Watch the full interview on GPS this Sunday on "Fareed Zakaria GPS" at 10 a.m. and 1 p.m. ET on CNN
Fareed speaks with Nobel Prize-winning economist and New York Times columnist Paul Krugman about his row with economists Ken Rogoff and Carmen Reinhart.
All right. I have to ask you about this, the spat between two celebrity economists, Ken Rogoff and Carmen Reinhart. [The] essay which talked about the tipping point at 90 percent debt to GDP, at which countries start growing much, much more slowly. I want to first ask you – they wrote a letter back, because you’ve criticized them...
…for feeding this austerity mania, which has caused governments to slash spending. And they say, you have engaged in spectacularly uncivil behavior in the past few weeks. “You’ve attacked us in very personal terms, virtually non-stop. You’ve doubled down. Your characterization of our work is selective and shallow. It’s deeply misleading.”
Now Rogoff and you were graduate students in MIT together, right?
Yes. Right. And we were actually, all of us were graduate students at MIT together. Almost everybody you’ve heard of. It’s a village. It’s kind of scary.
So what does it feel like to be embroiled in this?
It’s very unpleasant, because Ken is a magnificent economist. He’s done fabulous work over the years. And then this one paper, which was thrown out hastily, unfortunately, is the one that has had the greatest impact on policy debate…The fact of the matter is this one result – claimed result – which is that growth falls off a cliff when debt exceeds 90 percent of GDP, that’s what the world picked up. And that result is false. That result is clearly not true. There is a mild negative correlation between debt and growth, but that cliff doesn't exist. It never existed in the data. It certainly isn’t anything anyone should believe now.
That paper of theirs did a lot of damage by giving people who didn't want stimulus, who didn't want any kind of expansionary policy, a way to scare their opponents, to say if we don't do it my way, we'll go over the 90 percent line and terrible things will happen.
And my problem now with Carmen and Ken is that while they’ve said a lot of things that indicate more flexibility, they have never, to my knowledge, said clearly, OK, there is no cliff at 90 percent. And we really need that from them. For them to say, look, you know, we think debt is dangerous, we think it’s a problem. But 90 percent, that was an artifact of some things in our original calculation that don’t appear in subsequent work.
Are you surprised how personal this has gotten?
No, the stakes are high. I guess from my point of view, they went pretty far out on a limb with work which is far weaker than everything else in their careers. And, unfortunately, that became what they’re known for. And then if you said, well, this is really bad work and this had a deleterious effect on policy, which I believe to be the truth, how can it not be personal?
Let me say it, by the way – who cares, right? I mean who cares about my feelings or Carmen Reinhart’s feelings or Ken Rogoff’s feelings? We’re having a global economic crisis which is not over, which we have handled abysmally. We have massive long-term unemployment in the United States. We have massive youth unemployment in Southern Europe.
I don’t think the question of how civil a bunch of comfortable academic economists who went to MIT in the mid-1970s…I don’t think that matters at all compared to the question of the substantive issues and are we doing this wrong, which I think we are.