By Peter Klein • Monday January 26, 2009 2:59 PM PDT •
It’s hard to name any fallacy of basic economic reasoning that Paul Krugman hasn’t committed in his columns. You may have missed this little gem from yesterday’s Times piece on the glory of fiscal stimulus:
[W]rite off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.
Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets—and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.
This attempted reductio ad absurdum gets the “absurd” part right, anyway. It brings to mind that old thought experiment in which the government nationalizes the shoe industry and, many years later, someone suggests privatizing the production of shoes. “Are you crazy?” El Krug retorts. “You want only rich people to wear shoes?” Or, more to the point of Paul’s ATC [Air Traffic Control] example: “That would mean lots of injured feet because no one would wear shoes but, hey, stuff happens!” Paulie, isn’t it amazing that anything gets done without the government doing it?
BTW, as Iain Murray notes, the U.S. government-owned ATC system is one of the worst in the world, compared to the partially privatized ones enjoyed by other Western nations. It’s hard to believe that someone cloddish enough to choose ATC as an example of a good government program could get a Nobel Prize but hey, stuff happens.