Tsunami stimulus

Jeffrey Tucker points out that it didn’t take long for the Neo-Keynesians to resort to the Broken Window Fallacy:

“It may lead to some temporary increments, ironically, to GDP, as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake, Japan actually gained some economic strength” – Lawrence Summers, president emeritus of Harvard University and former director of the White House National Economic Council.

Based on this logic, the U.S. military should set off a series of nuclear explosions in the Atlantic, the Gulf of Mexico and off the California coast to trigger a series of tidal waves that will trigger instant economic growth all along the coasts. I’m not sure what we could do to help the Upper Midwest, but perhaps our intrepid biologists could do something about breeding a horde of giant rampaging beavers to destroy all the dams and bridges from Michigan to Idaho.

Now, as I explained in RGD, there are certain specific situations where broken windows will lead to economic growth, but earthquakes and tsunamis aren’t among them.


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