The MSN Money headline this morning reads;
Irene, The Stimulus Package? Hurricane Irene was a devastating storm, but it may end up giving the economy a much-needed boost.
I am forever amazed at how such fallacy survives in the face of common sense…
If you struggle with this one, read on:
Picture the cartoon:
A pile of money next to a perfectly good factory next to a vacant lot…
Picture a hurricane destroying the factory…
Picture the reconstruction: The workers, the concrete, lumber, glass, paint, and the manufacturers and distributors of said materials…
Picture the brand new factory and the pile of money moving through the economy…
So then:
Destruction = economic growth, right?
Hurricane good thing (economically speaking), right? Hmmm…
Now picture the scene without the hurricane:
Pile of money next to a perfectly good factory next to a vacant lot…
Picture the construction of a new factory on the vacant lot (with all the materials and labor mentioned above) next to the perfectly good building…
Picture the brand new factory AND the remaining perfectly good factory and the pile of money circulating through the economy…
I.e., Double the output for the same amount of money!!
So then:
Destruction = destruction, right? Right!
Hurricane bad thing (economically speaking), right? Right!!