Raghuram Rajan is an academic and policy star, University of Chicago professor, former chief economist for the International Monetary Fund, and former chief economic advisor to the government of India, and featured many times in NPR and other prestige media.
He also appears to be in the habit of telling purportedly data-backed stories that aren’t really backed by the data.
Story #1: The trend that wasn’t
Guarav Sood writes:
In late 2019 . . . while discussing the trends in growth in the Indian economy . . . Mr. Rajan notes:
We were growing really fast before the great recession, and then 2009 was a year of very poor growth. We started climbing a little bit after it, but since then, since about 2012, we have had a steady upward movement in growth going back to the pre-2000, pre-financial crisis growth rates. And then since about mid-2016 (GS: a couple of years after Mr. Modi became the PM), we have seen a steady deceleration.
The statement is supported by the red lines that connect the deepest valleys with the highest peak, eagerly eliding over the enormous variation in between (see below).
Not to be left behind, Mr. Rajan’s interlocutor Mr. Subramanian shares the following slide about investment collapse. Note the title of the slide and then look at the actual slide. The title says that the investment (tallied by the black line) collapses in 2010 (before Mr. Modi became PM).
Story #2: Following conventional wisdom
Before Gaurav pointed me to his post, the only other time I’d heard of Rajan was when I’d received his book to review a couple years ago, at which time I sent the following note to the publisher:
I took a look at Rajan’s book, “The Third Pillar: How Markets and the State Leave the Community Behind,” and found what seems to be a mistake right on the first page. Maybe you can forward this to him and there will be a chance for him to correct it before the book comes out.
On the first page of the book, Rajan writes: “Half a million more middle-aged non-Hispanic white American males died between 1999 and 2013 than if their death rates had followed the trend of other ethnic groups.” There are some mistakes here. First, the calculation is wrong because it does not account for changes in the age distribution of this group. Second, it was actually women, not men, whose death rates increased. See here for more on both points.
There is a larger problem here is that there is received wisdom that white men are having problems, hence people attribute a general trend to men, even though in this case the trend is actually much stronger for women.
I noticed another error. On page 216, Rajan writes, “In the United States, the Affordable Care Act, or Obamacare, was the spark that led to the organizing of the Tea Party movement…” This is incorrect. The Tea Party movement started with a speech on TV in February, 2009, in opposition to Obama’s mortgage relief plan. From Wikipedia: “The movement began following Barack Obama’s first presidential inauguration (in January 2009) when his administration announced plans to give financial aid to bankrupt homeowners. A major force behind it was Americans for Prosperity (AFP), a conservative political advocacy group founded by businessmen and political activist David H. Koch.” The Affordable Care Act came later, with discussion in Congress later in 2009 and the bill passing in 2010. The Tea Party opposed the Affordable Care Act, but the Affordable Care Act was not the spark that led to the organizing of the Tea Party movement. This is relevant to Rajan’s book because it calls into question his arguments about populism.
The person to whom I sent this email said she notified the author so I was hoping he fixed these small factual problems and also that he correspondingly adjusted his arguments about populism. Arguments are ultimately based on facts; shift the facts and the arguments should change to some extent.
In the meantime, Rajan came out with a second edition of his book, and so I was able to check on Amazon to see if he had fixed the errors.
The result was disappointing. It seems that he corrected both errors but in a minimal way: changing “American males” to “Americans” and changing “the spark that led to the organizing of the Tea Party movement” to “an important catalyst in the organizing of the Tea Party Movement.” That’s good that they made the changes (though not so cool that they didn’t cite me) but I’m bothered by the way the changes were so minimal. These were not typos; they reflected real misunderstanding, and it’s best to wrestle with one’s misunderstanding rather than just making superficial corrections.
At this point you might say I’m being picky. The fixed the error; isn’t that enough? But, no, I don’t think that’s enough. As I wrote two years ago, arguments are ultimately based on facts; shift the facts and the arguments should change to some extent. If the facts change but the argument stays the same, that represents a problem.
In making minimal corrections and not acknowledging that he made these errors, Rajan is dealing with the symptoms but not the underlying problem, which is that he’s processing recent history via conventional wisdom.
This should be taken as some sort of blanket condemnation of Rajan, who might be an excellent banker and college professor. Lots of successful people operate using conventional wisdom. We just have to interpret his book not as an economic analysis or a synthesis of the literature but as an expression of conventional wisdom by a person with many interesting life experiences.