Economists have been astonished to find that a famous academic paper often used to make the case for austerity cuts contains major errors. Another surprise is that the mistakes, by two eminent Harvard professors, were spotted by a student doing his homework.
Harvard economists Carmen Reinhart and Kenneth Rogoff wrote in 2010 that a country’s output fell substantially as soon as total public debt passed 90% of gross domestic product. Their paper said that – in 20 advanced economies since 1945 – growth of 3% to 4% collapsed to an average -0.1% at this point. Governments used the findings to support austerity measures. But University of Massachusetts students found coding errors in spreadsheets used in the study. Reinhart and Rogoff admit mistakes but say the research’s central point remains valid. New research says growth only falls to an average of 2.2% and that in some cases it can be higher than in countries with lower debt levels.
The “coding errors” occurred when the economists neglected to selected all of the cells in a column in their excel spread sheet.