Japanese reconstruction may boost economy, but it's not a blessing

Some argue that the economic boost that comes from reconstruction is a good thing. But putting money into building means there's less left for other important things.

Toru Hanai / Reuters
A worker walks past excavators at a port in Tokyo March 9, 2011, two days before an earthquake caused significant damage in Japan. Reconstruction will help boost the economy, but that still doesn't mean it's a silver lining.

After every natural disaster we have to put up with Keynesians telling people of the "silver lining" is that the economy will be boosted by rebuilding. Now we have Larry Summers saying just that, while of course deploring the loss of lives.

This is of course just another example of the "broken window fallacy" where it is ignored that the rebuilding spending means less money available for other spending, not to mention the fact that the value of the previously existing buildings goes lost.

One wonders BTW why Summers and others don't take this to its logical conclusion and advocate an orderly evacuation of some large American city, say New York, and then destroy all the buildings. If really the destruction of buildings from natural disasters are so good for the economy, why wait for "Mother nature" to cause this in a way which kills people? Why not simulate this in a way where no one is killed.

The logic of this argument means that we should, after having avacuated all the people, destroy all buildings in New York and perhaps a few more cities, and then rebuild them. Does that sound like a sensible idea to you? Well, that's Keynesianism for you.

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