"The welfare of humanity is always the alibi of tyrants" - Albert Camus

Thursday, March 24, 2011

What? The Quake An Economic Bonanza For Japan?

Yes, as previously in the case of Kyoto earth quake and hurricane Katrina, we have been hearing from crackpots like Nathan Gardels, Lawrence Summers, and Paul Krugman that the $300 billion plus catastrophe that befell Japan will actually help its troubled economy.

Mr. Gardel's current L.A. Times article includes the following passage:  "The need to rebuild a large swath of Japan will create huge opportunities for domestic economic growth, particularly in energy-efficient technologies, while also stimulating global demand and hastening the integration of East Asia. ... By taking Japan's mature economy down a notch, Mother Nature has accomplished what fiscal policy and the central bank could not."

This is lunacy to put it mildly.

As Frederic Bastiat famously said: "There is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."

Apparently, those unforeseen effects is the achilles heel of all progressive Keynesian type economists.

As Bastiat further elaborated in his "Broken Window Fallacy" parable, in Japan's case, the opportunity cost of the $300 billion in physical damage plus the currently incalculable other economic costs of rebuilding will be far greater than the stimulus provided by rebuilding the damaged structures. 

Capital not spent on innovating, or otherwise increasing productivity, is capital wasted.  It is too bad that such a simple, and historically demonstrable, concept is also so foreign to some economists.

If the Keynesians were correct, by the same ridiculous token, why don't we bomb our cities so that a real recovery can take place?

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