Thursday, November 1, 2012

Disaster Keynesianism -- Say something responsive for once!

Last day in Budapest for now, leaving in a few hours. But it looks like the topic of the day is the economics of Hurricane Sandy, and, as with any discussion of economics during a natural disaster, whether it will be "good for the economy".

Needless to say, this is a discussion that has happened several times already. Still, engagement with the other side's arguments is always good -- as long as you're actually, well engaging, rather than extending and reinforcing a non-responsive (or no-longer-responsive) point.

Which brings us to pseudo-contrarian Steve Landsburg's latest pseudo-contribution to the matter. He thinks he has an even more devastating critique of the "hurricanes can be good for the economy" by posing this:

ask your opponent whether it’s “good for the ants” when you put a stick down their anthill, wiggle it around and destroy their infrastructure. Go ahead and acknowledge that this can sure put a lot of ants to work.

Or, for that matter….

Ask if spilling ink on the living room rug is “good for your household’s economy” because of all the cleanup work you’ll do.

Of course, this doesn't actually address the Keynesian's central point, because their claim is that normally such acts are destructive, but need not be so when there are idle resources (found after a quick search).

To make absolutely sure I'm not misunderstood, please read these caveats if you plan on responding:

- I don't agree with they Keynesian "idle resources" argument, and have said as much before.

- I realize that Keynesians (and their critics) acknowledge that there are always better ways to do economic stimulus than a natural disaster -- just employ those otherwise-would-be-disaster-response-resources to do something that's not completely wasteful.

And yet there's no mention of relevance of idle resources in Landsburg's post, or in the army of back-slappers or hangers-on that dominate the beginning of the discussion. When we finally do, it's from critics who offer surprisingly good analogies, like commenter "Brian", who compares a stagnant economy to laziness ("akrasia") in an individual:

Suppose Billy Joe has been in bed for years. He’s overweight and unmotivated. His life appears to continue to spiral out of control as he watches reruns of every horrible show made from the 1970′s on. But when that ink falls on the floor, this finally gave him a reason to get out of bed and clean up the mess, and the mere activity of it kick started him into action of doing thins again, and even being motivated [sic]

And the defenders of the post (I guess *not* surprisingly) miss the point that of course making new windows is better than fixing broken ones, but that's not an option here. Landsburg himself does that in this comment:

... this is ridiculous, on Keynesian grounds or any other. If you believe it’s important to hire idle resources in order to “stimulate the economy”, then you don’t have to wait for a hurricane — you can hire people to build *new* bridges instead of having them rebuild old ones. The hurricane does not in any way expand your set of policy options; it only destroys stuff.

Except, of course, that it does expand your options, since by supposition, policy makers won't allocate funds for public works projects that build new windows, but will gladly fund projects to restore the windows that were broken in the disaster. (To re-iterate: I disagree that such public works funding -- whether for building or fixing -- is a good idea for "helping the economy"; this is simply about appreciation of one's opponent's arguments and responsiveness thereto.)

My point here is that if you want a really hot one-line zinger for why the "hurricanes good for economy" meme (in its most intelligent form) is wrong, you're going to have to do a lot more than just say that destruction is bad. No -- you're going to have to show why destruction is not "better than nothing" if its effect is to put (only) idle resources to use, thus giving people the dignity of a job and practice of their skills, when you don't have the option (for e.g. political reasons) of simply employing those idle resources to build on top of existing wealth.

What's that, you say? It's hard to give a concise, fun explanation of why that thinking is wrong? Well, it should be. Two-sided political debates tend to be like that. My shortest debunking is at least this long

Can you do better? Perhaps. But it won't be by invoking the ten millionth permutation of "destruction is bad, m'k?".