My daughter woke up during the night with fever and a sore throat. We went to the emergency room where a nurse recorded her temperature as 102 F. Two doctors came a few minutes later and looked at the paperwork. They scratched their beards thoughtfully for a few seconds and smiled. "Don't worry, kiddo," said one. "We know just what you need. Look, I have this very special thermometer. It belonged to my Grandpa John. With its easily adjustable scale I can make your fever go down to 98.6 F in a jiffy."
"Excuse me," I interrupted the guy. "What kind of a quack doctor are you? Where did you get your medical degree?" The guy was indignant: "I don't need a medical degree. I am the famous Thing One and I have a doctorate in economics, the imperial science. I graduated with honors from a very prestigious school and received a Nobel Prize for my research. My advice to the Cat in the Hat prevented a catastrophic Great Depression in 2008 and 2009. My assistant, Thing Two-who came to see you straight from a global summit of the leading central bankers-and I have been hired to improve America's healthcare system. So please sit back and let us do our job."
Providentially, the medical profession has moved far ahead in its understanding of the functioning of the human body than economics could ever learn about human action. Thus doctors are much less likely than economists to try to cure a disease by masking its symptoms. New York Times columnist and economist Paul Krugman is not the first to confuse money with capital, but he could be credited with the revival of an old fallacy. Keynesian theory is built upon earlier mercantilist views that reverse cause and effect. Sadly, such crackpot ideas have convinced many governments to implement policies that throw sand in the wheels of economic recoveries. It happened during the Great Depression and it is happening now.
In his critique of government efforts to stimulate spending by forcing interest rates below their market levels in late 17th century England, John Locke pointed out that prosperity cannot be engineered through manipulations of the loanable funds markets. Low borrowing costs are a result of thrift-they are the consequence, not the cause of wealth. The only thing that could be "stimulated" by additional government spending of newly manufactured cash under artificially low interest rates is another bubble.