The Phaserl


Debt, Growth, and the Illusions of Social Scientism

by Tomas Salamanca, Mises:

For all the politicians and economists who have been doggedly nonchalant about escalating levels of public debt, this was a good week. Making their week was the revelation that the statistical calculations in an influential paper were off. It is not often that a math error causes such a mix of glee and consternation as we have seen over the past several days. But the computations in question, advanced by Kenneth Rogoff and Carmen M. Reinhart, both professors at Harvard, are widely thought to have swayed governments in the Western world towards austerity policies. Thanks to a paper out of the University of Massachusetts, the empirical grounds for those policies have allegedly been swept away. Actually, what the Rogoff-Reinhart affair demonstrates is that empirical evidence does not, and indeed cannot, decide economic controversies.

That it can is the defining conceit of the neo-classic orthodoxy in contemporary economics. In this, the economics profession has long been following the dominant trend in the social sciences where a philosophic commitment to positivism became firmly ensconced in the post-World War II era.

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