Randy Wray — No, Rogoff And Reinhart, This Time Is Different! Sloppy Research And No Understanding Of Sovereign Currency

Carmen Reinhart and Ken Rogoff came as close to celebrity status as an economist can ever come, with their book, This Time Is Different. They claimed that 800 years (!) of financial history proves that high government debt ratios lead to low economic growth. Governments all over the world took heed and downsized, adopting austerity that cost millions upon millions of workers their jobs.

But it was all a lie. Yes, a lie. They screwed up their data analysis. Like so many times before—think Larry Summers at Harvard, Chicago’s Gene Fama, or Charles Plosser at the University of Rochester—the economists reach results counter to intuition and the real world.

Their work doesn’t pass the smell test: if it smells like nonsense it probably is nonsense.

Yeva Nersisyan (my brilliant student and coauthor) and I critiqued their book soon after it came out; see here: http://www.levyinstitute.org/pubs/wp_603.pdf. To put our conclusions as simply as possible, we concluded that they didn’t know what they are talking about.

Economonitor — Great Leap Forward
No, Rogoff And Reinhart, This Time Is Different! Sloppy Research And No Understanding Of Sovereign Currency
L.Randall Wray | Professor of Economics, UMKC