Tuesday, August 23, 2016

"There is no profit in destruction***" said no media outlet ever. Louisiana Flood Edition...

***Frederic Bastiat.

Well, it has not happened yet, but wait for it...

Here is a satellite photo (from NYTimes) that shows "Louisiana at Night".  The bright white on the left shows the State as it normally is at night.  The one of the right shows it on August 15, 2016.

Notice the lack of electricity where it used to be plentiful?  Many areas have gone dark.  Devastation.

When damage is done to property, private or public, it has to be repaired or rebuilt. This will necessitate new/current purchases of goods and services.

This adds to Gross Domestic Product (GDP).  It looks like the economy is humming along.

But GDP accounting must include a subtraction to account for what was lost, right?  The added purchases are simply making us whole again, right?

Nope.  GDP includes only "new goods and services" purchased.

Now, businesses will sell less of some goods (demanded before the flood) and more of others (stuff to rebuild) so it could (not likely) come out even.

But you are likely to see a news report that suggests there is a "positive side" to this tragedy---employment and the buying of new stuff.  DON'T BE FOOLED!!

"""From which, by generalizing, we arrive at this unexpected conclusion: "Society loses the value of objects unnecessarily destroyed," and at this aphorism, which will make the hair of the protectionists stand on end: "To break, to destroy, to dissipate is not to encourage national employment," or more briefly: "Destruction is not profitable."""" Bastiat.

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