« Prices | Main | Weeping for My Hometown» Don Boudreaux
August 30, 2005
Death, Taxes and Economic Ignorance
Russell Roberts
One of the most reliable results of any natural disaster is the spreading of bad economics. In this Reuters story from the Washington Post (rr), we learn that three mutually exclusive outcomes are going to somehow occur. First, Katrina is bad for us:
Katrina, which last week hit south Florida, was expected to cause a total of $10 billion to $26 billion in insured damages, according to hurricane modeling firms. It could be the most expensive storm to ever hit the United States.
But Katrina will also increase GDP, which is presumably good for us:
"There will be a lot of rebuilding that is going to need to occur. These things do spur GDP growth," said Ken Mayland, president of ClearView Economics in Pepper Pike, Ohio.
And at the same time, it's a wash—the costs will be counterbalanced by the benefits:
Diane Swonk, chief economist at Mesirow Financial in Chicago, said wages lost by workers and revenues missed at shops and other businesses would be generally short-lived and replaced by stepped-up demand for construction and other workers and higher sales at home-supplies outlets.
Maybe the last two economists quoted were quoted out of context. Or maybe they meant something more nuanced, holding things constant that they didn't explicitly mention. But maybe they just don't understand that Bastiat had it right. Destruction is bad.
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