There’s a race on right now between the climateers and the liberal cheerleaders for big government and economic illiteracy to see who can make the bigger fool of themselves over Hurricane Sandy. Two weeks ago in my Ashland University class I drew the students attention to Frederic Bastiat’s famous “broken window fallacy” of economics, and as exhibit one pointed to New York Times columnist (and Nobel Prize winner!) Paul Krugman, who wrote after the earthquake in Japan last year: “People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.” (This was not a one-off: After 9/11, Krugman wrote: “Ghastly as it may seem to say this, the terror attack—like the first day of infamy, which brought an end to the Great Depression—could do some economic good.”) Gee, if the Jihadists had just knocked over a few more buildings in Manhattan, think how much richer we’d all be by now! Maybe we should just knock them over ourselves??
So last night I challenged my students to look for the first instance of someone making the case that Hurricane Sandy would be an economic boon. It took just a few seconds to find several. In fact, the New York Times was already arguing this yesterday before Sandy had even made landfall:
Even as businesses struggled on Monday to gauge and contain the damage from Hurricane Sandy’s slow move up the East Coast, economists played down the likely long-term effects. The recovery after the storm, they said, could actually pump up growth temporarily in a few sectors, like construction and retail sales, when cleanup begins in earnest in a few days. . .
The Puffington Host has a piece on the “stimulus effects” of Sandy, but I imagine the irony is lost on the PuffHo crowd that their site is offline right now because of power disruption (so this link is dead at the moment–heh). (UPDATE: Link is back up now, and the piece is a muddle; not clear whether they have the story right, or think Sandy wan’t big enough to be a proper stimulus.) The Wall Street Journal offers a good illustration of why business executives are often idiots:
However, economically speaking, the clean-up is sure to generate its own visible effect on the economy. John Challenger, CEO of Challenger, Grey, put it this way:
“If there is any silver lining in all the destruction the storm is expected to cause, it’s that such storms tend to provide a boost to the economy in their wake. After the initial shocks to the economy related to lost output and productivity, we will probably see an employment surge in construction, skilled trades and other professions needed to help repair the damage. There will also be an increase in business and consumer spending and companies and homeowners replace damaged equipment, household items, etc. While much of it will be paid for with insurance money, the injection of money into the economy will be beneficial nonetheless.”
Even Forbes comes close to botching the issue, before kinda/sorta getting it right: “Is Hurricane Sandy To Provide A Stimulus For The US Economy?”
But, what about the impact of cleaning and reconstruction that is expected to follow the hurricane? Wouldn’t it give a boost to the economy? It depends on the extent of the damages and magnitude of the reconstruction to be done. Some experts talk of damages in the order of $10, $20, even $100 billion—seeing a “Sandy stimulus package.” But even if we go with the highest estimate, $100 billion, it is a too small number given the size of the US economy.
So, we should have wished for Sandy to have been more damaging over a bigger area? Sign this man up as Krugman’s research assistant.
Meanwhile, you can guess what the climateers are saying. I won’t even waste your time and precious pixels. (Well, if you really must see, here’s some typical off-the-hook-hysteria from the ClimateProgress folks.) The New York Times’ straight-shooting Andy Revkin reminds us: “While dramatic, Northeast storminess is not place to look for signals of greenhouse-driven global warming. Read this excerpt from an important 2002 Nature paper that used lakebed cores to create a record of extreme storminess through the Holocene:
Climate models suggest that human activities, specifically the emission of atmospheric greenhouse gases, may lead to increases in the frequency of severe storms in certain regions of the Northern Hemisphere. However, the existence of natural variability in storminess confounds reliable detection of anthropogenic effects.
During the past ~600 years, New England storminess appears to have been increasing naturally. This rhythm in storm frequency may explain some of the recently observed increases in extreme precipitation events. If the pattern of millennial-scale variability that we documented through the Holocene persists into the future, New England storminess would continue to increase for the next ~900 years. Because climate synopses compiled from instrumental records cannot distinguish underlying natural increases in storminess from anthropogenic effects, detected increases in contemporary storminess may not be a reliable indicator of human-induced climate change.
So we need a name for the new Power Line Hybrid Green Weenie/Economic Idiocy Prize.
(Hat tip to Jeffrey Scott in the Ashland Government 370 course.)