Austerity: A Debate Worthy of Stephen Colbert

The media coverage of the Boston attack made me miss several important news stories, including the renewed debate on conclusions stemming from an article condemned since its publication in 2010 by European and U.S. supporters of austerity, including former vice-presidential candidate Paul Ryan, R-Wis.

Titled “Growth in a Time of Debt,” signed by two renowned Harvard economists, Carmen Reinhart and Kenneth Rogoff, and based on information collected between 1946 and 2009, the article showed that growth appeared to be considerably lower in countries where the public debt exceeds 90 percent of the GDP.

And yet, three economists from the University of Massachusetts Amherst revealed serious errors in the Harvard pair’s calculations — errors that, in their opinion, overturn [the Harvard economists’] conclusions. According to their research, published on April 15, the 90 percent threshold had no particular significance, and the link between GDP growth and debt was very weak.

Here is the million-dollar question: Do the austerity politics of Europe and the U.S. rest on false conclusions?

The Harvard study debate continues today in the Opinion pages of The New York Times. In his column, economist Paul Krugman expressed his hope that a re-examination of Reinhart and Rogoff’s conclusions would force supporters of austerity to reassess their policies. He does not really buy into them.

At the same time, the two Harvard academics defend their study, notably minimizing the relative importance of their miscalculations as compared to “a century of data.”

Comedian Stephen Colbert is obviously not an economist, but he could not resist the urge to poke fun at the Reinhart-Rogoff duo, as you can see in the video at the end of this post.*

* Editor’s Note: Readers can access this video by clicking on the original article.