Fox Business - Economic Impact of Hurricane Sandy
Interview with Melissa Francis on Fox Business News discussing the economic impact of Hurricane Sandy. While the media has been pushing hard to turn the economic devastation into an economic boost the reality is that this simply isn't the case in the long term. In the short term there WILL be, assuming a $20-30 billion damage estimate, of about 0.5% boost to GDP. However, this boost will only be temporary in nature.
The reason is the destruction is not economically productive in the long run as it takes dollars that would have been used in the future to replace items that were already purchased previously today. The "broken window" theory says that if a window is broken it will lead to economic activity as the window is replaced. However, replacing a window keeps the homeowner from using the same dollars to purchasing something else.
Think about it another way - if devastation was economically positive in the long term then why don't we just embark on a plan to create rolling artificial devastations? We would have continuous economic growth right? Wrong. The displacement created by the devastation is only refilled but leaves a hole in future economic growth.