Saturday, April 20, 2013

Paul Krugman: The Excel Depression

In this age of information, math errors can lead to disaster. NASA’s Mars Orbiter crashed because
engineers forgot to convert to metric measurements; JPMorgan Chase’s “London Whale” venture
went bad in part because modelers divided by a sum instead of an average. So, did an Excel coding
error destroy the economies of the Western world?

The story so far: At the beginning of 2010, two Harvard economists, Carmen Reinhart and
Kenneth Rogoff, circulated a paper, “Growth in a Time of Debt,” that purported to identify a
critical “threshold,” a tipping point, for government indebtedness. Once debt exceeds 90 percent of
gross domestic product, they claimed, economic growth drops off sharply.

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