The Economics Earthquake

Big news in the world of economics after a grad student at the University of Massachusetts finds a small error with big consequences.

Mark Gongloff, chief financial writer for the Huffington Post. His latest on the story is here.

A little tongue-in-cheek on economics here...

New York Times "Ms. Reinhart and Mr. Rogoff had credibility thanks to a widely admired earlier book on the history of financial crises, and their timing was impeccable. The paper came out just after Greece went into crisis and played right into the desire of many officials to “pivot” from stimulus to austerity. As a result, the paper instantly became famous; it was, and is, surely the most influential economic analysis of recent years."

The New Yorker "But, wait a minute. Annual growth of 3.2 per cent doesn’t sound too bad. Is there a level of indebtedness at which growth ceases or turns negative? Reinhart and Rogoff argued that there was, and that’s what gave their pro-fiscal-consolidation message its potency. In the 2010 paper at the center of the dispute, they identified the threshold as a debt-to-G.D.P. ratio of ninety per cent. Once debt rose above that level, they said, the average growth rate was negative 0.1 per cent."