F.F. Wiley, the pseudonymous co-author of the Cyniconomics blog, has posted a very helpful overview of the Reinhart-Rogoff vs. Herndon-Ash- Pollin controversy.
Wiley reminds us that while the sensationalist media have focused on the arithmetical error in RR’s Excel file, the main reason for the discrepancy between RR and HAP is a function of their different ways of calculating averages.
Wiley also reminds us that “Much of the reporting extended beyond the 2010 paper, leading readers to believe that HAP’s critique invalidates RR’s other work, including their 2009 bestseller, This Time is Different. An LA Times report, which was also picked up by RealClearPolitics, even claimed that RR “popularized” the 90% threshold in their book. In fact, the book did no such thing, nor did RR publish any similar results before 2010.”
Wiley also points out that the influence of RR over actual economic policy, while probably quite real, was also probably quite limited as well. Austerity policies would probably have commanded majority support in national legislatures without the 2010 paper. At best, RR’s argument that a debt-to-GDP ratio of approximately 90% of GDP represented a sort of tipping point may have swung the vote of a few legislators. I made a similar point in an earlier blog post.
More fundamentally, HAP and RR agree that, in general, heavy public indebtedness is associated with reduced economic growth. (See below). They mainly disagree about whether debt’s impact on growth accelerates at around the 90% mark. Neither side have really demonstrated causation or that high debt causes slow growth, or vice versa.
The Past Speaks 