You write a column in one of the world's most prestigious periodicals. You want to make a point about the necessity of government intervention to solve important problems in the modern world. You don't have space for a long argument, so you choose one single case to make the point in a memorable, symbolic way.
You choose to mention decades of government regulation of a chemical that pollutes lakes.
Then you mention that the government recently warned people that lake water is dangerously polluted.
That's the show pony, the slam-dunk case for the necessity of government? A problem that the government hasn't even solved is not good evidence of the government's problem-solving ability.
Let's take a closer look.
Krugman cites a USGS paper that includes a history of the subject. In the late 1960's, water pollution became a significant concern in the United States, with Lake Erie being described as a "dead lake." By the early 1970's phosphorus, mainly from detergents and fertilizers, was recognized as the most important cause of harmful eutrophication (overgrowth of e.g. algae due to substances added to water). Local laws and the 1972 Clean Water Act limited the use of the chemical. By 1998 (when the paper was written), the situation had improved, but "there is limited information at a national scale concerning the status and success of phosphorus controls."
Another study from the Conflict Information Consortium provides insight into the industry side of the issue. This paper mentions the early regulatory efforts to control phosphorus pollution, then:
On the other side were the big three detergent manufacturers of Procter & Gamble, Lever Brothers, and Colgate-Palmolive, who accounted for about 80% of the total U.S. detergent market (Hammond 1971). Early on the detergent industry (the "Industry") took a very cooperative posture. Mr. H.J. Morgens, then president of Proctor & Gamble, said in 1970 "We recognize that the public wants phosphates out of laundry detergents and we intend to take them out. Our job is to make certain that we remove them as rapidly as we can do in a thoroughly reasonable manner. This we are doing." (quoted in Duthie 1972).
Mr. Morgens' statement reflected the Industry's concerted efforts since 1964 to substitute phosphate with sodium nitrilotriacetate (NTA) as the binder in detergents. As of May 1970 Procter & Gamble had spent $11 million on NTA research, $6.8 million in modifications to their facilities accommodating NTA substitution, and had placed orders for NTA valued at $167 million (Hamilton 1972). By then Procter & Gamble had spent several million dollars on researching NTA's environmental effects (Duthie 1972), and other studies had shown NTA to be biodegradable and environmentally safe (e.g., Swisher et al. 1969). Nevertheless, on December 18, 1970 the Surgeon General "requested" that detergent manufacturers discontinue the use of NTA until further testing (Duthie 1972). Primary concerns were the carcinogenicity of NTA degradation products, potential toxic and teratogenic effects of NTA:metal complexes, corrosion properties, and NTA decomposition under anoxic conditions (Congressional Report HR 91-1004 April 14, 1970, Hamilton 1972). It was not until 1980, after years of extensive risk assessment on NTA in drinking water supplies, that the EPA declared NTA's cancer risk of two in a million too small to pursue regulatory action regarding inclusion into laundry detergents (Cross 1986).
Late 1960's: Eutrophication is perceived as a significant environmental concern.
1964-1970: Detergent manufacturers recognize the need to remove phosphorus from detergents and spend considerable resources developing NTA, a safe alternative.
1970: The government tells detergent manufacturers to stop using NTA.
1972: The Clean Water Act and local laws restrict the use of phosphorus in detergent.
1980: The government says NTA is okay after all.
Is it obvious that the government even did more good than harm by getting involved with this issue?
Krugman credits regulation for saving Lake Erie, but worries that "farming has so far evaded effective controls, so the lake is dying again, and it will take more government intervention to save it." Those scofflaw farmers!
But, as anyone with a backyard garden knows, phosphorus is not an exotic laboratory chemical cooked up to sell more Miracle-Gro. It's one of the three main nutrients needed for plant growth.
Phosphorus is the P in ATP, necessary for photosynthesis to occur. Here's hoping the farmers can hold out a while longer against Krugman's readers!