- Britain in the last decade
- wasn’t so much a lie
- as a mistake.
- When the Chancellor was giving
- reasons for the necessity
- of austerity
- he relied heavily
- on recent findings
- by two Harvard economists.
- They had
- ‘shown’
- via a model built using
- 44 countries over
- two centuries
- that
- when a government’s ratio of debt to GDP went over 90 per cent,
- the economy shrank.
- The Chancellor
- drew directly on this research:
- ‘The latest research suggests
- that once debt reaches
- more than
- about
- 90 per cent of GDP
- the risk of a
- large
- negative
- impact
- on long-term growth becomes
- highly significant.’
- Cuts were planned.
- A graduate student at Amherst College,
- Thomas Herndon,
- was set to check the Harvard numbers,
- as a homework assignment.
- He tried to replicate the findings
- but couldn’t.
- So he asked them for the original data,
- which they (admirably)
- sent.
- Herndon checked the numbers
- and found a mistake.
- The economists
- had intended to sum twenty
- rows of data
- but had only used fifteen.
- When all twenty were included
- countries with debt to GDP ratios over 90 per cent
- were no longer shrinking.
- But by this point
- the government simply couldn’t back down.
[London Review of Books, 21/09/2023, ‘Get a rabbit’]