Mark Merritt, president of crisis-management consulting firm Witt Associates, said the hurricane should provide a bump in economic activity over the next few months.
“After a disaster, there’s always a definite short-term increase,” Merritt said. “There will be furniture bought, homes repaired, new carpet, new flooring, all the things affected by flooding.”
Instead of the Politico read Frédéric Bastiat on Ce qu’on voit et ce qu’on ne voit pas.
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It’s a pity more people didn’t die. It would both reduce the number of people competing for jobs, and provide a huge boost to the funeral industry.
It’s not surprising that the mainstream seems to view sending soldiers off to die as a great means to reduce unemployment.
Indeed, it won’t be long before Public Policy dictates there is an annual lottery in which a random US city will be selected to be carpet bombed for economic stimulus.
LOL.
Maybe Washington, DC, will be first?
This is already happening, only it’s not US cities. So that’s all right, then, best beloved, do you see?
I am currently reading Hazlett’s book, Economics in One Lesson. Fantastic book. A great intro as I am just becoming aware of the Austrian school. So many issues stated so clearly. But I would like some help in understanding this broken window fallacy. A kid throws a brick through a shopkeepers window. The shopkeeper has $250 to spare. He was going to buy a suit but now he has to spend the money on a new window. Instead of having a suit and a window, all he has is a window. But he still spent $250. That money still went out into the economy. It went to the glazier instead of the tailor but it was still money spent in the economy. I can understand why this is not good for the shopkeeper but I don’t understand what difference it makes in the larger economy. Can someone please explain?
If you view the economy in the lens of GDP and only care about money spent, it may not make a bit of difference. But you must understand why we have an economy. It is there to allow us to trade goods and services. We make trades in the hopes of improving our happiness. The shopkeeper would clearly be happier with both a window and a suit, and so his happiness has been reduced, while not really improving things on net for the other people in the economy. Keep in mind that the shopkeeper is part of the economy. So now instead of X windows and Y suits being owned by Z people, you now have X windows and Y – 1 suits owned by Z people. It’s a net loss for the “economy”.
But, it seems to me, it is not X windows and Y – 1 suits. It is X + 1 windows and Y – 1 suits. There was one more window purchased than if the boy had not thrown his brick. The shopkeeper is certainly in a worse position but I don’t see how it is a net loss for the economy.
Everything Hazlett says about taxes and unions and everything else makes perfect sense to me. The meaning of this analogy still escapes me.
But one window was destroyed. There are still the same number of windows before the brick was thrown as after the window was replaced. Another window was produced, but with an offsetting loss.
Okay, now the light it dawning. Sorry I am a little slow on the uptake. Thanks for the help.
I’m not an economist by any means, but one of the most important lessons I have taken from this site, and what has made a lot of things much easier to understand, is to remember that money is not wealth. Wealth is all the things we purchase with our money. The purpose of an economy is to allow us to trade the things we produce for other things we desire more. Money only facilitates this trade by giving a medium of exchange that is widely recognized. When money and wealth are confused, ideas come about like hurricanes being good for the economy. Another important lesson to remember is that production is not an end in itself, it is a means.
Greg,
I agree that most economists see money as nothing more than a medium of exchange, but the Austrian concept of human action requires that people psychologically view money as wealth.
I disagree with the assessment that money is nothing more than a medium of exchange. If money has no value (as an asset), then there is no reason to save it and I should have no fear if they decide to print more of it. The basis of Keynesian theory is you print more money then you have more exchanges thus the economy grows.
If you have sound money, (e.g. backed by gold) then money has value (retains value or increases in value in a deflationary environment) and thus can be considered an asset. In other words, I don’t have to speculate or gamble to increase/retain my wealth. I can work harder, take on two jobs, and actually increase my wealth. When money is viewed as an asset, there is value in work and savings.
The cornerstone of Austrian economic theory is that savings is needed to create capital goods (higher order goods) which in turn creates jobs and eventually lower order goods (the stuff we buy at the store).
There is no confusion. A hurricane is not going to be good for my savings (wealth). Diminishing the pool of savings in order to repair things, (mostly lower order goods) that weren’t broken in the first place, not only diminishes my wealth but also diminishes the pool of savings needed for the development of higher order goods and real jobs. That’s the problem.
I guess it’s the way I look at wealth then. I don’t deny that money must have value, but it is not an end unto itself. It is a means. Money does not offer entertainment, you cannot eat it or drink it, use it for shelter, or use it to travel. It is a means to exchange for those things that you can eat, drink, use for shelter, or use to travel. Even when money is in the form of gold coins, people don’t hold it for the sake of having gold to look at. They hold it because it’s a means to obtain those things that they need to live. This is what I mean when I say that money is not wealth.
Greg,
I only brought up the distinction of money as wealth in order to clarify an issue that often bothers me about the perception of money. My comment was directed not so much at you but to the non-choir who might be browsing these comments. Your comment was more of an inspiration than an outright disagreement.
Your assessment of money is absolutely correct…the goal of having money is to buy the things we need or desire.
I think your way of looking at wealth is the way most people look at wealth; in a sound money society, it is the way to look at wealth.
But having lived in an inflationary society, remembering my father pointing out the difference between a real millionaire (liquid) and a paper millionaire (assets and credit), coupled with my middleclass upbringing… when I see people with lots of stuff, I usually think debt.
Instead of the community having a window AND a new pair of shoes, they only have the window.
Economic activity, yes. Economic enrichment, no.
All one need do is read the first paragraph.
“The power outages and shuttered airports may stop the engines of commerce for several days, but Hurricane Irene might have provided some short-term economic stimulus as billions of dollars will likely be spent to repair the damage to the East Coast over the weekend.
”
Billions of dollars that would have been spent on new things instead of merely replacing things that had already existed.
Good job it didn’t materialize – at least we don’t have to put up with the usual allegations of profiteering, hoarding and price gouging. Spare me from having to listen to Chuck Schumer – I’m sure he was planning a field day.
The reason wars sometimes do work as a stimulus is that it reduces uncertainty, thus stimulating investment and making life much less stressful for people. For most people (and i assert it) war is very fun thing, full of mythos and heroism – as long as they stay home and not in trenches.
Thats why ww2 worked, and fake war wouldn’t.
It didn’t work, it made America a shithole 3rd world country with rationing and the worst quality products possible, you cretin
Apperently you didn’t try to read what i said, mr mauron
Suppose that the Keynesians are right. Then the obvious thing to do would to get the unemployed to destroy or vandalize Federal Government property.
However, from an Austrian perspective, it might actually stimulate the economy if all government agencies were burned to the ground and could not operate while they were being rebuilt. We could amplify the effect by continuously burning them down over and over again as the rebuilds were completed.
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