A recent Washington Post opinion piece by Lawrence Summers, past president of Harvard University and former Treasury secretary in the Clinton administration, sheds some light on the academic study being blamed for the current economic woes.
The study in question is a paper by Reinhart and Rogoff “Growth in a Time of Debt” which was then criticized by researchers at the University of Massachusetts, Amherst. In response to the criticism, Reinhart and Rogoff issued the following statement:
In May 2010, we published an academic paper, “Growth in a Time of Debt” in the American Economic Review. Its main finding, drawing on data from 44 countries over 200 years, was that in both rich and developing countries, high levels about of government debt — specifically, gross public debt equaling 90 percent or more of the nation’s annual economic output — was associated with lower rates of growth.
On April 15, 2013, three economists at the University of Massachusetts, Amherst, released a paper criticizing our findings. They correctly identified a spreadsheet coding error that led us to miscalculate the growth rates of highly indebted countries since World War II. They also accused us of “serious errors” stemming from “selective exclusion” of relevant data and “unconventional weighting” of statistics.
Summers points out a few lessons worth remembering:
1. Though the researchers being criticized are careful and credible, journals should confirm the accuracy of results before publishing.
2. Even when the results are accurate, we should be careful about relying on prior data when forecasting.
3. These researchers are not to blame for the economic policy, nor should people of differing political viewpoints take pleasure in embarrassing them.