Nothing warms the heart quite like a story of the high and mighty brought low. Harvard economists Carmen Reinhart and Kenneth Rogoff were the high and mighty—prestigious academics whose influential paper on government debt and economic growth was widely cited by policymakers and commentators to justify painful austerity policies. The underdogs who brought them down were three members of the UMass-Amherst economics department: graduate student Thomas Herndon and professors Michael Ash and Robert Pollin. As Dean Baker of the Center for Economic and Policy Research (CEPR) argues, it is no accident that UMass economists were the ones to debunk Reinhart and Rogoff. The department, Baker notes, “stands largely outside the mainstream” of the economics profession and so is “more willing to challenge the received wisdom.”
The letter below will be submitted to policymakers in support of pending legislation that would raise the U.S. minimum wage to $10.50 per hour. The bill, which is titled the “Catching Up to 1968 Act of 2013,” is sponsored by Congressman Alan Grayson.
As noted in the petition itself, we have also prepared a technical appendix and set of references covering all the points raised in the petition.
Economists who would like to be signatories to this letter should please send name and institutional affiliation to email@example.com.
We, the undersigned professional economists, support the “Catching Up to 1968 Act of 2013,” sponsored by Congressman Alan Grayson of Florida. This measure would raise the federal minimum wage from its current level of $7.25, established in 2009, to $10.50 per hour, and with automatic increases indexed to inflation thereafter.
Last Friday, The New York Times published a lengthy response by Reinhart and Rogoff to our critique of their work in “Growth in a Time of Debt,” and the ensuing worldwide debate. We have replied to them, which appeared in the Times online Monday night. As you can see below, we did not find their defense at all convincing. We also go into these issues in much more depth in a technical appendix here.
Debt and Growth: A Response to Reinhart and Rogoff
The debate over government debt and its relationship to economic growth is at the forefront of policy debates across the industrialized world. The role of the economics profession in shaping the debate has always come under scrutiny.
There have been an extraordinary number of reactions to the paper we wrote with Thomas Herndon that critiqued the highly influential 2010 Reinhart and Rogoff paper “Growth in a Time of Debt.” Not surprisingly, these reactions have run the gamut. It is obviously impossible for us to respond to all the points raised. One of the most thoughtful critical responses was from Prof. James Hamilton of UC San Diego. Prof. Hamilton is an eminent econometrician. He posted his critique on his own blog site Econbrowser here. We are reposting here his critique of our work along with our response, below. Prof. Hamilton was kind enough to post our response on his site as well.
In 2010, two Harvard economists published an academic paper that spoke to the world’s biggest policy question: should we cut public spending to control the deficit or use the state to rekindle economic growth? Growth in a Time of Debt by Carmen Reinhart and Kenneth Rogoff has served as an important intellectual bulwark in support of austerity policies in the US and Europe. It has been cited by politicians ranging from Paul Ryan, the US congressman, to George Osborne, the UK chancellor. But we have shown that several critical findings advanced in this paper are wrong. So do we need to rethink austerity economics more broadly?