Kevin Hassett shouldn’t throw stones

“The worst paper in the history of the Federal Reserve system,” was Kevin Hassett’s verdict on a new study by economists at the New York Fed. This concluded that most of the burden of Donald Trump’s tariff policies has fallen on US companies and consumers. Though consistent with several other studies, Hassett, Trump’s top economic adviser, said the finding should result in disciplinary action.

But if there were a hall of shame for economics papers, which would be the top candidates for inclusion?

Growth in a time of debt, by Carmen Reinhart and Ken Rogoff, is one. This 2010 paper concluded that economic growth slowed sharply once a country’s debt exceeded 90% of GDP, providing academic cover for austerity policies in countries such as Britain. In 2013, a graduate student discovered spreadsheet errors, data gaps and inappropriate weightings, undermining its main findings.

Paul Ehrlich’s resource scarcity models in the 1970s made wildly wrong predictions about commodities running out and mass famine by the 1980s (yet are still revered by post-growth economists).

Irving Fisher famously justified record share prices just before the 1929 stock market crash, claiming they had reached a “permanently high plateau” shortly before they fell by almost 90% in three years.

The winner, at least of the “economists in glass houses” category, is surely Dow 36,000, published in 1999 by James Glassman and, er, Hassett. This argued that US shares were greatly undervalued, predicting that the main market index,the Dow Jones industrial average, would soar to 36,000 within five years. It did eventually reach that number, but not until November 2021 – and, adjusted for inflation, it has never come close.

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