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.


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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