Oops! – Spreadsheet Error Invalidates Austerity Study

How a student took on two Harvard economists over their pro-austerity study — and won

Their study, which found economic growth slows dramatically when a government’s debt exceeds 90% 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%, instead of the slump to minus 0.1% that Reinhart and Rogoff predicted.

This is a bit scary in that so many governments have used this study as a justification for austerity measures.

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