This article appeared in Bloomberg.com and described the rebuilding effort in New Zealand after the earthquake, specifically in Christchurch. What struck me is the assertion that the demolition and reconstruction of infrastructure, buildings, and homes would give an economic boost to their economy. That came from a J.P. Morgan Chase economist so I am shocked, but maybe I should not be. Such thinking has become common wisdom among Keynesian economists.
Frederic Bastiat used the example of a broken window to examine the economic consequences of destruction. Keynesians would say that a broken window created work for the glass company and also demand for more plate glass. Austrian school economists look at the big picture and see a net loss of wealth, even if some wealth is redistributed. The same reasoning can be applied to war, where thousands of workers are employed to build arms and munitions. This Wikipedia article has Bastiat’s parable and a discussion of the subject.
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