Media coverage of Hurricane Sandy has included articles and posts, such as this random example, or this one, about how the hurricane damage may actually be good. Essentially, the idea is that the cleanup, repairs, and aid will create jobs, and that the recovery will eventually lead to improvements in buildings or technology that otherwise would never come about. The same argument has been made for other disasters, such as war.
This is the perfect time to bring out the classic illustration of the “Broken-Window Fallacy,” discussed by Frédéric Bastiat in 1850 and much beloved by Austrian economists.
The general idea of the parable is that a shopkeeper has had his window broken by an act of vandalism. Although this is a disappointment to him, others point out that it is ultimately good because it will provide work for the glazier.
Bastiat points out that this way of thinking is short-sighted. Sure, the glazier gets work, but the shopkeeper has had to spend money unexpectedly on a new window. That money might have been saved and accumulated interest. Or it could have gone to buy a new suit, or a new pair of shoes. Instead of a new suit and a whole window, the shopkeeper only has the whole window. The glazier has the added business, yes, but now the tailor does not. The shopkeeper might have used that money to expand his shop, potentially creating new business for both himself and whoever helps him expand—possibly the glazier, or a brickmaker, or a roofer, etc.
Although I am a libertarian and very much interested in Austrian economics, I’m not myself an economist, and I don’t know a great deal about specific measurements and technical terms involved in GDP and employment numbers (which are often manipulated).
I do know, however, that you cannot create wealth through destruction, on any scale. You don’t need complicated statistics to show what should be common sense.
If you could, Obama and Romney should stop making promises about unemployment and just start leveling towns at random. Honda should roll their new cars right off the assembly line and into the ocean. And the victims of Hurricane Sandy, the London riots, Hurricane Katrina, the earthquake in Haiti, the BP spillage, and Middle-East bombings should all be glad that their pain provided a way to improve the economy. (Didn’t it??)
To use a more frivolous example (hey, it’s Friday, I want to end on a more amusing note): If a tree falls and totals my car, I’m not going to be excited about the chance to buy a newer, better car, or that I’m giving mechanics and carmakers more business. I’m going to be pissed that I have less money to spend on what I really wanted, such as traveling expenses when I go to England next year. A pub in England, St. Paul’s cathedral, and British railways will all get less business because I don’t have as much money to spend on fish and chips, admission, and train tickets.If the death and destruction of war is good for the economy, then why is the end of The Avengers considered a happy one? Iron Man shouldn’t have (SPOILER ALERT) diverted the nuke, but should have let it reach its target of Manhattan. Just think: all those jobs created to build a whole new, better Manhattan! I suppose the Chitauri were glad that their mothership blew up instead and all those alien soldiers died, though. (Weren’t they?)
So, you see, Loki isn’t a villain—he’s just a Keynesian.
(I kid, of course: they’re the same thing.)