Wednesday, April 17, 2013

Reinhart-Rogoff in the German media

So the Reinhart-Rogoff paper "Growth in a time of debt" was replicated and there were several issues with it. I personally think mistakes happen and it is definitely not R-R's fault that politicians in Europe jumped their paper and showed it off as ultimate proof that their austerity ideology was without alternative.

Other parties that just loved the paper were the German newspapers. They for the most part supported Merkel's Europe policy and R-R really helped to pretend that science was behind them. Let's see how the four newspapers reacted to the news that sometimes mistakes are made and results are weighed and interpreted in a way that affirms the personal believes. There is a reason why double-blind experiments are used in medicine, it should therefore not have come as a huge surprise.

Krugman - in his first blog post on the subject - wrote:
If true, this is embarrassing and worse for R-R. But the really guilty parties here are all the people who seized on a disputed research result, knowing nothing about the research, because it said what they wanted to hear.
He also argued that the correlation "probably reflected reverse causation". Above I used two slightly left leaning publications (, and two slightly right leaning papers(, Let's see what they had to write about the new findings. First up Spiegel:

 Of course they get the facts right until they start quoting Krugman:

Some of us never bought it, arguing that the observed correlation between debt and growth probably reflected reverse causation. But even I never dreamed that a large part of the alleged result might reflect nothing more profound than bad arithmetic.
Why would you quote him in such a way? Well because Krugman "is for ideological reasons rather for spending and against saving". So it would not make sense, that such a person has any rational explanation, does it? Also if I had not read Krugman's blog, which they link, I would have believed that this Krugman person is not only a stupid ideologue, he is also still wrong, since they go on to write:
The correlation (sic! - no one does that) between high debt and little growth cannot be denied. It can also be found in the new Massachusetts paper.
Of course, Spiegel's imaginary Krugman is still more intelligent than FAZ's. That outright moron was quoted saying:

'Some of us never bought it,' that at over 90 % debt [to GDP ratio], ' terrible things happened (sic!)'.
He wrote happen not happened and he used the latter part to make the Very Serious People look stupid:

 Very quickly, everyone “knew” that terrible things happen when debt passes 90 percent of GDP.

Well Mr. Krugman, who's the idiot now?

SZ doesn't "quote" Krugman but thinks that R-R said the following:

[If] [t]he debt mountain increases, the growth dwindles.

Steigt der Schuldenberg, sinkt das Wachstum. (The way this is written indicates causality since it is short for wenn ... dann... if ...then...)

In fact, R-R actually said:

By the way, we are very careful in all our papers to speak of “association” and not “causality” since of course our 2009 book THIS TIME IS DIFFERENT showed that debt explodes in the immediate aftermath of financial crises.

So we now have three papers, doing the sensible thing. They leave essential parts out and make stuff up. Of course none of them quoted Krugman's last sentence about the "really guilty parties" which should definitely include German newspapers. Oh almost forgot about Welt. (google translate doesn't do a good job sadly, since the article is just bat shit crazy) I did not find anything about R-R but they are scared of dwindling deficits in Germany. Because, well dunno, also they don't want tax increases to reduce their angst. In fact they are giving away the game: the handling of the crisis was never about deficits. It was from a beginning aimed at destroying welfare and privatisation. So called reforms. And if the deficits aren't high enough anymore, the will to destroy and at least cause significant damage is reduced and that is just terrible in their eyes. We even made a word up for it, it is called "Reformwille". How do we increase the Reformwille? Through "Reformdruck" (reform pressure) and that is the reason we do not want eurobonds. That those would cost some money doesn't matter, that's just the story that is told to the proles. Welt could be happy that it would increase our borrowing costs since that scary possible budget surplus in 2016 would go away.

So, why am I not willing to give the German news media the benefit of the doubt (for example that they do not know the difference between correlation and causation and are really unable to quote correctly)? Well, the reason can be found in my first blog post.

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