The Excel Depression
Andre Willers
19 Apr 2013
“Quantitive easing was right after all !” AW
Synopsis :
The theoretical economic justification for austerity
measures have been proved to be due mainly to an Excel spreadsheet error . This
will have major political ramifications , especially if an Hysterical Focus
forms .
Discussion :
1.Broad summary :
Two respected academic economists (Reinhart and Rogoff)
purportedly showed that GDP fell over a cliff if debt exceeded 90% of GDP
This formed the basis of austerity policies , especially in
the EU . When subjected to the scientific requirement for replication , it was
found to be in error . See Appendices A , B ,C .
2. There will be major repercussions .
2.1 The EU will nearly certainly switch to the Quantitive
Easing US model .
2.2 This will preserve the EU .
2.3 Stockmarkets will boom .
2.4 The present EU recessions will ease to minor growth at
first .
2.5 Everybody will blame Reinhart and Rogoff . Convenient
scapegoats for bad governance .
3.Hysterical Focus :
See Appendix D
An Hysterical Focus of major proportions will form ,
especially if attempts are made to continue with austerity programs .
This news just broke , so it is still percolating down the
information strata . Democratic politicians will have to change tack sharply if
they wish to remain in office (German elections due in September) .
This will be an ugly
Hysterical Focus .
Millions of people have been hungry , had careers ruined , been
fired , etc . All because of an Excel blunder and governance gullibility
Remember , one of the defining characteristics of a big
Hysterical Focus is that it does not go away . Examples are the phone hacking
in UK or pedophiliacs .
4. Misery Index .
Economists are becoming rivals to religious fundamentalists
and conquerors in the sheer human misery their half-baked ideas have caused .
Adam Smith (“Invisible hand”) or Karl Marx (“Communism”) or others . Remember
conglomerates ?
5. The way out : Ostrum Systems .
6. Legal recourse :
The Granddaddy of all class-action suits.
Negligence by academe and governments caused the mess . So
sue them .
Perry Mason , where are you when the ministers need you ?
Andre
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Appendix A
Finally, Ms. Reinhart and Mr. Rogoff allowed researchers at the University of Massachusetts to look at their original
spreadsheet — and the mystery of the irreproducible results was
solved. First, they omitted some data; second, they used unusual
and highly questionable statistical procedures; and finally, yes, they made an
Excel coding error. Correct these oddities and errors, and you get what other researchers have found: some correlation
between high debt and slow growth, with no indication of which is causing
which, but no sign at all of that 90 percent “threshold.”
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Appendix B
|
Does
High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart
and Rogo
ff
Thomas Herndon | Michael Ash | Robert Pollin |
4/15/2013
Download 421
kB
Abstract:
Herndon, Ash and Pollin replicate Reinhart and Rogoff and find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period. They find that when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0:1 percent as published in Reinhart and Rogo ff. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower.
The
authors also show how the relationship between public debt and GDP growth
varies significantly by time period and country. Overall, the evidence we
review contradicts Reinhart and Rogoff
's claim to have identified an important stylized fact, that public debt loads greater than 90 percent of GDP consistently reduce GDP growth.
Media
requests: please contact Jared Sharpe.
>> Download the paper here1
>> Download the data and code files upon which the results are based >> Download a text document that describes the files in the code and data archive >> Download Robert Pollin and Michael Ash's op ed in the Financial Times
1 The
current version of this paper was updated at 1:35 pm on April 17, with the
following corrections:
(1) The
notes to Table 3: "Spreadsheet refers to the spreadsheet error that
excluded Australia, Austria, Canada, and Denmark from the analysis." is
corrected to read: "Spreadsheet refers to the spreadsheet error that
excluded Australia, Austria, Belgium, Canada, and Denmark from the
analysis."
(2)
Page 13: “Thus, in the highest, above-90-percent public debt/GDP, GDP
growth of 4.1 percent per year in the 1950-2009 sample declines to only 2.5
percent per year in the 1980-2009 sample” is corrected to read "Thus, in
the lowest, 0–30-percent public debt/GDP, GDP growth of 4.1 percent per year
in the 1950–2009 sample declines to only 2.5 percent per year in the
1980–2009 sample."
|
SEARCH
PERI >>>>>>>>>>>>>>>
|
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Appendix C
Who did it ?
The Econ Student Who Challenged Reinhart-Rogoff
on Debt
April 18, 2013
When Thomas Herndon, a student at the University of Massachusetts
Amherst's doctoral program in economics, spotted possible errors made by two
eminent Harvard economists in an influential research paper, he called his
girlfriend over for a second look.
As they pored over the spreadsheets Herndon had requested from
Harvard's Carmen Reinhart and Kenneth Rogoff, which formed the basis for a
widely quoted 2010 study, they spotted what they believed were glaring errors.
"I almost didn't believe my eyes when I saw just the basic
spreadsheet error," said Herndon, 28. "I was like, am I just looking
at this wrong? There has to be some other explanation. So I asked my
girlfriend, 'Am I seeing this wrong?'"
His girlfriend, Kyla Walters, replied: "I don't think so,
Thomas."
In the world of economic luminaries, it doesn't get much bigger
than Reinhart and Rogoff, whose work has had enormous influence in one of the
biggest economic policy debates of the age. Both have served at the International
Monetary Fund. Reinhart was a chief economist at investment bank Bear Stearns
in the 1980s, while Rogoff worked at the Federal Reserve, passing through Yale
and MIT before landing at Harvard.
Their study, which found economic growth slows dramatically when a government's debt exceeds 90
percent of a country's annual economic output, has been cited
by policymakers around the world as justification for slashing spending.
Former U.S. vice presidential candidate Paul Ryan, a
Republican congressman from Wisconsin, is one influential politician who has
cited the report to justify a budget slashing agenda.
Using the two professors' data, Herndon found that instead of a
dramatic fall in growth, the decline was much milder, slowing to about 2.2
percent, instead of the slump to minus 0.1 percent that Reinhart and Rogoff
predicted.
Things tend to move at a glacial pace in the world of academic
research papers, but within 24 hours Herndon and his two teachers, who
co-authored the report, Michael Ash and Robert Pollin, found themselves swept
up in a global debate. Herndon's paper began life as a replication exercise for
a term paper in a graduate econometrics class. He expected to replicate
Reinhart and Rogoff's results, then challenge the idea that high public debt
caused growth to slow.
But he never got that far. Repeated failures to replicate the
results roused his interest. Pollin and Ash encouraged him to pursue it after
he convinced them he was onto something. "At first, I didn't believe him.
I thought, 'OK he's a student, he's got to be wrong. These are eminent
economists and he's a graduate student,'" Pollin said. "So we pushed
him and pushed him and pushed him, and after about a month of pushing him I
said, 'Goddamn it, he's right.'"
Herndon approached Reinhart and Rogoff earlier this year for the
spreadsheets they used in their paper. The two professors provided them at the
start of April, unlocking the mysteries of the data that had stumped Herndon.
Herndon said only 15 of the 20 countries in the report had been
used in the average. He also said Reinhart and Rogoff used only one year of
data for New Zealand, 1951, when growth was minus 7.6 percent, significantly
skewing the results.
Reinhart and Rogoff have admitted to a "coding error" in
the spreadsheet that meant some countries were omitted from their calculations.
But the economists denied they selectively omitted data or that they used a
questionable methodology.
For Ash, the findings mean the claim that high public debt causes
growth to stall no longer holds water. "Their central thesis has been
substantially weakened," he said.
Reinhart and Rogoff, however, say their conclusion that there is a
correlation between high debt and slow growth still holds. "It is sobering
that such an error slipped into one of our papers despite our best efforts to
be consistently careful," they said in a joint statement. "We do not,
however, believe this regrettable slip affects in any significant way the
central message of the paper or that in our subsequent work."
Now that Herndon has ably crossed swords with some of the most
eminent figures in his field, he is thinking about expanding his work into a
Ph.D. thesis.
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Appendix D
Inside the Ignition of an Hysterical Focus.
Andre
Willers
28 Jun 2010
Synopsis :
The
spontaneous formation of order into a random set of 40 million diverse humans
grew out of at most 50 humans , but the tinder was dry .
Discussion :
I was
privileged to follow the ignition process . I never thought I would experience
this rather rare phenomenon .
I was
listening to CapeTalk 567 , a talk radio program in the Western Cape .
At about
10h00 on 4th June 2010, they reported receiving numerous SMS ,
emails , twitter and calls about delays in the issuing of tickets .
I expected
the whole thing to die down , as disgruntled citizens just gave up on it as
another example of incompetence . (Sepp Blatter's nephew was in charge)
The opposite happened .
Really
amazing !
The small
group interaction of the queuer's via twitter , SMS, emails , cellphone was
amplified by the inrush of new connectors because of long-range network
information systems like CapeTalk radio .
By 11h00
the tone had been set . Note network theory . The long-range network elements
like Twitter and TalkRadio had spread and the resultant inpour of messages
escalated the system into a runaway positive feedback system .
By 12h00
the system had lurched into the present benign mode of "Foreigners with money-good
, foreigners like Zimbabweans , Somalis – bad : get them later ."
This will
get externalised as wars .
The sheer
speed of it was amazing . By the afternoon , I was living in an entirely new
society .
This is typical of an Hysterical Focus .
A seemingly
trivial matter precipitates a phase change , focusing large-scale frustrations
into a Focus . The Focus then fractures the society in totally unforeseen ways
. When the breaks anneal , you have a new , more competitive society (cf French
Revolution) .
Has
it happened before ?
Yes , but
they had to work hard at it . Newspaper
owners in the USA , UK (Like Hearst)
thought they could ignite Hysterical Foci . They could , but only with months
of saturation propaganda .
Barack
Obama got elected mainly because of a minor ignition of the effect via Facebook
.
Can it happen again ?
Of course .
It is every marketer's wet dream . A small , controllable group influencing
millions of other people .
Why Twitter ?
The
interesting point here is that this is first hint of a workable system to break
the 150 person tribal ceiling . This ceiling is hard-wired in by genetic ,
epigenetic and meme systems . Twitter paradoxically bypasses this by the limitation on number of characters
allowed (140 , amusingly near the tribal ceiling . Not surprising) .
The
right of reply and fairness .
Fairness is
hardwired in humans . Abuse of Right of reply leads directly to systems like
Twitter , where there is no reply . 140 characters cannot give sufficient
data-space
The lack of
fairness can only be compensated for by large numbers of twitters of various
other persuasions . The totality sums .
We can
actually put some numbers on this :
See http://andreswhy.blogspot.com
"Inside of zero " and others . We need only 26 different centers of
uniqueness to describe any particular
Universum .
This
translates into a minimum necessary sufficient of 27 individuals to ignite a
Hysterical Focus .
Notice that
26=27-1
This is
known as God's Mercy .
Infinite
descent is possible .
The
cocktail party .How many guests to invite .At last we can put a minimum number
to it . And it is 27 .
Bagh. I am
sick and tired of it .
Andre
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