Hurricane Katrina and "The Broken Window"
Often after a natural disaster, you'll hear the chattering class talking about benefits of the new spending (especially construction spending), employment of laborers, and certain areas of economic activity "created" by the necessity of reconstruction.
They say "There will be billions of dollars spent on rebuilding which brings a big economic benefit to society."
The devastation wrought by Hurricane Katrina is so unimaginably large that most of the economic idiots who say such things are still in (properly) stunned silence. Maybe it takes something as bad as this for them to recognize the error in their thinking. But I think that gives them too much credit.
We should never accept an argument that destruction of something can be a net economic positive, that the money paid to the repairman or factory for the new part and its installation means that the economy is better off. That money had to come from somewhere, and it almost certainly comes from someone who would have made a different choice had he been free to.
One of the great economists of all time, Frederic Bastiat, wrote one of the great economic treatises of all time. It is called "That Which Is Seen, and That Which Is Unseen". It is more commonly known by its most famous metaphor, "The Broken Window".
The article is not short, but everyone with an interest in economics should read it...at least the first half.
Thanks to www.bastiat.org for this version of the English translation.
You can read it on their web site at:
or you can download or read a PDF version from my site by clicking here.
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