Larry Summers, of the President’s Council of Economic Advisers, and all around idiot Keynesian, has murmured something to the effect that rebuilding could temporarily boost the Japanese economy.
That is an amazing amount of lunacy to come from someone who is supposedly a trained and respected economist. It violates one of the basic tenets of economics. Bastiat’s broken windows fallacy.
Don’t let anyone fool you, a disaster or a war, do not boost the economy and will not bring anyone out of a bad economy. That is because of something called opportunity costs. Opportunity costs are all the purchases or investments you could make with a given amount of money that you used on something else. Just as the money spent by government on ethanol subsidies or a bridge to nowhere could have been better spent investing in new private sector investment or consumption.
What are the opportunity costs of the billions spent on rebuilding? What do you do about the lose of property that is irreplaceable? (lost heirlooms, memorabilia, lives, pets, and coastline to name a few). A loss is just a loss.
But didn’t WW2 get us out of the great depression you ask?
After WW2 our nation took off because of pent up demand. There was enormous demand for consumer items that could not be realized during the war because of rationing. Also, we were one of the few intact industrial economies so we gained a large share of foreign trade as well.
But if the Keynesians are correct then we could get the same amount of stimulus today by building battleships and aircraft carriers and then just sinking them.