August 12, 2020

Economix Blog: With Debt Study’s Errors Confirmed, Debate on Conclusion Goes On

The Harvard economists Carmen M. Reinhart and Kenneth S. Rogoff have acknowledged that their groundbreaking 2010 study “Growth in a Time of Debt” includes statistical errors that significantly alter its results.

Three economists at the University of Massachusetts, Amherst, uncovered those errors in a bombshell paper released this week, which has prompted a huge debate in the economics blogosphere and resonated with policy makers gathered in Washington for the spring meetings of the World Bank and the International Monetary Fund. (The paper is all the talk in Foggy Bottom.)

In an e-mailed statement, Professors Reinhart and Rogoff admit their mistakes but argue that they do not change the ultimate lessons of the paper, originally published in The American Economic Review. “We are grateful to Herndon et al. for the careful attention to our original ‘Growth in a Time of Debt’ AER paper and for pointing out an important correction,” they write. “We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work.”

Both the University of Massachusetts and the Harvard authors now find that countries whose debt loads are 90 percent or more of their annual economic output tend to experience slower growth than countries whose debt loads are lighter — though the effect is much smaller than previously thought.

The debate now centers on how to interpret those muddier results — and how the incorrect results influenced public policy in the post-crisis years.

The debate over interpreting the new results has centered on the thorny question of causation. Does low growth cause high debts, or do high debts cause low growth? Can the Reinhart-Rogoff data set shine any light on that question? For their part, Professors Reinhart and Rogoff do not make a causal case in their paper, though they have in subsequent public comments.

For more on this question, read Jared Bernstein, a former Obama administration economist, and Dean Baker of the left-of-center Center for Economic and Policy Research, as well as Tyler Cowen, Justin Fox and Mark Thoma.

A broader question is how influential studies like Reinhart-Rogoff were in persuading countries to adopt austerity budgeting. My sense is that for deeply indebted countries with no way to finance themselves on the international markets — Greece being the central example — the answer is that it had little to no influence.

That is because by 2010, when the Reinhart-Rogoff paper came out, Europe had already committed to austerity. Powerful policy makers including Angela Merkel and Wolfgang Schäuble of Germany as well as Jean-Claude Trichet of the European Central Bank saw fiscal consolidation as necessary, full stop. That meant countries like Greece were boxed into it.

The International Monetary Fund might have preferred a slower pace of fiscal adjustment, and in the past six months or so it has admitted that it greatly underestimated the impact that austerity budgets would have on weak economies. But in an interview, Olivier Blanchard, the fund’s chief economist, said that even if it had better understood the damage that budget cuts might cause, it probably would not have meant different policy agreements. The problem was that nobody wanted to put up any more money for countries like Greece.

“One of the unpleasant aspects of what happened is that we kept revising forecasts of growth in the euro periphery down,” he said. “Part of it, though not all of it, is due to the fact that we just underestimated the effect of fiscal consolidation.

“I don’t like to be wrong systematically,” Mr. Blanchard continued. “But if we had better forecasts, would we have had very different programs? I suspect the honest truth is that, because of financing constraints, probably only at the margin.”

A better question is what effect studies like Reinhart-Rogoff might have had in countries that elected to start the process of fiscal consolidation without much pressure from the bond markets or other external financiers.

Britain and the United States are the big question marks there. The Cameron government in Britain — over the protestations of the opposition party and the monetary fund and other groups — has slashed the country’s budget. But it still has not met its own deficit-reduction targets, because the economy has remained mired in recession and automatic spending on social programs has increased. The country still could reverse course and engage in an effort to improve growth rather than an effort to hold down its debts. But thus far it has chosen not to.

The United States has also embarked on a campaign of deficit reduction, though a more modest one. Thus far, the Obama administration and Congress have raised taxes on the wealthiest Americans and agreed to trillions in budget cuts. With the aggressive actions taken by the Federal Reserve, the economy has continued to grow — which will greatly aid the country’s fiscal situation in the long run. How important were academics like Professors Reinhart and Rogoff to that process? My sense is not very, as well, even if policy makers pushing for deficit reduction cited them.

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You’re the Boss: Can Muster Enough Traffic to Sustain a Business?

Site Analysis

What’s wrong with this Web site?

Last week, I asked you to take a look at, a site dedicated to fans of independently published books and the authors who produce them.

If you recall, Amy Edelman, a published author, wanted to turn her passion for reading and her interest in independently published books into a business. The site had been attracting a fair number of independent authors but had failed to draw an audience of readers. Ms. Edelman submitted her site for critique because she wanted to know why her traffic levels were so low.

Most of the You’re the Boss readers who took a look at the site were not impressed. Several were turned off because the site was featuring the Norwegian mass murderer, Anders Behring Breivik, as an example of a self-published author (citing his 1,500-page manifesto). As PW from Texas put it, “Indie equals too out of the path and non-commercial content to me. I was shocked to see a picture and article on the Norwegian drama that happened this weekend. It looked totally out of expectation and didn’t make me want to go any further.”

When I reviewed the site, it became clear to me that had a number of issues that were conspiring to keep traffic down:

  • It failed to get its central message across.
  • It failed to create a sense of community or belonging.
  • It isn’t doing enough to make sure fans of independent books find the site.
  • It is going after a very small niche audience.

If you want a content-based site to succeed as a business, you have to be able to drive significant amounts of traffic. While I concede that I am not an expert on the indie book scene, I’m afraid I agree with MHF from Houston who noted: “Much of the content doesn’t really make me want to give self-published books a chance — should we really accept the bad editing just because some mainstream books have typos, too, and why are those 400,000 authors gathering rejection slips if the books are any good?”

If you are going to try to make a go of this kind of site, it is essential that you do more than just present information (news, reviews and interviews). You have to tap into the passion of people who are really into reading. Long before the Internet, there were book clubs. Everyone has their opinions about books and authors. For generations, book clubs have thrived because they bring together people with a shared passion and strong opinions. might be a great place to take advantage of that dynamic, but thus far it has barely scratched the surface.

The site does little to build user participation. I would encourage Ms. Edelman to add discussion groups, create a members area and allow visitors to contribute their own reviews and share their favorite books. Give visitors the chance to pass articles on to friends and make those calls to action powerful.

There are some literary Web sites that have done an excellent job of integrating user-generated content. Look at Shelfari (below). It created user groups to discuss specific topics about books and authors. allows visitors to create personal pages on which they can talk about their favorite books, show what they are reading at the moment and find “friends” with similar passions.

Working with a relatively small budget, providers of original content can get the word out by contacting the “influencers” in the literary blogosphere. There are hundreds of blogs out there that discuss books, authors and publishing. Ms. Edelman should offer to contribute reviews and articles from her site (asking for links back to, of course). She can also offer to be interviewed by the bloggers. Another way of getting the word out to bloggers is to comment on their blogs.

It is clear that very little energy has been devoted to search engine optimization. Titles and tags need to be added that will drive visitors to the site. General terms like “books,” “authors,” and “novels” won’t do much, because you’ve got monolithic sites like Amazon and Barnes Noble out there dominating such terms. If she is looking to get traffic from her niche market, she needs an S.E.O. campaign with keywords featuring prominent independent authors.

Reader NY Nice Guy had this observation: “My sense is that Ms. Edelman’s vision is viable but she needs some SEO right now so that when her market catches up with her (as it is, she’s opened a lemonade stand on the moon), the site will have been well established to take advantage of the Zeitgeist.”

For this business to succeed, it needs to bring in money from a variety of revenue streams. Currently 70 percent of its revenue comes from consulting services performed by Ms. Edelman’s team. Advertising revenue is tied to visitor traffic and, at current levels, will not contribute much. A third stream comes from selling books through an affiliate program, but does a poor job of encouraging these revenues by failing to highlight the ability to purchase.

At the end of a book review or article about a particular author, there is a short, bland offer to purchase. Ms. Edelman seems almost apologetic when asking visitors to buy. By way of contrast, Salon books highlights the books that are reviewed and creates a clear feature called: “Buy Reviewed Titles.” This is a far more compelling call to action.

Ms. Edelman Responds

Ms. Edelman was disappointed that more You’re the Boss readers didn’t comment on her site. She took it as a sign that there just may not be that big of an audience for As for the advice she received, she plans to look into S.E.O. services and is already thinking about ways to get her visitors more engaged.

Got a Web site or mobile app you’d like to have reviewed? We are always looking for sites and apps. We are especially interested in hearing from businesses that are using smartphones, iPads and other mobile devices and apps as tools in marketing, selling and branding. To be considered, please send an e-mail to and tell us about your experiences — what works, what doesn’t and especially why you would like to have your site reviewed.

Gabriel Shaoolian is the founder and chief executive of Blue Fountain Media, a Web design, development and marketing company based in New York.

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