A Modest Proposal

By On October 31, 2012 · 32 Comments · In Current Events

After every disaster, someone says, “This will be good in the long run for the economy. Think of all the homes and infrastructure that must be rebuilt. Think of all the new cash that will come out reserves and go into circulation. This is just the stimulus we need.”

To those who genuinely believe this, I have a modest proposal. Instead of waiting patiently for hurricanes to fix our economy, why don’t we just manufacture our own disasters? For instance, the government could order a mandatory evacuation of California. We could then bomb the hell out of the state. Think of the stimulus this would create to the hotel, oil, military manufacturing, and ailing construction industries. Indeed, we could require Californians to leave their cars at home (to be bombed), and thus help the American auto industry as well. I understand insurance doesn’t cover acts of war, but surely this doesn’t count as war, does it?

At any rate, if you really believe this kind of stuff, it sort of solves the problem of evil, doesn’t it? Hurricanes aren’t apparent divine evil in need of explanation. Rather, God is a vulgar Keynesian just trying to help.

If you take enough econ classes, you will eventually learn to describe hypothetical conditions under which destruction could be a net blessing. But, in the real world, it’s pretty crazy for you to think you know that those conditions actually obtain. But if you do think those conditions in fact obtain now, then please explain to me why it would not also be good to have the military bomb a city or two.

 

 

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  • Electric Liberty

    Opportunity Cost. All that effort spent rebuilding would otherwise be spent building new stuff. NDP as in “net” would be a better measure of the economy than GDP. But it would have to include all forms of destruction, not just depreciation. If we scale that down to an individual or family, I’d be more interested in the change to net worth, than the change to income (both adjusted for inflation). It would also show something else: War is BAD for the economy.

    • Electric Liberty

      By “include” I mean subtract.

  • Fallon

    Why evacuate before bombing? Depopulation is great for wages. Exhibit A: The Great Plague. The survivors never had it so good. Better than unions even!

  • Svedingo

    “please explain to me why it would not also be good to have the military bomb a city or two.”

    Because everything is not about economics… stupid question

  • http://www.facebook.com/profile.php?id=1091737052 Chad Horne

    I see that you think you’ve done something clever here, but i can’t figure out what it is.

    You seem to imply that saying “one positive aspect of a hurricane at the zero lower bound is that it gooses aggregate demand” is equivalent to saying “hurricanes are a good thing on balance or all-things considered.” Obviously that’s not true.

    • http://www.facebook.com/profile.php?id=1702318862 Jason Brennan

      No, I literally saw three separate news reports yesterday in which broadcasters said that the net effect is positive.

      • http://www.facebook.com/profile.php?id=1091737052 Chad Horne

        Well, the net effect on GDP WILL be positive, because the damage to property won’t be counted but the spending on repairs will be. So that’s not necessarily wrong although I grant it’s misleading.

        If they meant the net effect all-things-considered, then yes, that’s nuts, but somehow I doubt that they did, as that would require an almost Panglossian level of moral nearsightedness.

        • purple_platypus

          I think you give the people who say shit like that far too much credit for being able (and willing) to understand somewhat-subtle economic distinctions.

  • Frederick Polgardy

    “God is a vulgar Keynesian just trying to help.” Best line I’ve heard all day.

    • Sean II

      If I was a rock star, I would drop that line out-of-context in between songs to make myself seem extra cool.

  • http://www.sandiego.edu/~mzwolinski Matt Zwolinski

    Genuine question: does anyone really claim that disasters are good for the economy *on net*? Or is the claim, rather, that the rebuilding of infrastructure / stimulus effects are partially offsetting benefits to an overall harmful event? Even that latter claim might be false, but it’s less obviously so, and, of course, it wouldn’t be vulnerable to the reductio you’ve presented here.

    • Sean II

      I’d say everyone who ever looked at the orgy of value destruction that was World War II and saw in it an economically beneficial event is definitely making the former claim.

      That’s a lot of people.

      • Sean II

        I wonder on what grounds my down-thumbers objected here. There are only a few possibilities

        1) They deny that WWII caused a whole bunch of value destruction
        2) They deny that anyone claims WWII produced a net economic benefit
        3) They themselves believe that WWII produced a net economic benefit

        The first possibility is absurd. The second is demonstrably false with a bit of googling. It’s gotta be the third.

    • http://www.facebook.com/profile.php?id=1702318862 Jason Brennan

      I have only heard the dumb versions of the argument so far.

    • Jay_Z

      In a world with indestructible objects, new entrants (the young) would find it difficult to trade their labor for objects. In a world where everyone can sing like an opera singer, the total money paid to all opera singers will be less than in a world where only a few can sing opera. No one hires cops or armies in a world with no crime or violence. There would be little if any trade and property would be acquired through inheritance only.

      Labor obtains value by differentiation, which means that people must lack objects the laborer can make, or value things the laborer can do that they themselves can’t.
      That can’t happen in a world where bad things never happen.
      .

      • Sean II

        Answer me this, Jay:

        If everyone can sing like Domingo and protect himself like Robocop while living in a world of indestructible objects, why would they even need money?

        You ask us to imagine a universe without scarcity and then complain that people there would find no work.

        The thing you have ignored here is nothing less than the most basic fact of economics. If loyalty to a thesis requires you to do THAT, then it’s time to lead your thesis into the woods and shoot it in the head.

  • martinbrock

    If every available resource, aside from labor, is fully employed producing goods that owners of the resources want, and if some laborers (owning no resources other than their labor) are not employed with these resources producing these goods, then these laborers may consume only what they can produce with no other resources, which is scarcely anything.

    In this scenario, destroying some of the productive capacity of the available resources could create demand for the idle labor, if the idle laborers can restore the productive capacity of these resources. Owners of the destroyed resources are less wealthy in this scenario, but the idle laborers don’t care.

    The owners could employ their resources producing different goods, requiring more labor, or they could simply give stuff to the idle laborers for nothing, but if these options are not attractive to the owners, destroying the resources is a net plus for the idle laborers. Whether it’s a net plus for the economy as a whole hardly matters, because the economy as a whole is a collectivist fiction anyway.

    • http://www.facebook.com/les.nearhood Les Kyle Nearhood

      I disagree, the economy as a whole does matter because a high level of economic activity and wealth creation benefits everyone involved in the economy. Whereas the reduction of wealth or the increase in inefficiencies will introduce costs born to some extent by everyone.

      • martinbrock

        Wealth creation does not benefit everyone involved in the economy to the same extent, and everyone does not bear reductions in wealth to the same extent. Ignoring differences between individuals is the essence of collectivist, political rhetoric.

        If you happen not to belong to an organization of resources producing goods for members of the organization (directly or through trade), and if all resources other than your labor belong to organizations satisfied with the productivity of their resources and desiring nothing from you, you’re just out in the cold.

        Statutory forces keep resources frozen in organizations isolating the resources from outsiders this way. Authorized organizations can and do freeze people out of productive interaction with resources other than their labor. They do it when GDP is rising and when GDP is falling.

        • http://www.facebook.com/les.nearhood Les Kyle Nearhood

          I just think you are overstating the case. I have worked in social circumstances with poor people and there is a really big difference in their lives between a good economy and a bad one. Naturally, that does not mean I am in favor of collectivist laws. I am in favor of laws that allow markets to work and create.

          • martinbrock

            That there is a really big difference in the lives of poor people between a good economy and a bad one is completely consistent with my point.

            If a poor person is unable to produce for whatever reason, the state of the economy matters less or differently, because this person does not consume his own marginal product. He can only consume what others produce.

            If a poor person is able but has a low marginal product because he lacks access to means of production, because owners fully employ these means in projects excluding the poor but able person, then the state of the economy makes all the difference, and changing the state of the economy so that owners require more labor to pursue their projects benefits the poor person.

            We can imagine changing the state of the economy so that owners of productive means require more labor to pursue their projects without some natural disaster, by changing the owners for example, but imagining this change doesn’t benefit the poor person.

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  • http://www.facebook.com/les.nearhood Les Kyle Nearhood

    This garbage comes up every time there is a natural disaster. I asked my uneducated, 78 year old mother in law about this. I presented the arguement the same way we always here it. In her common sense way she said, “How could people beleive such nonsense? If you have something then it gets broken, it cost you money to replace it.”

    So there you have it, a women without a high school diploma has more sense than several so called economists.

  • good_in_theory

    If one takes the present world as “the best of all possible worlds,” then disasters are unmitigated disasters. If one takes the present world as inferior to other possible worlds due to various systematic barriers to the ideal investment and allocation of capital, then disasters are mitigated by the extent to which they are capable of shifting a society from a sub-optimal equilibrium to an optimal equilibrium. Whether that equilibrium is better or worse than the other equilibrium without the costs of the disaster is rather irrelevant, as nothing was going to stop the disaster. One cares about whether the new equilibrium minus disaster costs is better than the old equilibrium minus disaster costs.

    There are all sorts of toy models about how disasters may cause such shifts (animal spirits, collective action problems, tragedies of the anticommons, and so on).

    • Fallon

      Interesting. Though I believe the “Broken Window Fallacy” is a ceteris paribus argument. Yet, I personally believe that a storm wiping Washington DC off the map would definitely be a gain for humanity as a whole…

      • good_in_theory

        Well, yes, the broken window’s fallacy is a fallacy if you grant ceteris paribus. But the arguments BWF critiques often aren’t ceteris paribus, so aren’t really fallacious (though they could very well be wrong/false. But falsity and fallaciousness are not the same thing).

        Most obviously, they (the arguments critiqued by BWF) assume a misallocation of resources that can be fixed the the change in the pattern of distribution prompted by a disaster.

        Obviously, if you disagree about the possibility for some outside authority to *know* that there is a superior pattern of distribution which one can *also* get to via the shocks caused by the disaster, then these stories won’t be compelling.

        But if you accept some theories of market failure and sub-optimal nash equilibriums, and are also compelled by accounts of how certain kinds of disasters/waste might nonetheless get you out of these problems, then it’s even possible for the benefits of shifting equilibria to outweigh the waste of the event, even if its totally improbable. But at the very least, one can see how *given* a disaster, the resulting change could lead to a contingently better situation.

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  • http://knappster.blogspot.com/ Thomas L. Knapp

    “Instead of waiting patiently for hurricanes to fix our economy, why don’t we just manufacture our own disasters?”

    We do. They’re called “governments.”

  • martinbrock

    We could then bomb the hell out of the state.

    Bombing the hell out of the state wouldn’t have the desired effect. Which property we destroy matters a great deal. We want to destroy property that is part of profitable organizations without destroying so much property that organizations can’t restore their profitability by repairing the damage.

  • http://twitter.com/_Srijit Srijit Sanyal

    Because the same thing could be done even better, without bombing anybody, with a fiscal stimulus package.
    (And the same thing could be done even better than that, by ending the tight monetary policy we’ve had for the last 4 years.)

    • Sean II

      The US monetary base has tripled since 2008. Unless you’re using the words “tight monetary policy” as a synonym for “any monetary policy that coexists with a recession, by definition”, I can’t imagine what you mean by that.

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