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Reading Russ’s latest post [2], in which he quotes Paul Krugman, reinforces the impression that I’ve always had of Keynesian economics and continue to have to this day: it mistakes a symptom for an underlying problem and then proposes to treat the symptom.
It’s as if a person who is bleeding to death because of a gunshot wound in his stomach is brought to a physician. The physician correctly realizes that the patient is losing massive amounts of blood and, also, correctly understands that such blood loss is dangerous to the patient’s health.
So the physician prescribes massive infusions of blood, period. If the patient doesn’t recover, the physician orders that the volume of blood-infusions be increased. If the patient dies, the physician will forever blame himself for not increasing the volume of blood-infusions even further.
If the patient does recover, the blood-infusions will be praised for saving the patient.
The big hole in the patient’s stomach is called a “micromedical” problem. It might well be a significant problem, the physician concedes, but our physician is trained to diagnose and cure one specific “macromedical” problem only, which is the problem of bleeding. Micromedical problems are fundamentally distinct from the macromedical problem, which is insufficient blood coursing through the patient’s body. (Blood, after all, is vital to a person’s vitality and vigor.) When a patient who had until recently been quite healthy begins losing blood, the consensus of many physicians is that by far the most important treatment – certainly a necessary one, and, generally, a sufficient one – is to keep pumping more and more new blood into the patient until his health is restored.
Questions of precisely why, where, and how the patient is losing blood aren’t as important as is the realization that the patient is losing blood. “A bite by a spirited animal” is the famous phrase that is typically used to explain the mysterious bleeding.
It’s very simple, really.
……
Like any analogy, this one isn’t perfect. For example, in economies, repairing the microeconomic wounds goes a long way by itself toward restoring demand for goods and services, while in wounded human beings (to whom mortality comes much more quickly than it does to economies) blood transfusions often are necessary, even though they are seldom a successful treatment for the underlying problem that caused the loss of blood to begin with.
(I thank George Selgin for helping me with this analogy.)