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September 08, 2005

Comments

John

Frank,

It seems to me that the only way a hurricane like Katrina could have a 'neutral' effect on the economy is if it (a) generates greater efficiency in public spending - money that would have been wasted is used productively and (b) encourages people to work harder in the face of total destruction, i.e. productivity increases.

I'm not sure that this holds up, but I thought I'd put it out there.

Frank McGahon

I don't think that really does hold up, there's really no reason why the devastation in itself ought to make public spending more efficient or increase productivity. Remember, for this to be "neutral" any such marginal increases would have to make up for the total dead loss of the cost of the damage.

John

there's really no reason why the devastation in itself ought to make public spending more efficient or increase productivity

Well, there's already talk about rolling back the $24bn highway bill, which is mostly unessential pork spending. That still leaves $175 or so to find in other efficiencies. I doubt that they'll find those, but I'm sure that if they really tried, they could.

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