Does Walter Block Understand Econ 101?

Thanks to the internet, Paul Krugman can bitch, from Japan, about the lack of public spending in the U.S., ignore ideas from such economists as Walter Block, and we can all read about it with amazement, from around the globe. Krugman writes, in a blog post titled, Infrastructure:

...the other party is standing in the way of much needed repair to our roads, ports, sewers, and more– not to mention creating jobs...

Beyond all that, the new initiative is a chance for me to air one of my pet peeves: the stupidity of the claim, which you hear all the time — and you’ll hear again now — that it’s always better to provide stimulus in the form of tax cuts, because individuals know better than the government what to do with their money.


Why is this claim stupid? Because Econ 101 tells us that there are some things the government must provide, namely public goods whose benefits can’t be internalized by the market.

So suppose we’re going to put $50 billion of resources that would otherwise be idle to work. Is it better to use them to produce public goods like improved roads, or private goods like more consumer durables? ...

....anyone who tells you that basic economics settles the question, that is says that devoting more resources to production of private goods is better, doesn’t understand Econ 101.


And there’s a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment...

First, as far as, public spending creating jobs. Krugman simply fails to get the very basic, first chart introduced to any ERcon 101 student. That is the "guns and butter" chart, where guns represent government spending and butter private sector spending. If the government is spending money to "create jobs", there is that much less available for the private sector. Thus, the Krugman implication that there is a net gain in job creation by government spending is false. It is a trade off, between government spending and private sector trading. This is not only Econ 101, but it is Chapter 1 of Econ 101. That Krugman doesn't get this is astounding.

From there the Nobel Prize winning Krugman goes on to show his lack of understanding of, admittedly, an advanced concept.

That concept is the belief that it is inaccurate to say only government can provide a road system.

Krugman writes as though he has never read any literature that has argued such. This, of course, could be an understandable error if written by a non-economist, but it is surely embarrassing for the pontificator Krugman to not be familiar with the work in his own profession.

Does this means that advocates of a private road system are not familiar with Econ 101, surely not. What it does mean is that there are advances made in public versus private sector theory made by such economists as Walter Block that Krugman chooses to ignore or is simply unfamiliar with. In either case, it is Krugman who is failing to provide a full picture.

One hopes that Block takes pen to paper to inform Krugman about his failure to recognize the growing work surrounding private road theory..