Krugman, Keynes, and "The Bleeding Cure"

For a month or so I’ve had this analogy kicking around in my head based on the old medical practice of blood letting.

If a patient was sick with just about anything, the answer was to bleed them, literally, and this was supposed to make them better. Problem was, more often than not this process actually made the patient sicker. Rather than question their methods, the physicians would “double down” and bleed the patient more and more until eventually, the patient died.

(Perhaps some readers will remember a recurring bit from the early days of Saturday Night Live, with Steve Martin playing Theodoric of York, Medieval Barber.)

The Keynesian approach of “stimulus” in which increased government spending is supposed to “help” the economy get restored back to health strikes me as the economic version of bleeding a sick patient. It doesn’t work. Not only does it not work, but it makes the economy “sicker”. Just like the ill informed physicians of the past, Keynesian politicians and economists ignore this failure and insist on doubling down. The solution to these people isn’t to change strategy, they think we haven’t bled enough to cure what ails the economy and they demand another round of the same failed policies, only on a grander scale.

Yesterday I saw that Paul Krugman has written an op-ed in the New York Times using this analogy… only he uses it to say calls for “austerity” are akin to the blood-letting physicians of yore. He has stumbled upon the perfect analogy to highlight his own failure as a Keynesian, but he completely misses the point. We don’t have a revenue problem, we have a spending problem, and it’s the out of control government spending that is analogous to bleeding. We need to staunch the bleeding with bandages and a tourniquet (which would be “austerity”) before we get any weaker from the loss of taxpayer dollars that have been spiraling down the drain of inefficient government.

Besides, when have we tried austerity to fix the economy? Certainly not in the last decade or so. For the analogy to work, someone has to be stubbornly trying a failed “cure” over and over, and be unwilling to admit that the cure is worse than the disease. We’ve tried Keynesian methods over and over since the Great Depression, and they have failed every single time. Perhaps it’s time to give austerity a try, shrink the size of government, lower the tax burden, and decrease government regulation. Unlike Keynesianism, it’s a solution that’s actually worked in the past.

At least Steve Martin’s Theodoric of York on SNL would occasionally consider the possibility that his methods were wrong, and entertain the idea of actually applying reason to see what worked. Paul Krugman hasn’t got a clue.