Author Topic: Austerity and excel error  (Read 644 times)

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Offline Quesi

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Austerity and excel error
« on: April 30, 2013, 07:23:03 AM »

All the conspiracy talk in another thread got me thinking about the current news about how international austerity measures, which are causing riots and suffering among low and moderate income families all over the world, were being justified by a study that contained a spreadsheet error.

Is anyone following this story? 

So these Harvard economists (Reinhart-Rogoff) put together a study which presented evidence that after a certain threshold in the ratio between GDP and debt, a nation’s economy goes into freefall collapse.

Don’t yawn.  I promise.  This is fun.

So their study was so impressive, that it was cited by US republicans to support their economic policies, and perhaps more importantly, was adopted by various European policy makers to justify horribly painful austerity policies in places like Greece.  Millions of people’s lives have been impacted by policies that have been implemented as a result of this study. 

There was no peer review of their study, but it became widely accepted as fact, and the evidence that they presented seemed so strong, that it became really hard to argue for policies that did not promote the slashing of funds to provide infrastructure and safety nets for the poor. 

Then some UMASS student studied their data, and found out that they had made a little error in their spreadsheet.  Basically, they didn’t pull the little cross symbol down to the bottom of a column, and as a result, left out a portion of the data that was used to create their calculation.



When the data was factored in to the equation, instead of a 1.1 decline, the data provided evidence of a 2.2 growth factor at the threshold of 90 and above. 

Ooops. 

I kind of felt sorry the professors at first.  I mean, I spend a lot of time working with data in excel spreadsheets, and I can see making a simple, innocent error like that.  Of course, I don’t have Harvard quality resources available to me to check my work. 

But it was their response to the error that is so outrageous. 

They said:
“The weight of the evidence to date, including this latest comment (by Herdon) seems entirely consistent with our original interpretation of the data. “

Colbert responded with this commentary: 

“Right, because no matter how much the results change, the hypothesis must remain the same.”



http://www.colbertnation.com/the-colbert-report-videos/425748/april-23-2013/austerity-s-spreadsheet-error

Offline Nick

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Re: Austerity and excel error
« Reply #1 on: April 30, 2013, 08:18:19 AM »
Never made sense to me how the economy could improve if you cut programs.  You just put more people out of work which affects buying and on and on.  The     top 1% control over 90% of the wealth in the world.  Wages for middle class families has dropped or stayed the same for 10 to 20 years now.  Taking the safety net away just seems cruel and nuts.

But then I'm just an atheist demonspawn...so never mind.
Yo, put that in your pipe and smoke it.  Quit ragging on my Lord.

Tide goes in, tide goes out !!!

Offline screwtape

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Re: Austerity and excel error
« Reply #2 on: April 30, 2013, 08:31:15 AM »
I've been following it closely.  Krugman has had a lot to say about it.  He's been against it from the start, but then, he's a Keynesian. 

And not only was the excel error a problem, but R&R exclused excluded important data and exaggerated the correlation of others.  In all, austerity was a sham.

Some linky-poos.
http://www.nextnewdeal.net/rortybomb/researchers-finally-replicated-reinhart-rogoff-and-there-are-serious-problems
http://www.dailykos.com/story/2013/04/26/1204927/-NYT-It-s-Krugman-Vs-Reinhart-Rogoff-Who-Trivialize-Their-Incompetence-And-Attack-Left

Daily Kos has a ton of links to krugman and other economists who throroughly trashed R&R.  I just didn't have the time to look them all up.
« Last Edit: May 01, 2013, 07:13:41 AM by screwtape »
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Offline screwtape

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Offline Quesi

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Re: Austerity and excel error
« Reply #4 on: April 30, 2013, 10:16:52 AM »

Some linky-poos.
http://www.nextnewdeal.net/rortybomb/researchers-finally-replicated-reinhart-rogoff-and-there-are-serious-problems

Wow. 

Selective Exclusions. Reinhart-Rogoff use 1946-2009 as their period, with the main difference among countries being their starting year. In their data set, there are 110 years of data available for countries that have a debt/GDP over 90 percent, but they only use 96 of those years. The paper didn't disclose which years they excluded or why.

Herndon-Ash-Pollin find that they exclude Australia (1946-1950), New Zealand (1946-1949), and Canada (1946-1950). This has consequences, as these countries have high-debt and solid growth. Canada had debt-to-GDP over 90 percent during this period and 3 percent growth. New Zealand had a debt/GDP over 90 percent from 1946-1951. If you use the average growth rate across all those years it is 2.58 percent. If you only use the last year, as Reinhart-Rogoff does, it has a growth rate of -7.6 percent. That's a big difference, especially considering how they weigh the countries.


And that is compounded by the unequal weighting, also described in this article, AND the coding error? 

This isn't just sloppy.  This is intentional. 


Offline screwtape

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Re: Austerity and excel error
« Reply #5 on: April 30, 2013, 10:38:59 AM »
yeah.  anyone still prescribing austerity is either a complete idiot, a recluse or megawealthy.

http://www.nytimes.com/2013/04/26/opinion/krugman-the-one-percents-solution.html

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Offline screwtape

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Offline jaimehlers

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Re: Austerity and excel error
« Reply #7 on: April 30, 2013, 10:44:17 AM »
Quesi, I don't really understand your explanation of the error they made.  I don't do a lot of work with spreadsheet formulas, so I don't see the significance of what you said (aside from the conclusion; it's the explanation I'm not quite following).

Offline screwtape

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Re: Austerity and excel error
« Reply #8 on: April 30, 2013, 10:50:13 AM »
To make a calculation you must select the cells in which the data resides. They did not select all the correct cells.  That was just a basic error, but it changed the results from supporting their claims to refuting it. 

They made other... errors, to put it generously, in their analysis.  They excluded data that contradicted their conclusion their and put greater weight on data that supported their conclusion. So top to bottom their study is a failure.

The bottom line is, in a recession, cutting government spending is the opposite of what you should do.  You make the cuts when the economy is healthy.  Classic Keynes.  Evidence is born out all across Europe


edit: exclused --> excluded
« Last Edit: May 01, 2013, 07:10:20 AM by screwtape »
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Offline Quesi

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Re: Austerity and excel error
« Reply #9 on: April 30, 2013, 11:14:26 AM »
Quesi, I don't really understand your explanation of the error they made.  I don't do a lot of work with spreadsheet formulas, so I don't see the significance of what you said (aside from the conclusion; it's the explanation I'm not quite following).

Ok.  Look under the column labeled "L" on the spreadsheet image.  You see it contains data from 19 countries, and at the bottom of the column, you see that there is a formula designed to determine the "average." 

Now see the blue box around some of the data contained in column L?  The blue box shows what items are selected to be part of the "average," which is determined in cell L51.  As you see, the blue box does not contain ALL of the data included in column L.  So the data contained outside of the blue box is not included in the calculations.  So basically, the person creating the spreadsheet did not drag the blue box down to the bottom of the column. 

Now if you are obsessive about numbers, and added up the numbers displayed on this sheet, you might notice that you don't get either the -1.1 or 2.2 that all of the experts are talking about.  Screwtape seems way more informed than I am on this issue, and perhaps he can clarify if the average in column L ends up in another calculation elsewhere.  I just grabbed this graphic from google images, since I had seen it used in several news articles. 

But anyone who uses excel on a regular basis understands the significance of a box around a portion of the data that was not dragged down to the bottom of the column.  It is an easy, novice mistake, that can happen if you create a formula, and then add additional rows, if you have a typo in your formula, or if you literally just don't drag the box down to the bottom. 

Does that make sense? 

Offline Irish

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Re: Austerity and excel error
« Reply #10 on: April 30, 2013, 11:45:25 PM »
I saw this story and the UMASS student on Jon Stewart's show.  At that time and after looking up a few articles about the story I had no idea what any of this was about.  I am a science guy... economics application and theory is completely foreign territory to me and way over my head.  :o

But I can say that from just this thread I've learned more about the news events of the article and theory behind what's wrong with the Harvard researchers economics than any article I've read.
La scienze non ha nemici ma gli ignoranti.

Offline jaimehlers

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Re: Austerity and excel error
« Reply #11 on: May 01, 2013, 09:26:13 AM »
I did some poking around after I posted that, and realized what the problem was.  An elementary error, indeed.

Offline screwtape

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Re: Austerity and excel error
« Reply #12 on: May 07, 2013, 10:50:32 AM »
Since this is sort of the Economics thread, here is a good piece by Joe Stiglitz.

http://blog-imfdirect.imf.org/2013/05/03/the-lessons-of-the-north-atlantic-crisis-for-economic-theory-and-policy/

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Offline LoriPinkAngel

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Re: Austerity and excel error
« Reply #13 on: May 07, 2013, 12:59:04 PM »
Hydrofracking makes your ass look better in jeans!  ;D
It doesn't make sense to let go of something you've had for so long.  But it also doesn't make sense to hold on when there's actually nothing there.

Offline LoriPinkAngel

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Re: Austerity and excel error
« Reply #14 on: May 07, 2013, 01:03:38 PM »
I made a bad excel error once on a urine specific gravity analysis.  It made it appear that a group of my Anatomy Class was severely dehydrated and should be hospitalized immediately.  :-[
It doesn't make sense to let go of something you've had for so long.  But it also doesn't make sense to hold on when there's actually nothing there.

Offline pianodwarf

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Re: Austerity and excel error
« Reply #15 on: May 07, 2013, 01:20:18 PM »
I made a bad excel error once on a urine specific gravity analysis.  It made it appear that a group of my Anatomy Class was severely dehydrated and should be hospitalized immediately.  :-[

I hear you.  It's amazing what kind of trouble you can get yourself into when you work with computers.

I work in desktop support myself.  I've never almost had anyone hospitalized, but I once accidentally trashed a two million dollar medical experiment because I didn't know that connecting to a computer remotely would lock up all the specialized lab equipment that was attached to it.  Shortly thereafter, pianodwarf found himself looking for a new job.  :-(
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Offline nogodsforme

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Re: Austerity and excel error
« Reply #16 on: May 07, 2013, 04:21:08 PM »
I have lost entire rows of student grades in Excel. I try to write everything on an old-fashioned pencil and paper sheet before I enter grades on the computers. I tell students to keep all their assignments until they get their final grades.

And I always give students the benefit of the doubt if they say I made a mistake. I check and if I can't find it, I still give the students some points. It's just not worth it to freak people out over a few points on an assignment.

As opposed to ruining the entire global economy based on faulty data....SH!T ON A SHINGLE. I heard a report about sick people in Greece not getting medication because the government no longer had the money to pay for the drugs. How come the people who do this don't end up in jail?
Extraordinary claims of the bible don't even have ordinary evidence.

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Online Willie

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Re: Austerity and excel error
« Reply #17 on: May 07, 2013, 08:46:26 PM »
As opposed to ruining the entire global economy based on faulty data....SH!T ON A SHINGLE. I heard a report about sick people in Greece not getting medication because the government no longer had the money to pay for the drugs. How come the people who do this don't end up in jail?

The purveyors of trickle-down economics did not reach their economic conclusions because of this paper. They've just been using it to prop up what they already believe. It's an irrationally held belief, much like creationism. They adhere to it because they're convinced that it is right in some moral sense, so they seize upon whatever supportive evidence or specious rationalizations they can find, and ignore whatever doesn't fit, in order to maintain their belief. They'd be pushing this same crap with or without this paper, no matter how many times Keynesian policies succeed, and no matter how many times, or how spectacularly, their own economic policies fail.

« Last Edit: May 07, 2013, 08:51:04 PM by Willie »