The Reinhart – Rogoff Study Controversy

by Pater Tenebrarum
Acting Man

The Study and its Critics

In 2010, Carmen Reinhart and Kenneth Rogoff released an empirical study entitled ‘Growth in a Time of Debt’. After crunching a long list of historical data series, they came to the conclusion that:

“..median growth rates for countries with public debt over 90 percent of GDP are roughly one percent lower than otherwise; average (mean) growth rates are several percent lower.” Countries with debt-to-GDP ratios above 90 percent have a slightly negative average growth rate, in fact.”

Our first objection to the sentence above is that ‘GDP’ is a very poor ‘measure’ of economic growth in the first place. It omits the entire production structure preceding the final goods stage ex ‘durable’ capital investment; it uses ‘hedonic indexing’ in its calculation; and it actually counts government spending as contributing to ‘growth’. A more useless economic statistic is really hard to imagine as far as we’re concerned.

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