HURRICANES ARE NO BOON TO THE ECONOMY
October 19, 2004
As Florida approaches the end of its official hurricane season, the media and a few economists are claiming that hurricanes are good for the economy. But the logic behind the claim leaves out the other half of the story -- that is, while hurricanes stimulate short-term rebuilding, they also destroy resources that could be used for more productive activities, says Justin W. Marshall (Mackinac Center for Public Policy).
- Hurricanes Ivan, Charley, Frances and Jean caused tens of billions in damage.
- Since the devastation of Hurricane Andrew in 1992, Florida homeowners' insurance rates have increased 150 percent.
- Many insurance companies have eliminated flat-rate deductibles in favor of higher deductibles equal to a proportion of the home value; some families would have to take out loans just to pay their deductibles.
Even if net economic growth from a hurricane is positive, it is paid for by taxpayer money through federal emergency aid. Mackinac president Lawrence W. Reed noted in 1995: a thief spending stolen money at a shopping mall does not contribute to economic growth, since the money was taken from other productive uses in the first place.
Today's bad economists are overlooking the theft and focusing on the thief's spending, says Marshall. They see the insurance checks, new buildings and jobs created by the hurricanes. Yet they ignore the unseen value of an economy free from the distress of destruction and full of stored-up potential to create new and vibrant markets.
In other words, we can not destroy our way to economic success, says Marshall.
Source: Justin W. Marshall, "Storm Drain," Mackinac Center for Public Policy, October 7, 2004.
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