February 19, 2014
"

Two rich economies, relatively similar in structure, reacted very differently to the global financial shock of late 2008. In America output sank sharply but then rebounded to new highs. Employment, by contrast, fell dramatically and has recovered much more slowly; it has yet to regain the pre-crisis peak. In Britain the trends were reversed; employment is setting new highs while output suffered an L-shaped recovery.

The key difference appears to be rates of inflation. Higher inflation in Britain reduced real wages. That, in turn, allowed firms to meet a given level of demand by using more workers less intensively—at lower productivities. In America, by contrast, lower inflation meant that real wages rose over the course of the recession and recovery. Some research results suggests that firms respond to sticky real wages by wringing more output out of existing workers—raising productivity. Firms meet a given level of demand using fewer workers more intensively, resulting in a jobless recovery.

"

Economist

January 18, 2014
Statement From Economists Regarding Minimum Wage

It looks like over at EPI, roughly 75 economists, including 8 former heads of the American Economic Association, have signed a letter urging Congress to raise the federal minimum wage.  Here’s the text of the letter:

Dear Mr. President, Speaker Boehner, Majority Leader Reid, Congressman Cantor, Senator McConnell, and Congresswoman Pelosi:

July will mark five years since the federal minimum wage was last raised. We urge you to act now and enact a three-step raise of 95 cents a year for three years—which would mean a minimum wage of $10.10 by 2016—and then index it to protect against inflation. Senator Tom Harkin and Representative George Miller have introduced legislation to accomplish this. The increase to $10.10 would mean that minimum-wage workers who work full time, full year would see a raise from their current salary of roughly $15,000 to roughly $21,000. These proposals also usefully raise the tipped minimum wage to 70% of the regular minimum.

This policy would directly provide higher wages for close to 17 million workers by 2016. Furthermore, another 11 million workers whose wages are just above the new minimum would likely see a wage increase through “spillover” effects, as employers adjust their internal wage ladders. The vast majority of employees who would benefit are adults in working families, disproportionately women, who work at least 20 hours a week and depend on these earnings to make ends meet. At a time when persistent high unemployment is putting enormous downward pressure on wages, such a minimum-wage increase would provide a much-needed boost to the earnings of low-wage workers.

In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.

Sincerely,

Henry Aaron, Brookings Institution

Katharine Abraham, University of Maryland

Daron Acemoglu, Massachusetts Institute of Technology

Sylvia Allegretto, University of California, Berkeley

Eileen Appelbaum, Center for Economic and Policy Research

Kenneth Arrow, Stanford University*+

David Autor, Massachusetts Institute of Technology

Dean Baker, Center for Economic and Policy Research

William Baumol, New York University+

Jared Bernstein, Center on Budget and Policy Priorities

Josh Bivens, Economic Policy Institute

David Blanchflower, Dartmouth College

Alan Blinder, Princeton University

Heather Boushey, Washington Center for Equitable Growth

Clair Brown, University of California, Berkeley

Gary Burtless, Brookings Institution

David Cutler, Harvard University

Sheldon Danziger, Russell Sage Foundation

Angus Deaton, Princeton University+

Gregory DeFreitas, Hofstra University

Peter Diamond, Massachusetts Institute of Technology*+

Avinash Dixit, Princeton University+

Arindrajit Dube, University of Massachusetts, Amherst

Ronald Ehrenberg, Cornell University

Henry Farber, Princeton University

Nancy Folbre, University of Massachusetts, Amherst

Robert Frank, Cornell University

Richard Freeman, Harvard University

Claudia Goldin, Harvard University+

Robert Gordon, Northwestern University

Darrick Hamilton, The New School

Heidi Hartmann, Institute for Women’s Policy Research

Raúl Hinojosa-Ojeda, University of California, Los Angeles

Harry Holzer, Georgetown University

Marc Jarsulic, Center for American Progress

Lawrence Katz, Harvard University

Melissa Kearney, University of Maryland

Adriana Kugler, Georgetown University

Mark Levinson, SEIU

Frank Levy, Massachusetts Institute of Technology

Lisa Lynch, Brandeis University

Julianne Malveaux, Past President, Bennett College

Ray Marshall, University of Texas, Austin

Alexandre Mas, Princeton University

Eric Maskin, Harvard University*

Patrick Mason, Florida State University

Lawrence Mishel, Economic Policy Institute

Alicia Munnell, Boston College

Samuel Myers, University of Minnesota

Manuel Pastor, University of Southern California

Robert Pollin, University of Massachusetts, Amherst

Michael Reich, University of California, Berkeley

Robert Reich, University of California, Berkeley

William Rodgers, Rutgers University

Dani Rodrik, Institute for Advanced Study

Jesse Rothstein, University of California, Berkeley

Cecilia Rouse, Princeton University

Jeffrey Sachs, Columbia University

Emmanuel Saez, University of California, Berkeley

Isabel Sawhill, Brookings Institution

Thomas Schelling, University of Maryland*+

John Schmitt, Center for Economic and Policy Research

Robert Shapiro, Georgetown University

Heidi Shierholz, Economic Policy Institute

Dan Sichel, Wellesley College

Timothy Smeeding, University of Wisconsin, Madison

Robert Solow, Massachusetts Institute of Technology*+

A. Michael Spence, New York University*

William Spriggs, AFL-CIO

Joseph Stiglitz, Columbia University*

Lawrence Summers, Harvard University

Peter Temin, Massachusetts Institute of Technology

Mark Thoma, University of Oregon

Laura Tyson, University of California, Berkeley

Paula Voos, Rutgers University

* Nobel laureate
+ Has served as American Economic Association president

December 27, 2013
"Here’s an incredible fact: If the typical American family still retained the same share of [national] income that they did in 1970 they would earn about $45,000 more per year. Imagine what our economy would be like if that were the case."

Nick Hanauer

December 16, 2013
"Hristos Doucouliagos and T. D. Stanley (2009) conducted a meta-study of 64 minimum-wage studies published between 1972 and 2007 measuring the impact of minimum wages on teenage
employment in the United States. When they graphed every employment estimate contained in these studies (over 1,000 in total), weighting each estimate by its statistical precision, they found that the most precise estimates were heavily clustered at or near zero employment effects (see Figure 1). Doucouliagos and Stanley’s results held through an extensive set of checks, including limiting the analysis to what study authors’ viewed as their best (usually of many) estimates of the employment impacts, controlling for possible correlation of estimates within each study, and controlling for possible correlation of estimates by each author involved in multiple studies. Doucouliagos and Stanley concluded that their results “…corroborate [Card and Krueger’s] overall finding of an insignificant employment effect (both practically and statistically) from minimum-wage raises.”"

John Schmitt: Why Does the Minimum Wage Have No Discernible Effect on Employment? (2013)

Somewhere in the basement of the Mises Institute, a dark ritual is being performed in an attempt to make this study spontaneously combust in a ball of flame.

December 11, 2013
The Libertarian Welfare State

Bruce Bartlett discusses the Basic Income Guarantee, vis-a-vis Switzerland’s recent proposal to give every citizen the equivalent of $2,800 per month in guaranteed income:

In October, Swiss voters submitted sufficient signatures to put an initiative on the ballot that would pay every citizen of Switzerland $2,800 per month, no strings attached. Similar efforts are under way throughout Europe. And there is growing talk of establishing a basic income for Americans as well. Interestingly, support comes mainly from those on the political right, including libertarians.

The recent debate was kicked off in an April 30, 2012, post, by Jessica M. Flanigan of the University of Richmond, who said all libertarians should support a universal basic income on the grounds of social justice. Professor Flanigan, a self-described anarchist, opposes a system of property rights “that causes innocent people to starve.”

Bartlett quotes F.A. Hayek from Law, Legislation, and Liberty:

The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born.

Milton Friedman also supported a Basic Income Guarantee in the form of a Negative Income Tax:

Friedman’s argument appeared in his 1962 book, “Capitalism and Freedom,” based on lectures given in 1956, and was called a negative income tax. His view was that the concept of progressivity ought to work in both directions and would be based on the existing tax code. Thus if the standard deduction and personal exemption exceeded one’s gross income, one would receive a subsidy equal to what would have been paid if one had comparable positive taxable income.

Bartlett also points to Matt Feeney, writing for Reason, who notes that a Basic Income Guarantee, if it completely replaces the present welfare state, would enhance personal liberty, preserve human dignity, and save money:

one of the tragedies of the current welfare system is that it strips welfare recipients of their dignity while treating many of them like children, and functions on the underlying assumption that somehow being poor means you are incapable of making good decisions.

[…]

Instead of treating those who, often through no fault of their own, have fallen on hard times like children who are incapable of making the right choices about the food they eat or the drugs they may or may not choose to take, why not just give them cash? Doing so would not only cut down on the huge administrative costs of America’s welfare programs, it would also promote personal responsibility and abolish much of the humiliation and stripped dignity associated with the current welfare system.

Obviously this is still government redistribution, and as such, violates the much beloved Non-Aggression Principle that many Libertarians abide by.  Nonetheless, the Basic Income Guarantee strikes me as a perfect example of not allowing the perfect to be the enemy of the good.  If we could eliminate the cumbersome bureaucracies that define the present welfare state, and replace them with a simple cash transfer, that seems like a win for increasing individual liberty and reducing the size of government.  It also takes the fate of the poor out of the hands of government agencies, who may deny someone access to benefits on so little as an outdated form.  If there is such a thing as a Libertarian welfare state, the Basic Income Guarantee is a way to achieve it.

November 26, 2013
"Look at the difference: In 1977 I bought a small house in Portland Oregon for $24,000. At the time I was earning $5 per hour working at a large auto parts store. I owned a 4 year old Chevy Nova that cost $1,500. Now, 36 years later that same job pays $8 an hour, that same house costs $185,000 and a 4 year old Chevy costs $10,000. Wages haven’t kept up with expenses at all. And, I should point out that that $5 an hour job in 1977 was union and included heath benefits."

an anonymous online commenter on the current economy. (via alchemy)

LTMC: When I was working at a gas station, I had an old-timer come in and tell that he used to make $2/hour at a factory job when he was in his late 20’s.  He said he could feed his whole family for the night by buying a 24-cut pizza for $2.  Fast forward to my gas station job, where I was making $8/hour, but a 24-cut pizza in my town costs closer to $20—2.5 times more on a dollar-for-dollar basis.  He said he had no idea how I even survived on what I was making (I was insured through college at the time, but had no savings, and relied on family for large expenses).

This is what people mean when they talk about income inequality.  The reason wages have not kept pace with expenses is because the nation’s previous method of wage redistribution—union representation—has declined substantially.  Wage increases have subsequently been absorbed on an increasingly larger basis by corporate entities and the top 1% of earners.  Strong unions used to serve as a soft redistribution mechanism to help ensure that increases in prosperity were shared equally.  A critical mass of union representation in the labor force has always had derivative wage benefits in the non-union labor market.  That critical mass no longer exists, however.  Consequently, the decline of union labor has led to a concurrent decline in wages relative to expenses, because there’s no longer an institutional mechanism for redistribution of earnings increases in the economy.  The critical mass of union representation is gone, and nothing has taken its place.

(Source: han-nara, via cognitivedissonance)

November 6, 2013
pol102:

From politicalprof:

Many conservatives insist that increasing the money supply (the blue line in the graph above), will inevitably lead to massive increases in inflation (the red line). 
To which all one can say is: anything is possible. But the recent record suggests such fears are overblown …
ht: An Economist’s View

When opinions and data collide, I always go with data.

LTMC: To play devil’s advocate for a moment, some economists would argue that this graph misattributes inflation to the CPI.  Inflation is simply an increase in the money supply.  An increase in prices is rather a symptom of inflation, not inflation per se.  We also don’t see represented here what the effect would have been if the money supply were not increased.  Presumably we would have had a decrease in the price index (or if you prefer, “deflation”), relative to the current baseline.
Plenty of economists would view deflation as a bad thing.  But there are others who would view such deflation as merely the hangover from decades of artificial growth fueled by inflationary monetary policy.  Under this view, deflation would actually be a good thing, because it is the first step on the road to a healthy economy where prices come closer to representing real (rather than artificial) wealth, as opposed to a proxy hybrid of the former and latter.  The business cycle would finally have time to readjust.  Deflation represents that adjustment.
I’m not saying I agree with any of this.  But I do think these ideas need to be addressed to get a complete picture of the economy.  2% price inflation is a great target (and even higher inflation might be better under certain circumstances).  But we ought to reckon with the idea that there may be additional consequences to increasing the money supply over and above increases in the consumer price index—consequences which we can’t see on this graph.  And I say this as a guy who thinks Keynes mostly had the right idea.

pol102:

From politicalprof:

Many conservatives insist that increasing the money supply (the blue line in the graph above), will inevitably lead to massive increases in inflation (the red line). 

To which all one can say is: anything is possible. But the recent record suggests such fears are overblown …

ht: An Economist’s View

When opinions and data collide, I always go with data.

LTMC: To play devil’s advocate for a moment, some economists would argue that this graph misattributes inflation to the CPI.  Inflation is simply an increase in the money supply.  An increase in prices is rather a symptom of inflation, not inflation per se.  We also don’t see represented here what the effect would have been if the money supply were not increased.  Presumably we would have had a decrease in the price index (or if you prefer, “deflation”), relative to the current baseline.

Plenty of economists would view deflation as a bad thing.  But there are others who would view such deflation as merely the hangover from decades of artificial growth fueled by inflationary monetary policy.  Under this view, deflation would actually be a good thing, because it is the first step on the road to a healthy economy where prices come closer to representing real (rather than artificial) wealth, as opposed to a proxy hybrid of the former and latter.  The business cycle would finally have time to readjust.  Deflation represents that adjustment.

I’m not saying I agree with any of this.  But I do think these ideas need to be addressed to get a complete picture of the economy.  2% price inflation is a great target (and even higher inflation might be better under certain circumstances).  But we ought to reckon with the idea that there may be additional consequences to increasing the money supply over and above increases in the consumer price index—consequences which we can’t see on this graph.  And I say this as a guy who thinks Keynes mostly had the right idea.

June 12, 2013
The Diamond Sham

Rohin Dhar, back in March, said that engagement rings are a sham, and it’s time that we stop asking men (or women, as the case may be) to buy them:

Americans exchange diamond rings as part of the engagement process, because in 1938 De Beers decided that they would like us to. Prior to a stunningly successful marketing campaign 1938, Americans occasionally exchanged engagement rings, but wasn’t a pervasive occurrence.

Not only is the demand for diamonds a marketing invention, but diamonds aren’t actually that rare. Only by carefully restricting the supply has De Beers kept the price of a diamond high.

Countless American dudes will attest that the societal obligation to furnish a diamond engagement ring is both stressful and expensive. But here’s the thing - this obligation only exists because the company that stands to profit from it willed it into existence.

Dhar continues:

A diamond is a depreciating asset masquerading as an investment. There is a common misconception that jewelry and precious metals are assets that can store value, appreciate, and hedge against inflation. That’s not wholly untrue…Diamonds, however, are not an investment. The market for them is neither liquid nor are they fungible.

Edward Epstein puts numbers on the issue:

Because of the steep markup on diamonds, individuals who buy retail and in effect sell wholesale often suffer enormous losses. For example, Brod estimates that a half-carat diamond ring, which might cost $2,000 at a retail jewelry store, could be sold for only $600 at Empire.

In other words, when you buy a diamond for your significant other, you’re not buying an appeciating asset, as many people probably think.  Your spouse’s diamond ring is more comparable to a used car than a precious work of art.

A friend of mine has a mother who works as a jeweler, and confirmed Dhar’s conclusions.  She said that a ring actually loses value when it has a diamond in it, because it costs jeweler’s more money than it’s worth to remove the diamond and resell them.  Plain wedding bands are actually a much better investment.  Diamond rings, however, are a no more reliable store of value than your 1996 Ford Taurus with missing mirrors and a rusted tailpipe.

To quote Fiona Apple:
Don’t understand about Diamonds
And why men buy them
What’s so impressive about a Diamond 
Except the mining?”

June 2, 2013
Debating the Minimum Wage

In a debate about the minimum wagerunningrepublican offers the following comments:

Here’s what we know. There is a federal minimum wages and state minimum wages. Businesses are required by law to pay people at that rate. Right now federal minimum wage is $7.25 per hour. At this current state of our economy, we are coming out of a recession much slower than what needs to happen. A big part of this is because there is a large degree of uncertainty right now. Companies don’t know how much it will cost to hire new employees. So they don’t hire people.

You might say “BUT BUT UNemployment IS goint doWn”. However unemployment is measured by counting exactly how many people file for unemployment. This is an innacurate measurement and stops counting people who become discouraged workers and go off unemployment. This also does not count part time workers who often still need more work. The true measure of how many people are working should be the CLFPR. The civillian labor force participation rate. It the percentage of working age Americans that are employed.

As you can see.the percentage is steadily declining since around January 2007.

The economy is on a razors edge, anything could happen. One of the reasons there is uncertainty is talks of minimum wage increasing.

Lets tackle the first reason. Minimum wage is intended to aid low wage earners. These people are usually unskilled workers, people who can not work another job (sometimes disability) and people like me, college students who are home for the summer. According to eh Bureau of Labor Statistics, 49% of minimum wage earners are younger than 24. Of this 49% of workers 62% live in families that have two to three times the income of the poverty line. This same ages experience the highest levels of unemployment. People younger than 25 have an unemployment rate of 16.2% over double the national unemployment rate. Keep in mind, earlier I said that unemployment understates the ammount of people not working. The other 51% of people are people who live in ususally poor but not impoverished families. 24.8% of those people are employed voluntarily working part-time. Only 4.7% of people who earn minimum wage are older than 25 and are main income earners. This proves that raising minimum wage, all negative effects aside, would be inneffective. It would not decrease the number of people on government welfare. 

“But if we can help that small percent…” 

Raising unemployment would not help. Uncertainty is a huge factor to employers. People often forget that employers do not hire people only because they need work done, they also must consider the cost of this persons salary or wage, the cost of health care if the employer provides that and if the total of these costs will be less than or equal to the ammount of work the person will do. An employer will not higher if it is cost inefficient to hire a worker. I could go on about healthcare too as another cause of uncertanty for employers. With Obamacare, many employers must either cut a workers hours so they do not meet the regulatory 30 hours per week or they must fire employees. The slow recovery would be halthed if minimum wage is raised. 

One of the biggest mistakes that armchair economists make is stating a theory for which there is evidence as an absolute unimpeachable fact. While it is true that the majority of economists believe that minimum wage laws increase unemployment, there is a lot of nuance beneath this general proposition that gets lost if you don’t interrogate the data correctly.

First, it should be obvious to anyone that a minimum wage law that increases the wage floor too far above what the market will tend to bear will have a negative effect on employment.  So when minimum wage critics ask, “why not raise the minimum wage to $100?”, they’re not actually asking a terribly profound question.  The answer is quite simple: that would be dumb, because the shock to the labor market would be so severe that it would upend the economy—just as converting America’s fiat currency back to a gold standard would likely cause a monetary contraction so large that it would cause a global depression.

Second, there have been many studies which suggest that minimum wage ordinances which do not raise the wage floor beyond an unreasonable level are economically beneficial (or at least have no negative effects on unemployment).   Schmitt (2013) concluded that “The weight of that evidence points to little or no employment response to modest increases in the minimum wage.”  Allegreto et al. (2010) concluded that “[i]ncluding controls for long-term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities [for teenage employment] indistinguishable from zero and rules out any but very small disemployment effects.”  Reich et al. (2010) found that “Increasing the minimum wage does not lead to the short- or long-term loss of low-paying jobs[.]”  Dube et al. (2010) concluded that “On balance, case studies have tended to find small or no disemployment effects,” and that traditional [analytical] approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies.”  Thompson (2008) found that in Indiana and surrounding midwestern states, “minimum wage increases did not have a significant impact on employment growth in the region controlling for state GDP and population growth.”  And of course, there is the infamous Card & Kreuger study, which found no negative unemployment effect when New Jersey raised its minimum wage in 1992.  Additionally, Magruder (2011) found evidence that a minimum wage drove industrialization in Indonesia, citing “strong trends” indicating “formal employment increases and informal employment decreases in response to the minimum wage.”  Fleck (2008) noted that New Deal programs had a similar effect on labor markets in the American South due to Farm programs and Labor law changes,  

Third, minimum wage critics often fail, as the bolded text above states, to account for other economic causes of unemployment when analyzing the negative effects of minimum wage increases.  One of the strongest examples is the fact that between 1967 and 2010, the real purchasing power of the federal minimum wage fell by 20%, because it failed to keep pace with inflation.  In order minimum wage earners to be earning the same amount of wages relative to their 1967 peers, they would have to be earning roughly $8.70 an hour.  Keep in mind that U-3 unemployment in 1967 was at 3-4%.  So the idea that the minimum wage is currently driving any substantial economic woes—whether for low wage earners or otherwise—does not hold up to historical analysis.  Recent research in jurisdictions with $10.00+ minimum wage ordinances has tended to confirm this, i.e.  research examining wage hike effects in San Francisco and Santa Fe, N.M. (which offers the country’s second-highest minimum, $10.51 an hour), echoes the Berkeley center’s findings.”

Is all of this unimpeachable?  Of course not.  There are plenty of scholars that disagree with the work cited above.  But the point is that condemning the minimum wage wholesale as an economic policy tool obscures a ton of nuance in how minimum wage policy is implemented.  While a $100 minimum wage hike would clearly be catastrophic, there is a lot of evidence that modest minimum wage increases have little to no negative effects on unemployment. 

 

(via raceandeconomics-deactivated201)

April 23, 2013
An Economy Of Error?

Lynn Stuart Parramore discusses the work of an economics grad student who recently blew the lid off Reinhart and Rogoff’s infamous study concluding that a 90% or higher GDP-to-debt ratio results in dramatic reductions in economic growth:

Since 2010, the names of Carmen Reinhart and Kenneth Rogoff have become famous in political and economic circles. These two Harvard economists wrote a paper, “Growth in the Time of Debt” that has been used by everyone from Paul Ryan to Olli Rehn of the European Commission to justify harmful austerity policies. The authors purported to show that once a country’s gross debt to GDP ratio crosses the threshold of 90 percent, economic growth slows dramatically. Debt, in other words, seemed very scary and bad.

Parramore notes that austerity advocates have used the Reinhart-Rogoff study to justify the implementation of austerity measures in multiple countries.  There is one tiny problem, however: the Reinhart-Rogoff data spreadsheet contains a massive error:

Enter Thomas Herndon, Michael Ash and Robert Pollin of University of Massachusetts, Amherst, the heroes of this story. Herndon, a 28-year-old graduate student, tried to replicate the Reinhart-Rogoff results as part of a class excercise and couldn’t do it. He asked R&R to send their data spreadsheet, which had never been made public. This allowed him to see how the data was put together, and Herndon could not believe what he found. Looking at the data with his professors, Ash and Pollin, he found a whole host of problems, including selective exclusion of years of high debt and average growth, a problematic method of weighing countries, and this jaw-dropper: a coding error in the Excel spreadsheet that excludes high-debt and average-growth countries.

What’s the end result?

In their newly released paper, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff” Herndon, Ash and Pollin show that “when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0:1 percent as published in Reinhart and Rogoff. That is, contrary to R&R, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower.”

I imagine that Reinhart and Rogoff are gearing up for a response.  Meanwhile, Parramore also links us to Daniel Schuchman at Forbes, who appears to have quickly respun this fairly devastating academic take-down as simply a sign that “academic economics, like many social sciences, is grounded in hubris and pseudo-precision.”  

Perhaps so.  But but I don’t think this requires throwing the baby out with the bathwater.  Indeed, we needn’t draw any conclusion from this episode other than the narrow one it stands for: there’s nothing automatically devastating about the 90% GDP-to-debt ratio.  It would be a mistake to conclude that this justifies terminal apathy about the size of the public debt, just the same as it would be to conclude that discrediting the Reinhart-Rogoff study leaves austerity policies with no other legs to stand on.  Nonetheless, it seems proponents of the latter will have to rely on other metrics going forward, as the methodology of the Reinhart-Rogoff study appears to be terminally flawed.

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