10/12/2012

Ken Rogoff, the Nobel prize, political biases, and elections

Ken Rogoff is a nice guy and very bright guy.  Someone who I got to know some when we were both at Hoover at the same time.  There is a drumbeat to give Ken Rogoff the Nobel prize.  If he gets it, like Krugman 08, Nobel committee will again interfering in US election.  The media will use this to conclude that Obama is not responsible for the poor economy.

But on the issue of financial crises I think that he is wrong.  There are multiple papers and books that take issue with Rogoff's claim that economic recoveries after recessions are particularly weak.  Regarding time series data for the US, Gerald P. Dwyer and James R. Lothian have a piece available here and Michael D. Bordo and Joseph G. Haubrich have something available here.  Regarding some slightly earlier published cross-country international evidence you can see a popular discussion available here, but the graphs and more detailed discussion are in my book with Grover Norquist available here.

You can see the argument in today's New York Times when Paul Krugman writes:

About that misplaced optimism: In a now-notorious January 2009 forecast, economists working for the incoming administration predicted that by now most of the effects of the 2008 financial crisis would be behind us, and the unemployment rate would be below 6 percent. Obviously, that didn’t happen.  
Why did the administration get it wrong? It wasn’t exaggerated faith in the power of its stimulus plan; the report predicted a fairly rapid recovery even without stimulus. Instead, President Obama’s people failed to appreciate something that is now common wisdom among economic analysts: severe financial crises inflict sustained economic damage, and it takes a long time to recover. . . .

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