to happen. I still maintain that Bloomberg should buy it and shut it down. (Bloomberg)
- Another noble call to treat firearm injuries as a public health problem, comparing firearms to tobacco. As they note, firearms are not tobacco, which is unsafe at any level of consumption. To help reduce injury and death, we need a broad based approach. Of course, they wrote this article with no health from the NIH. (JAMA)
- The Fed failed to predict the Great Recession. Someone at the Fed had to see it coming, though. This uncovers a major structural flaw in the Fed. Designed to mitigate crises, it in’t incentivized to act when times are good. (Bloomberg)
- The lessons of past slavery need to inform present day business owners, policy maker and slavers to improve working conditions. (History News Network)
- Bio-fuels and world hunger(food prices). This guy has the right idea, but misses a couple of important points. First, though the share of corn going to ethanol has been increasing, corn production as a whole has been increasing. Second, he misses that food price increases and volatility have been following the general trends of stock market since 2000, discounting the role of bio-fuels as a cause. Trading food like oil explains the oil like patterns in food. A good article though. (Conservable Economist)
- Developing countries are trading with each other more than they are exporting goods to wealthy countries. Mutual trade and accountability could do much for creating regional stability and stable governments. (Economist)
- Japan and China need to end this petty bickering before it becomes the end of us all. How far will they take this silly game? (Economist)
And to round this up, a graphic of US troop deployments which presents a picture vastly different from what some of my liberal comrades would like to believe. The Obama admin would do well to advertise this reduction more forcefully.: