Most Ph.D. students spend their days reading esoteric books and stressing out about the tenure-track job market. Thomas Herndon, a 28-year-old economics grad student at UMass Amherst, just used part of his spring semester to shake the intellectual foundation of the global austerity movement.
Herndon became instantly famous in nerdy economics circles this week as the lead author of a recent paper, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff," that took aim at a massively influential study by two Harvard professors named Carmen Reinhart and Kenneth Rogoff. Herndon found some hidden errors in Reinhart and Rogoff's data set, then calmly took the entire study out back and slaughtered it. Herndon's takedown — which first appeared in a Mike Konczal post that crashed its host site with traffic — was an immediate sensation. It was cited by prominent anti-austerians like Paul Krugman, spoken about by incoming Bank of England governor Mark Carney, and mentioned on CNBC and several other news outlets as proof that the pro-austerity movement is based, at least in part, on bogus math.
We spoke to Herndon about his crazy week, and how he's planning to celebrate his epic wonk takedown.
"This week has been quite the week," Herndon told us in a phone call from UMass Amherst's campus. "Honestly, I was not expecting at all the kind of attention it has received."
Herndon, who did his undergraduate study at Evergreen State College, first started looking into Reinhart and Rogoff's work as part of an assignment for an econometrics course that involved replicating the data work behind a well-known study. Herndon chose Reinhart and Rogoff's 2010 paper, "Growth in a Time of Debt," in part, because it has been one of the most politically influential economic papers of the last decade. It claims, among other things, that countries whose debt exceeds 90 percent of their annual GDP experience slower growth than countries with lower debt loads — a figure that has been cited by people like Paul Ryan and Tim Geithner to justify slashing government spending and implementing other austerity measures on struggling economies.
Before he turned in his report, Herndon repeatedly e-mailed Reinhart and Rogoff to get their data set, so he could compare it to his own work. But because he was a lowly graduate student asking favors of some of the most respected economists in the world, he got no reply, until one afternoon, when he was sitting on his girlfriend's couch.
"I checked my e-mail, and saw that I had received a reply from Carmen Reinhart," he says. "She said she didn't have time to look into my query, but that here was the data, and I should feel free to publish whatever results I found."
Herndon pulled up an Excel spreadsheet containing Reinhart's data and quickly spotted something that looked odd.
"I clicked on cell L51, and saw that they had only averaged rows 30 through 44, instead of rows 30 through 49."
What Herndon had discovered was that by making a sloppy computing error, Reinhart and Rogoff had forgotten to include a critical piece of data about countries with high debt-to-GDP ratios that would have affected their overall calculations. They had also excluded data from Canada, New Zealand, and Australia — all countries that experienced solid growth during periods of high debt and would thus undercut their thesis that high debt forestalls growth.
Herndon was stunned. As a graduate student, he'd just found serious problems in a famous economic study — the academic equivalent of a D-league basketball player dunking on LeBron James. "They say seeing is believing, but I almost didn’t believe my eyes," he says. "I had to ask my girlfriend — who's a Ph.D. student in sociology — to double-check it. And she said, 'I don't think you're seeing things, Thomas.'"
The mistakes Herndon found were so big, in fact, that even Herndon's professors didn't believe him at first. As Reuters reported earlier:
"At first, I didn't believe him. I thought, 'OK he's a student, he's got to be wrong. These are eminent economists and he's a graduate student,'" [UMass Amherst professor Robert] Pollin said. "So we pushed him and pushed him and pushed him, and after about a month of pushing him I said, 'Goddamn it, he's right.'"
After consulting his professors, Herndon signed two of them — Pollin and department chair Michael Ash — on as co-authors, and the three of them quickly put together a paper outlining their findings. The paper cut to the core of a debate that has been dividing economists and politicians for decades. Fans of austerity believe that governments should cut spending in order to grow their economies, while anti-austerians believe that government spending in times of economic duress can create growth and reduce unemployment, even if it increases debt in the short term. What Herndon et al. were claiming, in essence, was that the pro-austerity movement was relying on bogus information.
When Herndon and his professors published their study, the reaction was nearly immediate. After Konczal's blog post went viral, Reinhart and Rogoff — who got a fawning New York Times profile when their book was released — were forced to admit their embarrassing error (although they still defended the basic findings of their survey). And today, another UMass Amherst professor, Arindrajit Dube, followed up on Herndon's paper with additional proof that there were serious theoretical and causal problems (as opposed to just sloppy Excel work) in the Reinhart-Rogoff study. Observers have been raising serious questions about what Herndon's work means for the future of austerity politics, and Reinhart and Rogoff's respectability as scholars.
Herndon says he isn't implying that Reinhart and Rogoff intentionally skewed their data to support a pro-austerity finding, and simply reported the errors.
"I don’t want to sound the alarm and call for anyone’s jobs," he says. "I didn’t do this to be punitive or malicious."
With Reinhart and Rogoff's once-authoritative work now under serious question, there's no question that the austerity movement has been dealt a major blow. But Herndon's finding won't likely stop politicians from trying to reduce the deficit. The global march for austerity began before Reinhart and Rogoff's work was published, and will continue as long as there are people who believe that governments can shrink their way to prosperity.
Still, Herndon holds out hope. He calls austerity policies in the United Kingdom and elsewhere "counterproductive," and implies that part of why he took up the study of Reinhart and Rogoff's study was to question the benefits of current economic policy. "I have social motivations," he says. "I care deeply about how policy affects people."
Now that he's left his mark, Herndon says he's coping with the effects of academic celebrity — getting a new publicity head shot taken, receiving kudos from his professors and colleagues, handling interview requests. He says he's gotten extensions on some of his papers in order to handle his quasi-fame, but that he hasn't been popping Champagne yet in celebration.
"I’m going to celebrate this weekend," he says. "But for now, I have a really gnarly problem set."