The 90% Boundary

John Cochrane discusses a new paper by Reinhart and Rogoff called Public Debt Overhang. He makes some good points but this is my favorite:

And clearly, debt by itself doesn’t matter — it’s how debt leads to other economic events that matters.

What matters most isn’t a correlation, it’s the mechanism by which causes bring about effects that are most important. Every wag who reads a study he disagrees with immediately resorts to the trope of “correlation isn’t causation.” And sometimes it’s true. It’s important to be very clear about what claims we’re actually making. Establishing causality is difficult, but also very important. When people do achieve it (and they occasionally do), it’s a real addition to our knowledge.


This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s