Was the evidence for austerity — the economic policy used by governments to reduce budget deficits in difficult economic conditions — based on a faulty Excel spreadsheet? That’s the argument some made after a landmark study published by Harvard University economists Carmen Reinhart and Kenneth Rogoff was revealed to have crucial omissions in its data.
Rogoff and Reinhart’s “Growth in a Time of Debt”, which warned that high debt slows growth, informed many of the world’s austerity programs — that is, until a University of Massachusetts graduate student named Thomas Herndon found a mathematical error involving five excluded rows of data. Reinhart and Rogoff stood by their work, admitting to the errors while claiming they made little difference in the validity of their theories.
Some agreed: “We can debate an exact dollar amount,” Douglas Holtz-Eakin, a former director of the Congressional Budget Office, told BusinessWeek at the time. “But the simple fact that debt ultimately hinders growth is unchanged.” (Getty)