August 28, 2011

Hurricane Irene and the Broken Window Fallacy

Couldn't fit further left on the page.
So many people have spoken about the Broken Window Fallacy (myself included), that it's become a given that bad news and damage are not good for the economy.  That is it seems, unless you are Nobel Prize Winning economist, and progressivist shill Paul Krugman.

How someone wins a Nobel Prize in economics when they are calling for an alien invasion (or a faux one) is unclear.  How they get one when stuff they should know is blindly ignored is baffling.  How they get credence from a liberal media looking to elevate their side of the economic debate is less surprising, but it doesn't make it smart.  The New York Times may want to do some background checking on Mr. Krugman's economic prowess before continuing to push him as an expert because in the case of Hurricane Irene, he's got one more thing to add to his personal list of wrongness. He falls victim to a perfectly refutable idea that destroys his credibility in other matters completely.

The Boston Globe has a piece today reminding all that catastrophic events do  not bring good news to the economy.
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.

Consider the massive earthquake and tsunami that devastated Japan earlier this year - a catastrophe that killed more than 22,000 people, caused the worst nuclear crisis since Chernobyl, and pitched the already sagging Japanese economy into recession. Three days after disaster struck, the Huffington Post published Nathan Gardels’s essay celebrating “The Silver Lining of Japan’s Quake.’’ Urging his readers to “look past the devastation,’’ he rejoiced that “Mother Nature has accomplished what fiscal policy and the central bank could not.’’ Now the Japanese would have lots of bridges to build, “entire cities and regions’’ to reconstruct, and information networks to revamp.

...Yet the conviction that devastation is really a boon never seems to go out of fashion.

“It seems almost in bad taste to talk about dollars and cents after an act of mass murder,’’ wrote Paul Krugman in The New York Times less than 72 hours after the atrocities of 9/11, but the terrorist attacks could “do some economic good.’’ After all, Manhattan would “need some new office buildings’’ and “rebuilding will generate at least some increase in business spending.’’
But it just doesn't work that way. Apparently Paul Krugman hasn't gotten to that chapter in his Economics 101 text yet.  How he won a Nobel Prize is very puzzling.  Oh wait, it really isn't. It really, really isn't.

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