Friday, May 25, 2018
Business

Here's why Tropical Storm Debby won't really provide a stimulus

Our latest wakeup call from Mother Nature chewed up roofs, snapped trees and turned cars into soggy husks. • The mess needs repairing and replacing. That means spending, and spending is good for our anemic economy, right? Call it a storm stimulus. • If only it were that simple.

The storm is a windfall for the roofer whose phone won't stop ringing, or the carpenter called to fix the backyard shed, or the auto repair shop open late with new business.

But what about the restaurant owner forced to close early or the theme park that saw attendance plunge?

Or the fisherman idled by high seas?

"This storm is just killing us," Chad Haggert, who operates the Double Eagle II and III party boats out of the Clearwater Marina on Clearwater Beach, said earlier this week. "There are plenty of people here who want to fish, but Debby's just out there spinning in circles, costing us money."

Economist Don Boudreaux hears it all the time: Natural disasters stimulate the economy. He thinks, at least in part, the idea stems from a fascination in finding a silver lining in a bad situation.

"It's appealing, but it's just silly to think that destruction of valuable things is better for the economy," said Boudreaux, a professor at George Mason University. "If it was good, then Beirut would be one of the wealthiest cities in the world. It's not."

Economists refer to the concept as the broken windows fallacy. It goes like this:

A boy breaks a shop window. Townspeople bemoan the act of vandalism, until one speaks up about how it might be beneficial because the shopkeeper will have to buy a new window. The windowmaker puts more money is his pocket with which he can buy new tools. The toolmaker has more money in his pocket and so on.

The fallacy part is this, with all due credit to 19th century economist Frederic Bastiat: If the shopkeeper has to buy a new window, he can't hire a new stock boy, buy a new iPod or invest in another business. Money was moved around after the window was broken, but it was not created. Furthermore, something of value was destroyed. The shopkeeper — and by extension the town and the economy as a whole — has had to pay just to get back to where he was before the vandalism.

"Society loses the value of objects unnecessarily destroyed," Bastiat wrote.

The same concept can be applied to storms. The economy would be better off, proponents argue, if all the roofs, cars and windows remained intact and everyone spent the money on something else.

Sandy Ikeda, an associate professor at Purchase College in the State University of New York, argued that the fallacy becomes clear when you take the theory to its "logical extension."

"Why wait for disasters? We should invite them!" he wrote after the Haiti earthquakes in 2010. "Why waste resources on homeland security when just one well-placed nuclear bomb could boost our own economy. … Think of the jobs! If you're not into bombs, then how about advocating a new wave of 1960s-style 'urban renewal' by unleashing an army of federal bulldozers onto our major urban areas?"

Or, as Boudreaux put it:

"If destruction worked, we could just hire people to shoot buildings down with a bazooka to get things going."

That would be good for the bazookamaker, the theory goes. But not the economy.

Times outdoors/fitness editor Terry Tomalin contributed to this report. Graham Brink can be reached at [email protected]

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