Researchers at the National Institutes of Health are diligently mapping all 100 trillion neural connections between our 86 billion neurons, and President Obama has just announced a $100 million Brain Research Through Advancing Innovative Neurotechnologies Initiative that will study all those networks in action.

The neurologist Robert Burton is skeptical, to say the least. His new book, "A Skeptic's Guide to the Mind," is a scathing indictment of reductionism in all its guises, and a stirring call to consider whether scientists are even asking the right kinds of questions.

... Given our brain's tendency to seek out patterns and avoid ambiguity, we are physiologically condemned to question the very entity that is responsible for generating the questions.

[...] We can study brain function and ultimately arrive at a good working model of how the brain works. However, there is no scientific method to address subjective experience...

[...] Believing that knowledge of brain wiring can tell us the nature of consciousness is like predicting what sound will come out of a set of speakers by looking at wiring diagram of the component parts.

- Jake

Friends come and go. Enemies accumulate.

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.

Choice of endpoints. Classic cheating.
And the bucketing is another fiddle.
But the best is yet to come : error in the friggin' spreadsheet excluding certain countries!

Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious Problems. | Next New Deal

If this error turns out to be an actual mistake Reinhart-Rogoff made, well, all I can hope is that future historians note that one of the core empirical points providing the intellectual foundation for the global move to austerity in the early 2010s was based on someone accidentally not updating a row formula in Excel.

So what do Herndon-Ash-Pollin conclude? They find "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 [Reinhart-Rogoff claim]." Going further into the data, they are unable to find a breakpoint where growth falls quickly and significantly.

Score one for transparency. Somebody tell the ECB.

_{It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II}

The others are just as serious and frankly more worrying from a bias point of view.

What it highlights most of all is that the assumptions at work in processing the data have deep implications. Which is a big problem even if the profession were more diligent (unlikely as that is in economics.) It's a big problem because journalists are never going to be more diligent. So policymaking is always going to be vulnerable to this kind of misleading work...

I have sent a note to Martin Wolf (of the FT), maybe he can give this a bit more publicity. Has Krugman written about this (not that it will make a difference)?

Wind power

I am guessing that the hidden story is where total debt is involved and the correlations will start to show when the game of peak oil musical chairs starts to play out. Once it is understood that the current amount of debt (and wealth) cannot be materialized period as it exceeds in multiples the planet's resources.

Orthodoxy is not a religion.

Microsoft Excel: The ruiner of global economies?

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

Speaking at conference [ECB Board member Joerg Asmussen] said abandoning the tough reforms and raising spending instead would not solve the debt crisis and would merely shift the problems to the future. He said:

It is an illusion to think that more debt is the answer to this debt crisis. Recent research has shown that high public debt levels in the euro area hamper growth, with a serious negative effect starting when debt exceeds 90% of GDP.

While the spreadsheet problems in Reinhart and Rogoff's analysis are the most most obvious mistake, they are not as economically significant as the two other issues identified by Herndon, Ash, and Pollin: country weighting (weighting average GDP for each country equally, rather than weighting country-year observations equally) and data exclusion (the exclusion of certain years of data for Australia, Canada, and New Zealand). According to Table 3 in Herndon et al., those two factors alone reduced average GDP in the high-debt category from 2.2% (as Herndon et al. measure it) to 0.3%.*

In their response, Reinhart and Rogoff say that some data was "excluded" because it wasn't in their data set at the time they wrote the 2010 paper, and I see no reason not to believe them. But this just points out the fragility of their methodology. If digging four or five years further back in time for just three countries can have a major impact on their results, then how robust were their results to begin with? If the point is to find the true, underlying relationship between national debt and GDP growth, and a little more data can cause the numbers to jump around (mainly by switching New Zealand from a huge outlier to an ordinary country), then the point I take away is that we're not even close to that true relationship.

In their response, Reinhart and Rogoff also argue that it is correct to weight by country rather than by country-year. Their argument is basically that weighting by country-year would overweight Greece and Japan, which had many years with debt above 90% of GDP. Herndon et al. recognize this point:

   "RR does not indicate or discuss the decision to weight equally by country rather than by country-year. In fact, possible within-country serially correlated relationships could support an argument that not every additional country-year contributes proportionally additional information. . . . But equal weighting by country gives a one-year episode as much weight as nearly two decades in the above 90 percent public debt/GDP range."

Both weighting methods are flawed. (Country-year weighting is only flawed if there is serial correlation, which there probably is; if the U.K.'s nineteen years with debt greater than 90% of GDP were independent draws, then it should be weighted 19 times as much as a country with only one such year.) But this brings me to the same point as above: if your results depend heavily on the choice of one defensible variable definition rather than another, at least equally defensible definition, then they aren't worth very much to begin with.

Suffice it to say that Reinhart & Rogoff were wounded by a paper that showed that their data was flawed. They defended themselves, and were also defended by numerous economists around the world who argued that although the data might be flawed, the economic analysis justified their conclusions. But the next day, the Rortybomb blog delivered the killer punch. Econometric analysis by Arindrajit Dube demonstrated that even with good data, the economic analysis was flawed and the conclusions unjustifiable. High public debt cannot reliably be shown to cause low growth. But low growth can reasonably reliably be shown to cause high public debt.

This is a no-brainer, actually. There are two reasons for this.

Frances Coppola is always worth reading.

The blow-up over the Reinhart-Rogoff results reminds me of a point I've been meaning to make about our ability to use empirical methods to make progress in macroeconomics. This isn't about the computational mistakes that Reinhart and Rogoff made, though those are certainly important, especially in small samples, it's about the quantity and quality of the data we use to draw important conclusions in macroeconomics.

...

The point is that for a variety of reasons - the lack of experimental data, small data sets, and important structural change foremost among them - empirical macroeconomics is not able to definitively say which competing model of the economy best explains the data. There are some questions we've been able to address successfully with empirical methods, e.g., there has been a big change in views about the effectiveness of monetary policy over the last few decades driven by empirical work. But for the most part empirical macro has not been able to settle important policy questions. The debate over government spending multipliers is a good example. Theoretically the multiplier can take a range of values from small to large, and even though most theoretical models in use today say that the multiplier is large in deep recessions, ultimately this is an empirical issue. I think the preponderance of the empirical evidence shows that multipliers are, in fact, relatively large in deep recessions - but you can find whatever result you like and none of the results are sufficiently definitive to make this a fully settled issue.

I used to think that the accumulation of data along with ever improving empirical techniques would eventually allow us to answer important theoretical and policy questions. I haven't completely lost faith, but it's hard to be satisfied with our progress to date. It's even more disappointing to see researchers overlooking these well-known, obvious problems - for example the lack pf precision and sensitivity to data errors that come with the reliance on just a few observations - to oversell their results.

Reinhart and Rogoff's errors, I suspect, reflect a culture which prizes brilliance - and no-one doubts that Rogoff is brilliant - over dull pedantry.

Evil it is then?

Be nice to America. Or we'll bring democracy to your country.

... while a nonlinearity may be expected at high ratios due to a tipping point, the stronger negative relationship at low ratios is difficult to rationalize using a tipping point dynamic.

sigh

A non-linear Emergent Property tipping point can occur in either a positive or negative summation (aka, non-dissipative) Feedback Loop.  

There's a serious flaw in the Model if it cannot handle such things.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre