Quick Followup to Yesterday’s Hurricane/Economy Blog Post

Yesterday, I blurted out a quick post after reading a headline suggesting that hurricanes help economies. I prefaced it with a warning that the topic deserves more, and better, than I had time to present. After my little dinner story below, I’ll offer up a bit more reasoning…


I asked our youngest over dinner last night if he thought hurricanes hitting communities ultimately help the economy. He answered “yes” almost instantly. “Why?” I asked. He went on to describe with unwaveringly confidence what many respected personalities — one Fed president no less — have been suggesting of late; that the aftermath activity will be legitimate economic stimulus.

So I grabbed my iPhone and said “let me share a little something I read today that challenges your reasoning.” I proceeded to read yesterday’s blog post. About halfway through I could see his lights go on. When finished he asked “who wrote that?” I replied “does it matter?” He knew at that moment that I was reading my own stuff, which he forced me to confess. True to his contrarian form (which I love by the way!) — although his lights going on told me I already had him — once he considered the source he proceeded to challenge my assertions. Honestly, it was a half-hearted attempt compared to a typical Ryan rebuttal. He may be a contrarian, but he’s a smart kid. I.e., he relatively quickly surrendered to the logic.


In addition to the effects of redirecting resources I mentioned yesterday, last evening’s dinner conversation had me realizing that I didn’t stress how redirection takes place in the economies of the households affected, as it does in the economy at large. 


Rosemary Fike does a better job than I of debunking the popular fallacy that the destruction of useful property somehow nets economic benefits. Here are three snippets from her Learn Liberty article (HT Don Boudreaux):

Yes, people will need to rebuild. So expenditures on the goods and services necessary for rebuilding will of course increase dramatically. There will be more construction jobs in the Houston area in the following months (perhaps years) than there would have been had the storm not happened.

But the money and other resources directed toward these rebuilding efforts would have been used in other ways had the disaster not happened. The dollars people will now spend repairing their homes cannot also be used to buy clothes, cars, vacations, or any number of things residents of Houston would rather have done with their hard-earned money.

And:

The long-run growth of an economy greatly depends upon the size and productivity of its labor force and its capital stock (the tools its labor force can use). A natural disaster destroys homes, businesses, and machinery; and it displaces large portions of the labor force.

A huge amount of money will need to be spent just to get Houston’s capital stock back to what it was before the storm. And this process will shift the labor of its residents toward rebuilding and away from creating new goods and services.

 And the “real bright side”:

If you’re looking for the real bright side to this disaster, you might find it by looking at the way people work together in Harvey’s wake to overcome challenges and rebuild. There are already countless stories about people donating their time and resources — and risking their lives — to rescue stranded community members.

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