As night follows day, the promoters of the broken-window fallacy have emerged following another natural disaster to proclaim its economic benefits. This time it’s a columnist at Politico.com, who claims that Hurricane Irene will provide a boost to the economy because “billions will be spent on rebuilding and recovery.”
No doubt the writers at Politico will next propose the demolition of all buildings in the country to stimulate the construction sector. Or maybe they’ll suggest that the government hire people to dig holes and fill them in again to get the economy back on track.
How many times will these sorts of claims have to be refuted? I’ve posted about this subject before, and people far more knowledgeable than I have been fighting this fight for 150 years. It should be pretty clear to anyone who stops to think about it that if destroying and rebuilding stuff increases GDP, then GDP is not a very useful statistic for measuring prosperity. But most people will never think about what could have been done with all the capital that will now be expended in rebuilding damaged or destroyed property.