Disasters Such as Hurricane Irene Are NOT Economic Stimulus

Several reasons, all of them are not obvious. Re-building helps people get back to even — to where they were before the disaster.

Physical capital was destroyed. Cars, buildings, etc.  These structures can no longer be used to generate income. People cannot get to their jobs if their cars were destroyed. Maybe they’ll get paid, maybe they won’t.  Either way is only part of the problem.  The work they intended was not worked on.  As well, they will now have to divert their income from what they had it planned for to replacing or fixing the vehicle that was destroyed or disabled.

Commerce was halted. Businesses small, medium, and large closed. This deprived the owners and employees of income. Customers were unable to buy the things they sought.

Existing processes were disrupted. People could not get to and from work, parents could not bring their kids to schools or other activities. Supply chains to brings goods to market were disrupted and so the goods could not be delivered. Retailers and other recipients of those goods could not sell them or had to take orders for future delivery at best. But, often, stuff is bought on-the-spot. If it’s not in stock it cannot be sold. People sat home and could not work or attend to other activities that promote commerce. Sure, there was some temporary activity to fill the gap but that is money diverted from its intended purpose.

Jeff Jacoby on Frederic Bastiat’s That Which is Seen, and That Which is Not Seen:

The fatal flaw in that thinking, Bastiat wrote, is that it concentrates only on “what is seen’’ – the glazier being paid to make a new window. What it ignores is “what is not seen’’ – that the shopkeeper, forced to spend six francs on that, has lost the opportunity to spend them on better shoes, a new book, or some other addition to his standard of living. The glazier may be better off, but the shopkeeper isn’t – and neither is society as a whole.


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