Brad DeLong is as cranky about not winning the Nobel as I am, and kicks sand in Fama’s face by bringing up an article the new Nobelist wrote in 2009 criticizing “stimulus.” What jumped out at me was the following passage from Fama’s essay:
Government infrastructure investments benefit the economy if they are more productive than the private projects they displace. Some government investments are in principle productive. The government is the natural candidate to undertake investments that have widespread positive spillovers (what economists call externalities). For example, a good national road system increases the efficiency of almost all business and consumption activities. Because all the benefits of a good road system are difficult for a private entity to capture without creating inefficiencies (toll or EZ Pay booths on every corner), the government is the natural entity to make decisions about road building and other investments that have widespread spillovers.
Does anybody know: Is Fama just trying to clarify that he’s not an anarchist? In other words, if I’m sitting down having a beer with him, is he really going to say that he thinks the inefficiencies of toll collection outweigh all of the Public Choice problems in allowing government to maintain the roads?
“Who will build the roads?” is the question that belongs at the top of every libertarian drinking game. If we didn’t have forced labor, the argument runs, there would be no roads. There’d be a Sears store over there, and your house over here, and everyone involved would just be standing there scratching their heads.
(Yes yes, Tom is blowing up a particularly naive version of the issue–which is not a strawman, incidentally–but we can match the pro-government-road crowd argument for argument if they want to up the ante as Fama has done.)