Friday, May 19, 2017

#196: Economic Homeopathy

Homeopathy is a form of quackery that proposes that the more water you add to a medical solution, the more potent the medicine becomes. You don’t need to know much about science to know why that’s BS. All you need is to have made lemonade or ice tea. If you add more water to a drink, the drink become weaker, not stronger. So if you were to add more water to medicine, would the medicine become weaker or stronger? If you answered “weaker”, then you’re clearly smart enough not to buy anything sold by Dr. Oz.

Now, let’s apply this lesson to economics. Of all of the inane concepts within Keynesian “economics”, perhaps the most ludicrous is that of quantitative easing, which proposes that an economy can be stimulated by printing more money. Now if adding more water to medicine makes the medicine weaker, what would happen if you printed more money? Would that make the currency stronger or weaker? If you answered “weaker”, then you’re smart enough not to take economic advice from Paul Krugman.