Greg Mankiw On Reinhart-Rogoff: Hey, Everybody Makes Mistakes

Far from surrendering, the defenders of austerity are digging deeper.

The latest to join the resistance is Harvard's Gregory Mankiw, a former adviser to President George W. Bush and presidential candidate Mitt Romney. In a blog post, he comes to the aid of his fellow Harvard economists, Carmen Reinhart and Kenneth Rogoff, whose oft-cited research on government debt and economic growth was recently revealed to be full of mistakes, which the economists have compounded with still more mistakes.

"Everybody makes mistakes," writes Mankiw, who happens to be the chairman of the economics department that employs Reinhart and Rogoff. Even he, Greg Mankiw, made a mistake once, he admits. It was a technical mistake in a paper not related to austerity.

Of course, Mankiw's mistake was not used repeatedly as a cudgel to beat governments into austerity, as Reinhart and Rogoff's mistakes were. But who's counting? Aside from starving Greek children, I mean. And the Greek environment. And U.S. air travelers. And American children on food stamps. And the U.S. military. And 12 million unemployed Americans. Other than that small group of people, who's counting?

Certainly not Greg Mankiw. He dismisses the idea that Reinhart and Rogoff's paper was all that influential anyway, saying it wasn't the only reason governments in the U.S. and Europe went on an austerity craze in the middle of a rolling global depression. And he's right about that: There were other reasons! For example, Greg Mankiw's own earlier papers suggesting that government debt is a bad thing that can cause all sorts of nasty problems, if government borrowing "crowds out" the borrowing of corporations, or if bond investors all at once decide to jack up interest rates.

Neither of those things have happened to the U.S. government, nor to the Japanese government, whose borrowing binge has been even longer than that of the United States. But Mankiw still firmly believes that debt is bad because it just has to be bad, doggone it.

Mankiw's view echoes that of Erskine Bowles, who has been telling everybody who will listen that, despite the flaws of Reinhart-Rogoff, it just feels right, it's just "common sense," that people, and companies and governments should avoid debt.

So despite declarations that the war between pro- and anti-austerity factions is over, and despite the debunking of Reinhart and Rogoff, austerity fanatics have not given up. That's because their fanaticism is not based on numbers, but on a feeling.



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