Hurricanes and Broken Windows
By Arnold Kling
Why are Florida’s hurricanes a “plus”? It’s simple. According to St. Petersburg Times reporter Joni James, “Construction creates thousands of jobs, insurance provides for billions in consumer purchases, and new facilities built to higher standards might help offset future storm-related losses.”
…Bastiat wrote a parable about this that has become known as the “Broken Window Fallacy.” A shopkeeper’s window is broken by a vandal. A crowd forms, sympathizing with the man, but pretty soon, the people start to suggest the boy wasn’t guilty of vandalism; instead, he was a public benefactor, creating economic benefits for everyone in town. After all, fixing the broken window creates employment for the glazier, who will then buy bread and benefit the baker, who will then buy shoes and benefit the cobbler, and so forth.
Those are the seen effects of the broken window. What’s unseen is what the shopkeeper would have done with the money had the vandal not broken his window. He might have employed the tailor by purchasing a suit.
I think perhaps Florida could benefit from the hurricane if (a) much of the insurance costs are borne by people outside of Florida and (b) if the hurricane causes Floridians to spend relatively more on local services and relatively less on “imports” from the rest of the country.
For Discussion. How likely is my scenario, and would it really improve Florida’s economy?