{"id":25000,"date":"2017-08-29T17:24:56","date_gmt":"2017-08-29T22:24:56","guid":{"rendered":"http:\/\/olduvai.ca\/?p=25000"},"modified":"2017-08-29T17:25:04","modified_gmt":"2017-08-29T22:25:04","slug":"opinion-no-hurricanes-are-not-good-for-the-economy","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=25000","title":{"rendered":"Opinion: No, hurricanes are not good for the economy"},"content":{"rendered":"
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Opinion:<\/span> No, hurricanes are not good for the economy<\/a><\/h3>\n<\/div>\n<\/div>\n
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Yes, GDP may get a temporary boost from rebuilding, but there\u2019s nothing positive about destruction<\/p>\n<\/div>\n

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REUTERS\/Adrees Latif<\/cite><\/div>
Think of the increased production of motor vehicles to replace all those flooded trucks!<\/figcaption><\/figure>\n
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Once the immediate danger of a natural disaster subsides, and the loss of life, property damage, cost of rebuilding, and degree of insurance coverage can be assessed, attention generally turns to the economic effect. How will Hurricane Harvey affect the nation\u2019s gross domestic product?<\/p>\n

You will no doubt hear assertions that the rebuilding effort will provide a boost to contractors, manufacturers and GDP in general. But before these claims turn into predictable nonsense about all the good that comes from natural disasters, I thought it might be useful to provide some context for these sorts of events.<\/p>\n

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The destruction wrought by a hurricane and flooding qualifies as a negative supply shock.<\/a> Normal production and distribution channels are destroyed or disrupted. Producers have to find less-efficient (i.e. more expensive) ways to transport their goods. The net effect is lost output and income, and higher prices.<\/div>\n<\/div>\n

Over the years, I\u2019ve observed a tendency among economists and traders to view such events through a demand-side prism. They see lost income translating into reduced spending on goods and services, which might even warrant some largesse from the central bank.<\/p>\n

Of course, that is precisely the wrong medicine. Supply shocks reduce output and raise prices. The Federal Reserve\u2019s interest-rate medicine affects demand. Lower interest rates will increase the demand for gasoline, among other goods and services, but they have no effect on supply. An easing of monetary policy under such circumstances would increase demand for already curtailed supply, raising prices even more.<\/p>\n

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…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Opinion: No, hurricanes are not good for the economy Yes, GDP may get a temporary boost from rebuilding, but there\u2019s nothing positive about destruction REUTERS\/Adrees LatifThink of the increased production of motor vehicles to replace all those flooded trucks! Once the immediate danger of a natural disaster subsides, and the loss of life, property damage, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[15772,353,8479,5220,13513],"class_list":["post-25000","post","type-post","status-publish","format-standard","hentry","category-economics","tag-caroline-baum","tag-gdp","tag-hurricanes","tag-marketwatch","tag-natural-disasters"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25000","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=25000"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25000\/revisions"}],"predecessor-version":[{"id":25002,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25000\/revisions\/25002"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=25000"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=25000"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=25000"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}