It’s not often that you get to watch strait-laced academics snarl at each other in full public view. So the episode that’s been playing out between economists Reinhart-Rogoff and Krugman is nothing if not amusing.

At the heart of their argument is this – how much money can a government borrow? And is there an upper limit on public debt that countries shouldn’t cross?

Carmen Reinhart and Kenneth Rogoff, senior Harvard economists with stints at the International Monetary Fund, believed they had the answer. In May 2010, they published a fairly exhaustive historical account of government debt in a research paper, Growth in a time of debt , which drew strong links between the amount of debt a government racks up to the growth rate of the country’s GDP. They found that if a government borrowed anything over 90% of GDP, the country faced the likelihood of a downward economic spiral as GDP started to shrink. Conditions apply, of course.

For the two senior economists, the paper’s timing was opportune. By early 2010, many of Europe’s big banks had transferred their private debt over to their national governments through what are, quite heroically, called bailouts. So what began as a banking crisis in 2007-08 had, in a couple of years, turned into a sovereign debt crisis, with fairly prosperous European countries facing a mountain of debt everybody knew they couldn’t pay off. Overnight, countries found themselves either already broke or heading in that direction.

As whole countries in mainland Europe now needed to be bailed out, calls for economic austerity began. If they were to receive any money to stave off bankruptcy, governments were asked to save up what they could, cut spending (mostly as health, education and retirement benefits) and clear debt. And whether its authors had intended this or not, the Reinhart-Rogoff paper was just the proof the prosecution needed.

Or so it seemed. A month or so back, Thomas Herndon, a student at the University of Massachusetts Amherst, found that Growth in a time of debt is riddled with errors, right from the data Reinhart and Rogoff used in their calculations to a botched up Excel spreadsheet that altered results. Others have since joined the fight in denouncing the duo’s research, with Nobel Prize-winning economist Paul Krugman being the most vocal.

Reinhart and Rogoff have, no doubt, come to their own rescue. They’ve said that the errors don’t really amount to much and that their core arguments still hold true, dismissing the hugely publicised criticism of their work as ‘academic kerfuffle’. Well, some of their defence is true, because how you read data is often a question of which side of the economic debate you’re on.

How much the paper actually affected government policy in 2010 is debatable, but the results of the policy are real. Politicians on both sides of the Atlantic had used the paper to justify spending cuts to voters. So the recent newsflash probably leaves them feeling a little foolish. (To a much smaller extent, I feel the same way – the only dissertation I’ve ever written drew on the conclusions of the Reinhart-Rogoff paper.)

As the government started pulling its money out, riots broke out in Greece. Savings that people in these countries built up over a lifetime suddenly disappeared. Even now, about 60 per cent of educated young people in mainland Europe find they can’t land jobs .

It would be unfair to blame Growth in a time of debt for all of this. While the paper may have exaggerated the speed and extent of the downward economic spiral, the fact that too much debt can’t be a good thing is common knowledge. Ask those who run up credit card bills that are several times their incomes. At some point, creditors will come calling. What is disturbing, however, is how an academic exercise, so quickly and so comprehensively, became a slave to policy. Any other time in history and the paper would have received the scrutiny and criticism it deserved. This one didn’t.

I’ve always wondered which debate would define the Great Recession – you know, what is that one lasting theory that economists on both sides of the fence (or how many ever sides it has these days) will agree on. Like Keynes was the Great Depression’s big find. For a while it seemed that Reinhart and Rogoff had it there, but that party has wound up.