To Recover, Japan Must Ignore the Economic Fallacies

RealClearMarkets ^ | 03/16/2011 | John Tamny

[SeekAndFind]

"The possibility of a rapid repair of their disasters, mainly depends on whether the country has been depopulated. If its effective population have not been extirpated at the time, and are not starved afterwards; then, with the same skill and knowledge which they had before, with their land and its permanent improvements undestroyed, and the more durable buildings probably unimpaired, or only partially injured, they have nearly all the requisites for their former amount of production."~ John Stuart Mill, Principles of Political Economy, Book I, chapter 5.

The ongoing tragedy in Japan has unsurprisingly generated a great deal of commentary covering how - and if - the country will recover economically from difficulties that at least from the television screen, seem insurmountable. The happy news is that if history is any kind of indicator, Japan will rebound with great speed.

And since Japan will recover, it's important to discuss some of the economic falsehoods that like Groundhog Day, always reveal themselves anytime a country suffers a natural disaster. This is useful because in discounting what's ahead for Japan, it's necessary to discredit the fallacies that will have nothing to do with the country's resuscitation.

First up is the sad, discredited, and surely horrifying notion that the collapse of country infrastructure, and its subsequent rebuild, will be economically stimulative. This false belief system was long ago discredited by economists Bastiat and Hazlitt who helpfully noted that while broken windows might stimulate glaziers, the unseen would be the investment that wouldn't occur in order fix what wasn't previously broken.

[yldstrk]

No deficit spending!

[Palmetto Patriot]

Interesting article.

Thanks for the post.