Skip to main content

Lessons from ReinhartRogoffgate

A number of weeks ago, I had a post on the data errors in Reinhart and Rogoff's famous 'austerity' paper.

So what are the lessons for the economics profession of ReinhartRogoffgate?

Lesson 1: Diversity is good. The errors in Reinhart and Rogoff's paper were discovered by economists working at UM Amherst. Amherst's economics department is not typical as it is heterodox i.e., open to economists who are not from the mainstream neoclassical school. You can read a Washington Post article about this department here

Lesson 2: Economics is not a 'hard' science. Economics is not physics and quantification in economics is of  limited use when it comes to measuring relationships between variables. Quantification is useful in physics as there are laws of nature which do not change (i.e., g - the acceleration of gravity on earth = 9.8 m/s^2). You can read Samuel Brittan's opinion piece on this issue here (hat tip - Graham Brownlow).


Popular posts from this blog

Bitcoin Bubble?

According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money.   George Selgin , a free banker, takes an opposing view - click here .  Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press .