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article imageOp-Ed: Sorry, Keynesians, Hurricane Sandy is not great for the economy

By Andrew Moran     Nov 5, 2012 in Politics
New York - Is a disaster as catastrophic as Hurricane Sandy actually beneficial to the economy and a nation's populace? Keynesian economists like to suggest such nonsense, but the notions have already been refuted by the likes of Frederic Bastiat.
The destruction that Hurricane Sandy perpetrated on the United States east coast is estimated to be more than $50 billion. It will take months, possibly years, to rebuild that part of the country. It was a tragic incident that has not been seen in the U.S. since Hurricane Katrina – or perhaps every time economists, like Paul Krugman, open their mouths.
Last week’s disaster would fit to the background of Frederic Chopin’s Prelude Op. 28 No. 24 in D minor, but not into an economic model that would report positive news and endless job creation, which would benefit President Barack Obama or Mitt Romney, if elected Tuesday.
What am I talking about? Who in their right mind is even suggesting Hurricane Sandy was great for the economy? I am referring to a report published in the Financial Times, and elsewhere across the media landscape, which insinuates post-Hurricane Sandy will be a terrific boost into the U.S. economy.
Here are some quotes from the referenced report:
“The storm that ravaged the north-east coast of the US last week will hit economic growth in the final quarter of 2012 but will boost it in the first half of next year, company executives and economists say, creating some positive momentum for the winner of this week’s presidential election.
“However, economists are already looking forward to the likely boost to GDP next year from spending on reconstruction. Goldman Sachs estimated that while the storm would reduce GDP growth by up to 0.5 percentage points in the fourth quarter, it would add ‘slightly more’ than that to growth in the first quarter of 2013.
“Clearing up the damage and rebuilding will also boost demand for many companies. H&E Equipment Services, the construction equipment rental, sales and service chain, said on Thursday it expected to benefit from the reconstruction.”
It’s unfortunate to see, even after all these decades, economists purport the notion a disaster invokes economic growth. This herein lies the denunciation by 19th century French economist Frederic Bastiat and his 1850 piece “That Which is Seen, and That Which is Not Seen.”
In Part No. 1 of his articulate article titled “The Broken Window,” Bastiat talks about a shopkeeper, who has his window broken by some individual and he now must hire someone to fix the damage. The local townspeople are distraught by the news, but they make the case that this will benefit the economy because he must hire the window repairman.
However, if his window was never broken in the first place, he would have had money that he could’ve done something else with, such as go to the local cinema, dine out at the local jazz club or purchase clothing from a local tailor. There could’ve been countless other ways he could’ve spent his earnings.
This famous idea is now referred to as the Broken Window Fallacy. The notion that we should break everyone’s windows, create endless chaos and provide unimaginable damage is fantastic for an economy is foolishness.
Unfortunately, there are members of our society, who are held in high esteem because of certain (worthless) accolades and awards, that actually hold validity to this failed principle. One of these men is economist Paul Krugman.
Krugman hasn’t, not yet anyway, said that Hurricane Sandy is great for the economy, but he has shared the concept that disaster equals economic growth.
During an interview with CNN, Krugman suggested that an alien invasion would generate wealth, while also proposing that World War II helped end the Great Depression. Both theories are surely incorrect.
World War II didn’t conclude the Great Depression. It only profited the military-industrial complex (weapons manufacturers, airplane developers and other defense contractors). What ended the Great Depression were vast spending cuts to the federal budget.
Although Krugman likes to (rightly) rail against the neo-conservatives for trying to benefit from wars, he is just as much a culprit because his ideas are contributing to such public policies that lead to endless wars, loss of life and unwanted calamities practiced by the present U.S. administration and its predecessors.
In conclusion, in the Keynesian mind, if you want immense economic growth, just initiate obliteration to a society.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
More about hurricane sandy, Keynesian economics, Economic growth, Paul Krugman, Frederic Bastiat
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