Here’s a question: Are natural or manmade disasters good for the economy? Dr. Larry Summers, top economic adviser to President Obama, said about the Kobe, Japan, earthquake: “(The disaster) may lead to some temporary increments ironically to GDP as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake Japan actually gained some economic strength.” After devastating Floridian hurricanes, it’s not uncommon to read newspaper headlines such as “Storms create lucrative times”, or “Economic growth from hurricanes could outweigh costs”, or “It’s a perverse thing … there’s real pain, but from an economic point of view, it is a plus”. Then there’s Nobel Laureate Paul Krugman who wrote in his New York Times column “After the Horror”, after the 9/11 attack, “Ghastly as it may seem to say this, the terror attack — like the original day of infamy, which brought an end to the Great Depression — could do some economic good”. He went on to explain that rebuilding the destruction would stimulate the economy through business investment and job creation.
One would never hear my colleagues in George Mason University’s economics department spouting such insanities. Just ask yourself whether the Japanese economy would have faced even greater opportunities for economic growth had the earthquake also struck Tokyo, Hiroshima, Yokohama and other major cities? Would the 9/11 terrorists have made a greater contribution to our economy had they also destroyed lives and buildings in Chicago, St. Louis, Los Angeles and Atlanta? The belief that a society benefits from destruction is sheer lunacy.
French economist Frederic Bastiat (1801-1850) explained it in his pamphlet “What is Seen and What is Not Seen”. He said, “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen”. That’s why my George Mason University colleagues are good economists.
Walter E. Williams, “Economics Reality”, Townhall.com, 2020-02-04.
February 5, 2025
QotD: Economies and disasters
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