Austerity: a spreadsheet error?
More or Less
BBC
4.6 • 3.7K Ratings
🗓️ 22 April 2013
⏱️ 10 minutes
🧾️ Download transcript
Summary
Tim Harford tells the story of the student who uncovered a mistake in a famous economic paper that has been used to make the case for austerity cuts. In 2010, two Harvard economists published an academic study, which showed that when government debt rises above 90% of annual economic output, growth falls significantly. As politicians tried to find answers to the global economic crisis, “Growth in a Time of Debt” by Carmen Reinhart and Kenneth Rogoff was cited by some of the key figures making the case for tough debt-cutting measures in the US and Europe. But, in the course of a class project, student Thomas Herndon and his professors say they have found problems with the Reinhart-Rogoff findings. What does this mean for austerity economics?
Transcript
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| 0:47.1 | Hello and welcome to more or less on the BBC World Service. I'm Tim Harford. |
| 0:55.0 | Let me take you back to January the 4th 2010, the Marriott Hotel in Atlanta. |
| 1:01.0 | The annual meetings of the American Economic Association, where the world's leading |
| 1:05.7 | economists gather to chew the fat. |
| 1:08.7 | Two respected economics professors, Carmen Reinhart and the former chief economist of the International Monetary |
| 1:14.0 | Fund, Ken Rogoff, are presenting a research paper called Growth in a Time of Debt. |
| 1:20.8 | As with all conference papers, it's brief and won't be published in a peer-reviewed journal, |
| 1:25.0 | but it will pack a real punch. |
| 1:28.0 | Reinhart and Rogoff had been gathering together a large set of historical data about economic growth and government debt, |
| 1:35.3 | specifically the debt to GDP ratio, comparing government debt to the overall size of a country's |
| 1:40.6 | economy. |
| 1:41.9 | And they concluded that for countries with a high debt to GDP ratio |
| 1:45.9 | growth was dramatically lower. |
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