Posts tagged reviews

Paul Krugman’s graph of the debt/GDP ratio against interest rates

Update: You can see what I have to say in the wake of Thomas Herndon, Michael Ash and Robert Pollin’s critique of Carmen Reinhart and Ken Rogoff’s work on national debt and growth in my column “An economists mea culpa: I relied on Reinhart and Rogoff.” (You can see my same-day reaction here.) Also, on the substance, see Owen Zidar’s nice graph in his post “Debt to GDP & Future Economic Growth.” I sent a query to Carmen Reinhart and Ken Rogoff about whether any adjustments are needed to the two figures from the paper with Vincent Reinhart that I display below, but have not yet received a reply to that query. I think that covers most of the issues that recent revelations raise. 

Note that I have revised “What Paul Krugman got wrong about Italy’s economy.” This post is now the go-to source for what I originally said there, relying on “Debt Overhangs, Past and Present” (which has Vincent Reinhart as a coauthor along with Carmen Reinhart and Ken Rogoff). My original passage is in an indented block a little above the colorful pictures your eye will be drawn to below.

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In a world where people wrote frankly, Noah Smith has written the response to my Quartz column “What Paul Krugman got wrong about Italy’s economy” that Paul Krugman should have written: 

• Noah Smith: “Fancy Stimulus Tools: Policy vs. Politics,”

instead of what Paul actually wrote in response to my column:

• Paul Krugman: “Another Attack of the 90% Zombie.”

(The brief summary of my column is that electronic money could help the UK and the Federal Lines of Credit could help both Italy and the UK stimulate their economies without the problems that might arise from adding substantially to their debt by a simple increase in government spending, as indicated by my original title: “How Italy and the UK Can Stimulate Their Economies Without Further Damaging Their Credit Ratings.”)

Read more …

Niklas Blanchard’s current Twitter avatar @cheapseatsecon

In response to my latest Quartz column

• “What Paul Krugman got wrong about Italy’s economy,” 

Paul wrote a post

• “Another Attack of the 90% Zombie,” 

taking aim at my reliance on Carmen Reinhart, Vincent Reinhart and Kenneth Rogoff’s paper “Debt Overhangs, Past and Present.” I plan to write a reply to Paul at some point. In the meanwhile,  I appreciate Niklas Blanchard coming to my defense in his post

• “Master of Noance.” 

Not surprisingly, I like Niklas’s post. But Niklas also takes me to task for my reliance on the paper “Debt Overhangs, Past and Present.” (Update: Niklas tweeted that his title about lack of nuance was directed at Paul, not me. I interpreted it as my not being careful enough in my discussion of Reinhart, Reinhart and Rogoff.) Among other discussions about the interaction with Paul, you can see my attempt to justify myself to Niklas in these storified tweets:  

• “Twitter Convo About Miles’s Dustup with Paul Krugman About the Dangers of Debt.”

For the record, here is the passage in question in my post:

And national debt beyond a certain point can be very costly in terms of economic growth, as renowned economists Carmen Reinhart, Vincent Reinhart, and Kenneth Rogoff convincingly show in their National Bureau of Economic Research Working Paper “Debt Overhangs, Past and Present.”

Where do the United Kingdom and Italy stand in relation to the 90% debt to GDP ratio Reinhart, Reinhart and Rogoff identify as a threshold for trouble? 

For comparison, here is the abstract for “Debt Overhangs, Past and Present”

We identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90% for at least five years. Consistent with Reinhart and Rogoff (2010) and other more recent research, we find that public debt overhang episodes are associated with growth over one percent lower than during other periods. Perhaps the most striking new finding here is the duration of the average debt overhang episode. Among the 26 episodes we identify, 20 lasted more than a decade. Five of the six shorter episodes were immediately after World Wars I and II. Across all 26 cases, the average duration in years is about 23 years. The long duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that cumulative shortfall in output from debt overhang is potentially massive. We find that growth effects are significant even in the many episodes where debtor countries were able to secure continual access to capital markets at relatively low real interest rates. That is, growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest rates.

Postscript: In this context I love Noah Smith’s Twitter homepage illustration

Here is a link to my 13th column on Quartz: “John Taylor is wrong: The Fed is not causing another recession.” It is the two-paragraph précis of yesterday’s post “Contra John Taylor.”

Twitter provided some reviews of these two pieces that I liked. Here are a few:

• Noah Smith: Miles Kimball bellows, turns green, shreds his clothes, and hurls John Taylor into low Earth orbit
• Daniel Altman: With @TimHarford smacking down Rachman and @mileskimball smacking down Taylor, I think the Internets are won for today.
• Tomas Hirst: An excellent post from @mileskimball explaining why #QE scaremongers are wrong
• Jonathan Prober: Thought your elaboration upon your agreement with Taylor on scope of Fed intertwined with your discussion of SWF was top notch
• Matthew Yglesias

I know that many of you view supplysideliberal.com in ways that don’t let you see the sidebar. So I wanted to make sure you knew how many useful links and other things there are on the sidebar if you go to supplysideliberal.com itself on a device with a full screen. Following my technical expert Diana Kimball’s advice, I have tried to make the sidebar attractive to the eye by sprinkling thumbnail photos throughout the sidebar (often of the header illustrations of key posts). 

The most important innovation on the sidebar are the “sub-blogs” of tagged posts. The sub-blogs look exactly like the blog itself, with one full post after another (not just links), but with only a subset of all the posts. Here are the sub-blogs I have so far (more to come):

http://blog.supplysideliberal.com/tagged/longrunfiscal

http://blog.supplysideliberal.com/tagged/shortrunfiscal

http://blog.supplysideliberal.com/tagged/money

http://blog.supplysideliberal.com/tagged/politics

http://blog.supplysideliberal.com/tagged/reviews

http://blog.supplysideliberal.com/tagged/humor

http://blog.supplysideliberal.com/tagged/happiness

http://blog.supplysideliberal.com/tagged/religionhumanitiesscience

Among the many useful things lower down on the sidebar that you can’t see in my two screen shots above, the most useful is the within-blog search box. I use that all the time to find posts. It has to be at the bottom of the sidebar because the search results appear underneath it.  

Finally, another new addition is the “Top Economics Site” badge which clicks through to an aggregation site that lays out its selection of 100 other economics sites. I like the short description there of this blog so much that I quote it under the badge on my sidebar. Here is that description:

This unique blog by a University of Michigan economics professor applies market-driven and supply-side ideas to issues normally dominated by liberal activists. The result is a fascinating and well-written site that will challenge the assumptions of nearly any reader.  

David Love, whom I only now learn goes by “Dukes,” was a star student in my very advanced “Business Cycles” class at the University of Michigan. He went on to get a Ph.D. in Economics at Yale and become a tenured macroeconomics professor at Williams College. We have stayed in touch over the years, but had not corresponded recently. I share his email a few days ago with his permission:  

Dear Miles,

After a week of continuously visiting and reading your blog, I thought I’d let you know that you’re providing a wonderful public service. There’s a gem in nearly every entry, and I’ve found myself eagerly returning to see whether you’ve posted anything new. If you want to know how influential a good blog can be, consider that I’ve read Chetty’s article on measuring risk aversion; your recent NBER paper on the fundamental aspects of well being; and I just ordered an exam copy of Weil’s textbook on Economic Growth — and all in the week since I started visiting Confessions of a Supply Side Liberal. I was especially touched by your sermon inspired by David Foster Wallace, and I sent it along to friends and family far removed from economics.

There are many economics blogs out there, but yours contains a rare mixture of fine writing, humanity, and Feynman’s pleasure of finding things out. Thanks for putting it out there!

Sincerely,

Dukes