Why the Reinhart-Rogoff affair is actually good news.

This was really funny: since a couple of days the economists community is unsettled. It has been found that one of the most influential economic article  of the latest years – more than 2000 quotes – was wrong.

book cover: this time is different
The besteller from the two Harvard professors

In 2010, Kenneth Rogoff and Carmen Reinhart of Harvard present a paper that seems to give scientific and indisputable bases to the Austerity policy [PDF]: they compare many countries – between year 1945 and 2009 – and discover that the ones with the economic numbers more in shape, i.e. with a debt below 30% of the GDP (Gross Domestic Product), have grown 4.1% on average.
The ones with a debt between 30% and 90% of GDP have grown only 2.8% on average.
The ones – like Italy – with a debt more than 90% of GDP had a negative growth: -0.1%

Political-economic conclusion: when the debt is too high, the interest rates payments bring the country in recession. Therefore, to reduce the public debt using cuts and taxes is necessary in order to grow again.

Now, three years later, two professors of Amherst University in  Massachusetts, Robert Pollin and Michael Ash, assign to one of their student, Thomas Herndon, a classic exercise (maybe not so practiced in economic studies): to take the data used by some famous research and repeat the calculus (something that an academic journal should do before publishing a paper, but often they don’t).

The result: the calculations by Rogoff and Reinhart were wrong [PDF], probably because of a bug in an Excel spreadsheet !

Continue reading “Why the Reinhart-Rogoff affair is actually good news.”

Example of a backlog

This post is part of the series “Z2A: From zero to agile”.

Here is an example of how a backlog can be quickly created with a tool like a spreadsheet.
Each row represents the information for a topic (user story/issue/etc.) and includes the following fields:

PRODUCT BACKLOG (example)
ID Name Import. Estim. How to demo Notes
1 Deposit 30 5 Log in, open deposit page,
deposit €10, go to balance page
and check that it has increased by €10.
Need a UML sequence diagram.
No need to worry about encryption for now.

 

  • ID – a unique identification, just an auto-incremented number. This is to avoid “losing” topics when you rename them.
    If you have a separate bug tracking system, like Jira or Bugzilla, you can use their tracking ID.
  • Name – a short, descriptive name of the backlog item, typically a functionality or an error correction. For example “Check transaction history”. Clear enough so that the team members and the product owner understand what we are talking about, and clear enough to distinguish it from other backlog items. Normally 2 to 10 words.
    Continue reading “Example of a backlog”

Why some messages are more interesting than others

“The sun rised today” = not news
“The sun didn’t rise today” – interesting!

Why?

Claude Shannon in his article about Communication Theory (1948) wrote that information is related to surprise.
Specifically, that a message informing us of an event that has probability p to happen conveys

‐log(base 2) p bits of information.

For example, if an event has 50% probability to happen, then it has ‐log 0.5 = 1 bit of information associated.

If the event has only 10% probability to happen, then it has -log 0.1 = 3.3 bits of information.

Shannon’s diagram of a communication system – from Wikipedia

When we pick up a newspaper, we are looking for maximum information, so more `surprising’ events make for better news.

See also what the physicist John Wheeler wrote in 1990:

“… every it — every particle, every field of force — derives its function, its meaning, its very existence entirely from yes-or-no questions, binary choices, _bits_.”