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Tsunami and Foolishness

By: kyle8 (Diary)  |  March 15th, 2011 at 02:52 PM  | 

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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.

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  • aesthete

    The extent to which liberal economists are willing to obviate the most fundamental economic laws in the rush to endorse governments spending is mind-boggling.

    Significantly, a good chunk of New Deal policy and regulation was also rolled back both during WWII and directly after, with the election of a Republican Congress during Truman’s term. That certainly helped, as did the fact that any industrial competition to the US was bombed to rubble (something which helped the US to the extreme detriment of the world economy, of course).

  • http://theminorityreportblog.com Repair_Man_Jack

    Ah, the broken window fallacy. Ignore the cost of what was destroyed. Ignore the opportunity cost of not having what was destroyed. Talk up the benefits of getting to rebuild all the really cool things that got trashed. Presto! People start believing we should always benefit from a disaster. I mean just look at what Katrina did for New Orleans.

  • BillM

    I may have my facts wrong, and I may also be talking about oranges instead of apples.

    Be that as it may, I am a firm supporter of Mayor Bing’s plans to bulldoze dozens if not hundreds of abandoned city blocks of Detroit and convert them either to greenspace, canalways or high-tech industrial parks. Nobody is ever going to move back to those ‘neighborhoods’ and it costs a (bankrupt, in this case) city a fortune to provide services to an area with such low population density, never mind the low incomes.

    IIRC Rush recently criticized such plans as “giving up”; again, I’m painting with a broad brush.

    I also admired the way McCain frankly told the unemployed in the Rust Belt states during the ’08 primaries “Your old jobs aren’t coming back”, in contrast to Romney for one, let alone the Dems, but now I’m really off-topic.

  • http://impudent.edublogs.org/ kyle8

    He isn’t proposing to bulldoze buildings that are currently being used. In that case the loss has already occurred and he is proposing to rebuild, something out of nothing as it were.