COLUMNISTS MAKE predictions at their peril, but I’ll go out on a limb: If Hurricane Irene turns out to have wrought the havoc some forecasters have predicted, some expert will quickly reassure us that all the destruction is good for the economy. “One of the most reliable results of any natural disaster,’’ remarks economist Russell Roberts, “is the spreading of bad economics.’’ And few fallacies are more enduring than the belief that disasters are really a net benefit to society, since the money spent on recovery stimulates new jobs and construction...You know what else isn't economic stimulus? Stimulus packages.
More than 160 years ago, the French political economist Frederic Bastiat skewered such attitudes in a now-famous parable: A boy breaks a shopkeeper’s window, and everyone who sees it deplores the pointless destruction. Then someone insists that the damage is actually for the good: The six francs it will cost the shopkeeper to replace his window will benefit the glazier, who will then have more money to spend on something else. Those six francs will circulate, and the economy will grow.
The fatal flaw in that thinking, Bastiat wrote, is that it concentrates only on “what is seen’’ - the glazier being paid to make a new window. What it ignores is “what is not seen’’ - that the shopkeeper, forced to spend six francs on that, has lost the opportunity to spend them on better shoes, a new book, or some other addition to his standard of living. The glazier may be better off, but the shopkeeper isn’t - and neither is society as a whole.
Broken windows are not economic stimulus. Hurricanes aren’t either. There is no silver lining in useless destruction. Not even if “experts’’ say otherwise.
Sunday, August 28, 2011
Hurricane Irene Will Stimulate The Economy!
When I read columns by Jeff Jacoby, I often marvel that he's still employed by the Boston Globe. This is one of those columns: