'They Said at First That They Hadn't Made a Spreadsheet Error, When They Had'

U.of Massachusetts at Amherst

Thomas Herndon
April 24, 2013

Thomas Herndon, a doctoral student at the University of Massachusetts at Amherst, is the talk of economics after demonstrating flaws in a hugely influential 2010 journal article by the economists Carmen Reinhart and Kenneth Rogoff. They wrote that countries whose debt exceeds 90 percent of gross domestic product suffer "notably lower" economic growth.

Conservative politicians have consistently cited the paper when arguing for austerity measures for nations with faltering economies, as opposed to stimulating those economies with additional government spending and tax decreases.

Now liberal economists, including the Nobel laureate Paul Krugman, are stating more loudly what they said when the Reinhart/Rogoff paper first appeared: The authors failed to demonstrate causality, and it was not clear, and probably impossible to determine, how climbing debt and economic slowdown interacted.

Worse, say the critics, the Reinhart/Rogoff claim was ideology, not social science.

Mr. Herndon, a third-year graduate student, discovered the problems while trying to replicate the economists' paper for an econometrics project. Unable to do so with publicly available documents, he asked Ms. Reinhart and Mr. Rogoff, now both at Harvard, to help; they sent him their spreadsheet of data.

Mr. Herndon, a self-professed skeptic of the "austerity movement," quickly spotted errors in data relating to countries' economic growth and debt levels. When he announced his findings last week in a working paper, they rapidly went viral, in print and online.

As the much-read Business Insider blogger Joe Weisenthal explained in a series of posts, Mr. Herndon and his two co-authors showed various shortcomings in the Reinhart/Rogoff paper, "most stunningly" a spreadsheet error that magnified the effect the authors claimed to demonstrate.

Critics are now saying that error allowed the pair to make their case seem much stronger than it is, an outcome particularly galling to anti-"austerians" because the Reinhart/Rogoff thesis has shaped political decisions over the best way to deal with foundering economies.

Mr. Herndon talked about his findings in a recent conversation with The Chronicle, excerpted here.

Q. Professors Reinhart and Rogoff say your paper actually strengthens their case that growth slows as debt rises. How does that strike you?

A. I was pretty unsatisfied with their response. The purpose of our paper was not to impute any dishonest motives on their part. The thing I was dissatisfied by is they said at first that they hadn't made a spreadsheet error, when they had. In their response, they admit to the original spreadsheet error in one table but then reference a different table and claim that the error does not apply to this table. The error in fact does apply to that table. That didn't make me feel good, at all; it discouraged me.

Q. You say, don't you, that their use of data was faulty?

A. Yes. The terms we used about their data—"selective" and "unconventional"—are appropriate ones. The reasons for the choices they made needed to be given, and there was nowhere where they were.

Q. And how about their claim that your findings support their thesis that growth slows as debt rises?

A. That is not our interpretation of our paper, at all. If you read their paper, it's interesting how they handle causality. They waffle between strong and weak claims. The weak claim is that it's just a negative association. If that's all they claim, then it's not really relevant for policy. But they also make a strong claim, more in public than in the paper, that there's causality going from high debt to drops in growth. They haven't been obvious about that.

Q. Did you study their paper because it has figured so prominently in the austerity movement?

A. Certainly that was one of the reasons. But it all started at the beginning of a semester, when Robert Pollin and Michael Ash [two professors who wrote the working paper with Mr. Herndon] gave a lecture on the use of descriptive statistics to clearly communicate economic ideas. They used the Reinhart/Rogoff paper as an example of a paper that did this excellently.

Q. Paul Krugman wrote in The New York Times that your work confirms what many economists have long intuitively thought. Was that your intuition?

A. Yes. I just thought it was counterintuitive when I first saw their claim. It wasn't plausible.

Q. This is more than a spreadsheet error, then?

A. Yes. The Excel error wasn't the biggest error. It just got everyone talking about this. It was an emperor-has-no-clothes moment.

Q. Have you experienced any resistance after making your findings public?

A. Some people have called our paper malicious and vicious. That's not at all a proper reading. Throughout we've tried to be polite and reasonable.

Q. Have you been getting any work done, with all the media attention? Your findings have been cited favorably by people like the new governor of the Bank of England, and Stephen Colbert had you on his show, noting that, "even worse, none of their pie charts contained real pie."

A. It has been nonstop, all-hours, wall-to-wall interviews. But the media response has been incredibly positive and supportive. I'm grateful for that because I'm a young graduate student without much experience of the media. They haven't chopped up my responses and skewed them.

Q. What will you do with your finding?

A. I'm finishing my doctoral coursework this year, and haven't started on a dissertation. Now it looks like I'm going to keep on this topic, as it relates to financial crises and political economy. This is one of the most important aspects of what we found. I want to do a much more powerful analysis of the data on debt and economic growth.

Clarification and correction (4/24/2013, 9:50 p.m.): 

Mr. Herndon wanted to clarify the nature of the spreadsheet errors, so two  sentences were added to indicate that the errors occurred in two tables. And because of a transcription error, the interview mischaracterized how Mr. Herndon first encountered the Reinhart/Rogoff work. It was in a lecture on the use of descriptive statistics to clearly communicate economic ideas. He was not asked to tell a story using statistics.