Category Archives: Economics

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Krugman’s take on the R&R debacle:  http://tinyurl.com/cz8yv45

From Tetris to coffee stains, an interesting article on the fascinating topic of universality:  http://tinyurl.com/b9t28gs

Here’s an article from the Chronicle on the problems facing the fashionable theories of today’s physics.  Again, refer to Peter Woit for a full treatment of symmetry and string theory.  http://tinyurl.com/aplg9j7

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Getting Granular…

espresso, Union Square, San Francisco

espresso, Union Square, San Francisco

Oh boy.  In the last post, I discussed the importance of replicating research as a mechanism in the scientific process.  Replication is especially important when the original research informs policy decisions and influences political actors.  Well, it looks like a seminal paper (RandR) in economics by Reinhard-Rogoff (followed by their book (“This Time is Different: Eight Centuries of Financial Folly“) contains some outcome-changing errors.

You might be thinking…well, so what?  Some nerdy economics paper turns out to be off the mark.  Well…the problem here is – when it comes to debating economic policies for countries (think U.S. and E.U.) –  the paper in question is the most influential in the aftermath of the global economic crisis.  Since publication, it has been cited about 450 times in related work.  (see here for a fuller explanation of the issues with the R&R work).  The three main issues that distorted R&R’s results were: selective exclusions, unconventional weighting, and a coding error.  The coding error is really quite unbelievable.  Basically, it’s a spreadsheet error.  Therefore, the key research that provided the basis for global moves toward austerity turns out to be partly based on someone messing up in Excel.

What’s interesting is how theories in social sciences go from paper to book to influencing policy with very little attempt  to replicate the original results.  Obviously, not the first time this has happened.  Still, scholars need to wake up and smell the coffee.

The End of US Economic Growth? Maybe.

Is the flame of economic growth going down?

Is the flame of economic growth going down?

I often cringe when economists or other social scientists make predictions about future outcomes.   Nevertheless, provocative postulations that draw ire always pique my interest.  In a Wall Street Journal op-ed, economist Robert Gordon argues that the growth rate experienced in the United States between 1891-2007 is not going to return any time soon.   Innovation – the engine of US productivity – will not be sufficient to sustain the 2% annual growth rate of output per person during this period.   Not surprisingly, Gordon’s thesis received many boo’s and hisses from commentators.

Paul Krugman’s polite denouncement of Gordon’s claim seems slightly off target.  In my reading of Gordon’s argument, techno-pessism is not the primary explanatory variable for why growth won’t match previous rates.  Innovation will continue.  However, the new technologies simply won’t produce seismic shifts in consumer spending and worker productivity.  The pool of those who benefit from innovation is going to get smaller and smaller in coming decades.