Many people believe the fallacy that wars and disasters are good for the economy, perhaps because some people like defense contractors and home-builders benefit. But it is important to understand how wealth works. If you build a house from raw materials you are richer. For instance suppose you take $50,000 worth of raw materials and add $50,000 worth of labor and come out with a house worth $150,000. in that case you created $50,000 worth of wealth out of thin air. But if someone comes along and knocks your house down and you rebuild it: 1) Are you better off? 2) Worse off? 3) The Same? ~ Tim McMahon, editor In this article Kerk Phillips looks at "hurricane economics". Even Economically, … [Read more...]
Hurricane Katrina: The Economics of Disaster
The Economics of Disaster: Are Hurricanes Inflationary or Deflationary? Insurance companies have estimated the damage from hurricane Katrina at $25 Billion Dollars. But the economic effect is much greater than that. That is just the loss of property. Another consideration is the loss of revenue while things are being rebuilt. What about the loss of jobs from the companies who won’t be rebuilding because they didn’t have insurance? According to the “Financial Times” current estimates of “total economic losses” are closer to $100 Billion. Those numbers are so large that it is almost impossible for us to get our minds around it. If you stacked 100 billion one dollar bills on top of each … [Read more...]
