Reinhart and Rogoff call for "civility"

The burned economists write an open letter to Paul Krugman, hitting back at his claims.

Carmen Reinhart and Kenneth Rogoff, the two economists who inspired the now-discredited claim that economic growth drops off sharply when a country's debt exceeds 90 per cent of GDP, have written an open letter to Paul Krugman, the Nobel laureate and New York Times econoblogger, in which they condemn his "spectacularly uncivil behavior" over the weeks since their key work was exposed as flawed.

Reinhart and Rogoff write:

You have attacked us in very personal terms, virtually non-stop, in your New York Times column and blog posts. Now you have doubled down in the New York Review of Books, adding the accusation we didn't share our data. Your characterization of our work and of our policy impact is selective and shallow. It is deeply misleading about where we stand on the issues. And we would respectfully submit, your logic and evidence on the policy substance is not nearly as compelling as you imply.

The letter goes on to reinterate the kernel of the disagreement between Reinhart and Rogoff and the left-Keynesian blogosphere, of which Krugman is an unofficial leader: how responsible are the pair for the claim which they came to be seen as the source of, how defensible that claim is, and how much damage has been done by policymakers latching on to it to justify austerity movements the world over.

They write, for instance, that:

The debate of the last few weeks does not change the fact that debt levels above 90% (even if one entirely rejects this marker for gross central government debt as a common cross-country "threshold") are very rare altogether and even rarer in peacetime. From 1955 until right before the recent crisis, advanced economies spent less than 10% of those years at a debt/GDP ratio of higher than 90%; only about two percent of the years are above 120% debt/GDP. If governments thought high debt was a riskless proposition, why did they avoid it so consistently?

Krugman, for his part, has responded with a piece focusing on "where their analytical sin lies", writing that:

To some extent it lies in the downplaying of causality issues — of whether high debt causes slow growth, slow growth causes high debt, or both high debt and slow growth are the result of third factors (as was the case in demobilizing postwar America, which they highlighted in their original paper).

But the more important sin involves the misuse of the “90 percent” criterion…

[There is] an enormous difference between the statement “countries with debt over 90 percent of GDP tend to have slower growth than countries with debt below 90 percent of GDP” and the statement “growth drops off sharply when debt exceeds 90 percent of GDP”. The former statement is true; the latter isn’t. Yet R&R have repeatedly blurred that distinction, and have continued to do so in recent writings.

Indeed, the 90 per cent threshold is just an artefact of the arbitrary groupings the original paper used to analyse the data. Reinhart and Rogoff analysed the effects of debt below 30 per cent of GDP; between 30 and 60 and 60 and 90 per cent; and above 90 per cent. Owing to several questionable methodological choices and one outright error, the 90 per cent bucket showed a large dropoff in growth; but the fact that 90 per cent was the level of the discontinuity happened no reason other than the chance decision by the economists to split the categories at that level.

And as Krugman points out, that distinction is crucial when countries like the UK are hovering at exactly that level. It is a hard position for Reinhart and Rogoff to be put in; they didn't explicitly make the claim in any paper they wrote, and since the flaws were pointed out, they have actively been rolling it back. Nonetheless, their work on the matter did not win fame for pointing out the simple correlation between high debt to GDP ratios and slow growth, but for (at the very least) strongly implying a causation. Politicians began to claim, with reference to their paper, that debt to GDP ratios over a certain level caused low growth. Take George Osborne in 2012:

Our gross debt is already forecast to peak above 90% of GDP, a level above which the evidence suggests higher debt tends to reduce growth.

Coincidentally, Osborne was pressed today on his support for this paper by Evan Davis on Radio 4's Today programme, and refused retract it, saying "I don't think most people doubt that countries carrying very high debt burdens suffer economically for that." Almost as though he was taking notes, he also echoed Reinhart and Rogoff's point that they've been very good at spreading understanding of financial crises, which is true but also faintly irrelevant.

In the end, though, the battle lines have been drawn, and no-one is likely to change their mind after this open letter. Which is why much of the debate in economics circles isn't over the economics of the thing at all, but over the demand that Krugman present his objections civilly. And to that, he writes:

Since we’re probably going to have a bunch of stories about feuding economists and all that, just a reminder: it’s not about the people. It’s about the disastrous wrong turn policy took, all across the advanced world, in 2010. The economists matter only to the extent that they aided and abetted that wrong turn; their feelings (and mine!) matter not at all.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Lord Empey: Northern Ireland likely to be without government for a year

The former UUP leader says Gerry Adams is now in "complete control" of Sinn Fein and no longer wants to be "trapped" by the Good Friday Agreement

The death of Martin McGuinness has made a devolution settlement in Northern Ireland even more unlikely and has left Gerry Adams in "complete control" of Sinn Fein, the former Ulster Unionist leader Reg Empey has said.

In a wide-ranging interview with the New Statesman on the day of McGuinness’ death, the UUP peer claimed his absence would leave a vacuum that would allow Adams, the Sinn Fein president, to consolidate his hold over the party and dictate the trajectory of the crucial negotiations to come. Sinn Fein have since pulled out of power-sharing talks, leaving Northern Ireland facing the prospect of direct rule from Westminster or a third election in the space of a year. 

Empey, who led the UUP between and 2005 and 2010 and was briefly acting first minister in 2001, went on to suggest that, “as things stand”, Northern Ireland is unlikely to see a return to fully devolved government before the inquiry into the Renewable Heat Incentive scheme is complete -  a process which could take up to a year to complete.

“Adams is now in complete control of Sinn Fein,” he said, adding that it remained unclear whether McGuinness’ successor Michelle O’Neill would be “allowed to plough an independent furrow”. “He has no equal within the organisation. He is in total command of Sinn Fein, and that is the way it is. I think he’s even more powerful today than he was before Martin died – by virtue of there just being nobody there.”

Asked what impact the passing of McGuinness, the former deputy first minister and leader of Sinn Fein in the north, would have on the chances of a devolution settlement, Empey, a member of the UUP’s Good Friday Agreement negotiating delegation, said: “I don’t think it’ll be positive – because, for all his faults, Martin was committed to making the institutions work. I don’t think Gerry Adams is as committed.

Empey added that he believed Adams did not want to work within the constitutional framework of the Good Friday Agreement. In a rebuke to nationalist claims that neither Northern Ireland secretary James Brokenshire nor Theresa May can act as honest or neutral brokers in power-sharing negotiations given their reliance on the DUP’s eight MPs, he said: “They’re not neutral. And they’re not supposed to be neutral.

“I don’t expect a prime minister or a secretary of state to be neutral. Brokenshire isn’t sitting wearing a hat with ostrich feathers – he’s not a governor, he’s a party politician who believes in the union. The language Sinn Fein uses makes it sound like they’re running a UN mandate... Gerry can go and shout at the British government all he likes. He doesn’t want to be trapped in the constitutional framework of the Belfast Agreement. He wants to move the debate outside those parameters, and he sees Brexit as a chance to mobilise opinion in the republic, and to be seen standing up for Irish interests.”

Empey went on to suggest that Adams, who he suggested exerted a “disruptive” influence on power-sharing talks, “might very well say” Sinn Fein were “’[taking a hard line] for Martin’s memory’” and added that he had been “hypocritical” in his approach.

“He’ll use all of that,” he said. “Republicans have always used people’s deaths to move the cause forward. The hunger strikers are the obvious example. They were effectively sacrificed to build up the base and energise people. But he still has to come to terms with the rest of us.”

Empey’s frank assessment of Sinn Fein’s likely approach to negotiations will cast yet more doubt on the prospect that devolved government might be salvaged before Monday’s deadline. Though he admitted Adams had demanded nothing unionists “should die in a ditch for”, he suggested neither party was likely to cede ground. “If Sinn Fein were to back down they would get hammered,” he said. “If Foster backs down the DUP would get hammered. So I think we’ve got ourselves a catch 22: they’ve both painted themselves into their respective corners.”

In addition, Empey accused DUP leader Arlene Foster of squandering the “dream scenario” unionist parties won at last year’s assembly election with a “disastrous” campaign, but added he did not believe she would resign despite repeated Sinn Fein demands for her to do so.

 “It’s very difficult to see how she’s turned that from being at the top of Mount Everest to being under five miles of water – because that’s where she is,” he said. “She no longer controls the institutions. Martin McGuinness effectively wrote her resignation letter for her. And it’s very difficult to see a way forward. The idea that she could stand down as first minister candidate and stay on as party leader is one option. But she could’ve done that for a few weeks before Christmas and we wouldn’t be here! She’s basically taken unionism from the top to the bottom – in less than a year”.

Though Foster has expressed regret over the tone of the DUP’s much-criticised election campaign and has been widely praised for her decision to attend Martin McGuinness’ funeral yesterday, she remains unlikely to step down, despite coded invitations for her to do so from several members of her own party.

The historically poor result for unionism she oversaw has led to calls from leading loyalists for the DUP and UUP – who lost 10 and eight seats respectively – to pursue a merger or electoral alliance, which Empey dismissed outright.

“The idea that you can weld all unionists together into a solid mass under a single leadership – I would struggle to see how that would actually work in practice. Can you cooperate at a certain level? I don’t doubt that that’s possible, especially with seats here. Trying to amalgamate everybody? I remain to be convinced that that should be the case.”

Accusing the DUP of having “led unionism into a valley”, and of “lashing out”, he added: “They’ll never absorb all of our votes. They can try as hard as they like, but they’d end up with fewer than they have now.”

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.