Paul Krugman dismantles crazy conservative economics

http://www.alternet.org/economy/paul-krugman-dismantles-crazy-conservative-economics

What will it take for right-wing ideologues to abandon the austerity myth?

Europe has taken leave of its senses—or its economic leaders have. That, in a nutshell, is the case that Paul Krugman makes in his column Friday. America's economy may be making a stumbling, long overdue recovery, but the eurozone remains in deep doldrums, a crisis that Krugman compares to the 1930s.

A sort of mass hysteria has taken hold in Europe. No matter how much evidence piles up that slashing budgets and government spending is exactly the wrong way to go about creating confidence, economic leaders keep espousing austerity.

The problem does not lie with fundamental economic models, Krugman explains:

It’s true that few economists predicted the crisis. The clean little secret of economics since then, however, is that basic textbook models, reflecting an approach to recessions and recoveries that would have seemed familiar to students half a century ago, have performed very well. The trouble is that policy makers in Europe decided to reject those basic models in favor of alternative approaches that were innovative, exciting and completely wrong.