I have frequently said that Paul Krugman deserved his Nobel Prize for his work on trade theory, and I stand by that. But keep in mind that his work there was very narrowly focused and quite technical, which doesn’t automatically indicate a good overall grasp of how the world works. And ever more I begin to wonder if Krugman really is just a rather average, even shallow, thinker outside his narrow specialty. This is from a 2008 Krugman blog post.
… Bob Hall and Susan Woodward argue against the multiplier effect of infrastructure spending by pointing out that GDP and military spending rose by about the same amount during World War II.
With the onset of World War II, numerous challenges confronted the American people. The government found it necessary to ration food, gas, and even clothing during that time. Americans were asked to conserve on everything. With not a single person unaffected by the war, rationing meant sacrifices for all.
[Bangs head against the table]
Seriously? Does Krugman understand why rationing was put in place? It was because government was commandeering resources for the war effort, so those resources weren’t available for the consumer market! If there’s no goods for consumer to buy because the government is buying everything, then consumer spending can’t increase, so what exactly has been multiplied?
Or as Russ Roberts responded, “Does he think the rationing is what produced scarcity rather then being a response to scarcity?”