Friday, April 3, 2009

The Natural Disaster Stimulus Plan

See also: The Broken Window Fallacy
From BusinessWeek:

When major floods or earthquakes hit, millions of insurance and federal dollars come in to rebuild, creating new homes and new jobs

Can a natural disaster be a good thing?

The Red River waters that blanketed Fargo, N.D., and Moorhead, Minn., neighborhoods this week caused immediate destruction, despair, and economic devastation, but the surge of spending in coming years to repair and rebuild roads, sewers, homes, and businesses might be a long-term lift to the local economy.

Fargo and Moorhead, which were hit by a blizzard on the heels of the flood, are now assessing the damage and the possibility that the river will swell again after the snow melts. But if the federal aid and private spending pumped into other communities hit by previous natural disasters are a guide, the flood could be an economic stimulus.

"It's a perverse kind of benefit," says Barton Smith, an economist at the University of Houston. "You do have to recognize it's a mixed blessing. If your home survived and you're working in the construction industry, you probably come out of it better. If your home didn't survive, then you're suffering.">>>MORE