It’s a common policy misconception that disasters are good for economic growth. Hurricane Sandy provides us with an ideal opportunity to reflect on a profound and important economic lesson.
Forbes.com writer Agustino Fontevecchia points to “the positive economic impact in the near-term” that Hurricane Sandy left in her wake. This is what economists call the “Broken Window Fallacy,” and Mr. Fontevecchia is not the only one under the delusion of this fallacy
Consider this quote from “What Is Seen and Not Seen,” an essay written in 1850 by the French economist Frederic Bastiat.
“Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son has happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators…offered the unfortunate owner this invariable consolation—“It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”…This will never do! [This consolation] stops at what is seen. It does not take account of what is not seen.”
The lesson Bastiat articulates so well throughout his essay is that destruction does not provide beneficial opportunities for spending to stimulate recovery. In other words: natural disasters are not an opportunity for economic growth or job creation.
Hurricane Sandy brought levels of destruction to New York, New Jersey, and Delaware that were unprecedented. These areas of the world do not live in traditional hurricane zones. Many people are still without power and shelter. Homes and businesses that were destroyed will have lifetime impacts on their owners, and many people’s savings may be wiped out as a result. Most estimates place the cost of the damage somewhere between $20 and $50 billion.
Speaking as someone from the Christian faith, I know our job as citizens, neighbors and people of faith is first and foremost to pray and to care for the people affected — whether by giving a charitable donation to a church or nonprofit poised to help, or by going and helping ourselves. But speaking also as an economist, I know that we are never called to embrace the storm as a chance for new building, new construction, and new economic growth.
• Storms like these destroy scarce resources that we are called to steward. Why celebrate the violent destruction of those resources?
• We shouldn’t use situations like these to call for an economic boost, because any new investments that are made are attempting to replace investments eliminated by the damage.
This is where economic thinking can help us to better understand God’s call to stewardship.
Destroyed resources bring with them huge opportunity costs. The money spent rebuilding homes and businesses after Hurricane Sandy would have been used on other projects and investments had the storm never occurred. Those other projects are now just ideas, because the storm has forced people to redirect their savings to rebuild something that was destroyed.
Might it provide short-term benefits to some? Sure. If you are in the home repair business, your phone might be ringing off the hook right now. But all of the dollars spent on rebuilding was intended for something else.
Good stewardship of money requires understanding the following:
• We are called to steward the scarce resources God entrusts to us.
• Because we live in a world of scarcity, all of our investments and choices have tradeoffs.
• Anything devastating our resources destroys something that people have built, tended to, and cared for – thus devastation brings high costs.
• Flourishing depends on taking what we are given and multiplying it with our time, talents, and money.
The last bullet is especially important. We don’t achieve human flourishing in our communities and across the nation because of destructive forces like hurricanes, tornadoes and flooding.
Yes, there may be some short-term benefits for some people; however, this is not how the massive economic growth this country experienced in the 20th century took place. We need plumbers, roofers, and mechanics for when things go wrong, but we also need many other people using their gifts and talents in the marketplace. All of our jobs contribute to economic growth, not just jobs demanded during trials.
Flourishing is set back by disasters, not fueled by them. For us to advance human flourishing we must create and innovate. Each and every one of us has the opportunity to create and innovate, regardless of our profession. As the election is now decided, let’s pray our leaders will embrace flourishing as God intended and remember the important lesson of the broken window.Anne Bradley, Ph. D. is vice president of theological initiatives at the Institute for Faith Work & Economics.
Article originally appeared in the Washington Post