Krugman(?): If only the earthquake had done more damage, the economy would have gotten a boost

WWII had two effects on the US economy.

The first, short-duration effect was to put a huge swath of the population to work making armaments, and to take another huge swath of the population out of the workforce and put them into uniform. We had an over-supply of labor (with the 15% unemployment) going into WWII. The vast rush to put men into the armed forces solved that labor over-supply issue, and brought wages up to sustainable levels immediately.

The second, longer-term effect was to destroy huge amounts of production capacity in other countries while leaving ours intact. We then had captive markets for our manufactured goods following the war, which led to the prosperity of the 50’s. By 1930, the economies of Europe and Japan, coupled with the US, had a great deal of surplus production capacity, much of it built on credit. The implosion of prices led to trade wars and debt deflation.

When the world has excess production capacity, war is often the result. You might read up on the work of a Russian ag economist by the name of Krondatieff, which shows the cyclical nature of these things.

Thanks for bringing up the 'broken window fallacy.' I remember reading about it years ago in something called 'The Freeman' which is a magazine that I recommend for everyone.

You have to wonder... If Krugman's house was demolished in an earthquake, would he be philosophical about it and say - hmmm... maybe this is really good for the economy!

This was his post and his demented mind found sense in it. Why? In his twisted, socialist, Keynesian-istic mind this was justice and impetus for gigantic new public works his FDR’d mind craves.

To carry Krugman's insanity to its illogical conclusion, criminals and arsonists who destroy property are doing yeoman's work for the administration by creating demand for products and services where none existed before.

And what of the murderer who creates work for police, judges, prison guards, morgue workers, undertakers, grave diggers, florists, casket manufacturers and others?

As pointed out in post #4, Krugman's entire house of cards is built on his faulty first assumption - that money spent repairing a broken window or replacing a burned out home was just sitting around unused and would not have been spent had the criminal or arsonist not manufactured demand.

Post #5 sums it up nicely - he is quite insane.

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