Krugman: Academic Non-Obscurity

[Scuba]

http://krugman.blogs.nytimes.com/2013/04/25/academic-non-obscurity/

But while R-R obviously had nothing to do with the start of the crisis, the question is how they played into the response. For the remarkable thing about this ongoing slump isn’t so much that we had a financial crisis as the fact that we responded to it, not by applying what macroeconomists thought they had learned, but by repeating all the policy errors of the 1930s. Again, fiscal policy from the IMF by year of the recession cycle:



OK, so what is the real story here? Austerity policies would probably have proceeded without Reinhart-Rogoff (and Alesina-Ardagna, another instant hit academic paper that dissolved under scrutiny). But the paper certainly helped sell the policies.

And anyway, the important story isn’t about the sins of the economists; it’s about our warped economic discourse, in which important people seize on academic work that fits their preconceptions. Even if you don’t think Reinhart-Rogoff made much difference to actual policy, the meteoric rise and catastrophic fall of their reputation speaks volumes about why this slump goes on and on.