Hurricanes Harvey and Irma actually will lead to increased economic activity ... New York Fed President William Dudley said in an interview.
Increased economic activity.
Jeff Jacoby
Jeff Jacoby has been a columnist for The Boston Globe since 1994. He has degrees from George Washington University and from Boston University Law School. Before entering journalism, he (briefly) practiced law at the prominent firm of Baker & Hostetler, worked on several political campaigns in Massachusetts, and was an assistant to Dr. John Silber, the president of Boston University. In 1999, Jeff became the first recipient of the Breindel Prize, a major award for excellence in opinion journalism. In 2014, he was included in the “Forward 50,” a list of the most influential American Jews.
Frederic Bastiat’s broken window fallacy is less obvious under a debt-based monetary system and fiat currency.
Yes, its true that a storm destroying a car may be good for Toyota or Ford, but what about the owner who suffers the loss? Or, the insurance company who has to cover the owner’s loss? Or the government who bails out the insurance company?
The cost must end up somewhere. In our present system though, the cost is just swallowed into the pit of massive government debt in our printed currency. It allows people like Krugman to see it as just another debt-based, money-printed stimulus scheme.
Hurricanes Harvey and Irma actually will lead to increased economic activity ... New York Fed President William Dudley said in an interview.
Increased economic activity.
They must be Ferengi Econo-misseds.........
Ferengi Rules of acquisition:
War is good for business.
Peace is good for business.
Disasters are good for business.
Massive disasters do “help” the economy... the problem is - most of the disaster recovery spending is actually debt-based, which actually digs an ever-deeper hold that long-term cripples the economy.
Sure - there will be quite a few people with work to do - many new short-term jobs will be created... But ultimately, the hole gets deeper.
How many $billions with taxpayers be spending via taxes (or borrowed money from the Fed with interest) in disaster funding just on these two hurricanes? It is a staggering amount.
In theory, structures built prior to the building code changes will be rebuilt to a better standard and suffer less loss in the next storm.
Already covered in the Fifth Element.
"Life, which you so nobly serve, comes from destruction, disorder and chaos. Now take this empty glass. Here it is: peaceful, serene, boring. But if it is destroyed...
[Pushes the glass off the table. It shatter on the floor, and several small machines come out to clean it up]
Zorg: Look at all these little things! So busy now! Notice how each one is useful. A lovely ballet ensues, so full of form and color. Now, think about all those people that created them. Technicians, engineers, hundreds of people, who will be able to feed their children tonight, so those children can grow up big and strong and have little teeny children of their own, and so on and so forth. Thus, adding to the great chain of life. You see, father, by causing a little destruction, I am in fact encouraging life. In reality, you and I are in the same business."
I disagree
I believe disasters to be a net positive in the long run.
Everything damaged will be replaced with new items even aging infrastructure that otherwise would have sat continuing to decay.
“It seems almost in bad taste to talk about dollars and cents after an act of mass murder
“The most immediate consequence was a halt to the campaigns of the Hundred Years’ War. In the long term, the decrease in population caused a shortage of labour, with subsequent rise in wages, resisted by the landowners, which caused deep resentment among the lower classes. The Peasants’ Revolt of 1381 was largely a result of this resentment, and even though the rebellion was suppressed, in the long term serfdom was ended in England. The Black Death also affected artistic and cultural efforts, and may have helped advance the use of the vernacular.”
https://en.wikipedia.org/wiki/Black_Death_in_England
If these hurricanes provide excuses to expand freedom of action, we will all be better off in the long run.
Anyone anywhere is the U.S. with even marginal construction skills is almost guaranteed a year or more of steady work in Texas or Florida. If they are collecting unemployment or welfare, lay down the law: go where the work is (with our assistance making the contacts and traveling) or leave the rolls.
Disasters can have beneficial effects for certain segments of the economy, but they are not good for the economy overall.
The Broken Window Fallacy is about hidden costs.
It depends what you mean by “good” for the economy. You have to replace what was destroyed. That cost of replacement is counted as production, but the destruction isn’t subtracted from production. So yes, any statistic of economic growth will be inflated by the destruction. But that inflation isn’t something good; it’s just something that looks good because of misleading statistics.
Of course, the money spent replacing what was destroyed will come out of money that COULD have been spent building something new and productive. (This is the same flaw with Keynsian spending.) So if you take the size of the economic product and subtract the cost of replacement, you get a value significantly lower than what the size of the economic product WOULD have been without having to make the replacement. But I expect if you don’t make that correction for destruction, you would have a value higher than if there hadn’t been the destruction, unless the destruction was so devastating and widespread that you hamper economic activity down the road, such as after the Japanese or Indonesian tsunamis, the Haitian earthquake, etc.