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Krugman Today on Austerity

15 Mar

March 15, 2012, 8:48 am

Bleeding the Patient

Brad DeLong and Larry Summers have a paper in progress about fiscal policy in a liquidity trap; some of the analytics here. The bottom line, fleshed out with a lot of evidence, is one that others — including me and Christy Romer — have been arguing for a while: expansionary fiscal policy under these conditions doesn’t just aid the economy in the short run, it may well even improve the long-run fiscal prospect. And austerity may be self-defeating even in fiscal terms.

If this is right (and I think it is), austerity-loving pundits and policy makers really are like medieval doctors who believed in treating illness by bleeding their patients, making the patients even sicker, leading to more bleeding.

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3 Comments

Posted by on March 15, 2012 in Economy, Politics

 

3 responses to “Krugman Today on Austerity

  1. mpbulletin

    March 15, 2012 at 6:00 pm

    Oh I like that medieval doctor analogy there at the end. Nice 🙂

     
    • h2dog

      March 15, 2012 at 7:28 pm

      Perfect analogy, isn’t it.

       
      • toph

        March 16, 2012 at 3:28 pm

        The think I enjoy about reading his articles is how he simplifies things (but not overly so) and makes them entertaining to boot

         

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