Saturday, April 20, 2013

Paul tries his hand at, 'Nevermind'

But the liberal's conscience doesn't seem to have wholeheartedly endorsed it;
For my vague, unquantifiable sense is that the debacle is changing the conversation quite a lot, even among the guys in suits.  And it was the coding error that did it.  Now, the truth is that the coding error isn't the biggest story; in terms of the economics, the real point is that R-R's results were never at all robust....
The 'coding error' being a mistake in an Excel spreadsheet used by Reinhart and Rogoff--and just admitted to--in a famous paper arguing that a government debt to GDP ratio over 90% has negative consequences for that country's economic growth.

What Krugman is admitting to (sorta) is that that coding error didn't make a whit of difference to their argument, but it did give their critics another excuse to hammer their logic (and about which the critics may be correct).  But, the comments section of Krugman's blog is filled with self righteous denunciations of the dishonesty of Rogoff and Reinhart by people one suspects couldn't use Excel to find the correct discounted present value of their children's allowances.

Entirely lacking is any sense of perspective, which Krugman isn't in any hurry to correct.  Nor is there any shortage of embarrassing errors by supposedly competent economists, published by supposedly reputable sources, over the years that DID have enormous consequences. Say, the one that got the housing bubble started back in the 1990s (we're still suffering from that) from the Boston Fed;
This paper examines mortgage lending and concludes that studies based on data created by the BostonFed should be reevaluated. A detailed examination of these data indicates that irregularities in these data, when combined with the most commonly used research methodology, appear to have biased previous research toward a finding of discrimination against minority applicants. When the most severe data irregularities are eliminated, evidence to support a hypothesis of discrimination disappears. The currently fashionable "flexible' underwriting  standards of mortgage lenders may have the unintended consequences of increasing defaults for the 'beneficiaries' of these policies.   
The reference is to a study supervised by Boston College's Alicia Munnell that was riddled with errors (such as, home loans made with negative interest rates!), but nonetheless was used by housing activists and politicians like Barney Frank to justify the most irresponsible government policies imaginable.

Note how prescient Liebowitz and Day were back in 1998, in that last sentence from their abstract; ...may have the unintended consequences of increasing defaults for the 'beneficiaries' of these policies.

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