When Economists Collide
1st September 2011
Don Boudreaux, Chairman of the Economics Department at George Mason University, spanks another (purported) economist (who ought to know better).
Prof. Peter Morici
University of Maryland
Smith School of Business
College Park, MDDear Peter:
In your guest blog-post yesterday at CNBC you argue that the destruction caused by hurricane Irene will spark a “process of economic renewal [that] can leave communities better off than before” (“Economic Impact of Hurricane Irene“). Central to your argument is your claim that, because of the rebuilding, “the capital stock that emerges will prove more economically useful and productive.”
In other words, whenever assets still in use are destroyed, wealth will thereby be created – that is, people whose assets are destroyed will be made richer – because these destroyed assets are replaced with ones that are newer and more productive.
I hereby offer my services to you, at a modest wage, to destroy your house and your car. Act now, and I’ll throw in at no extra charge destruction of all of your clothing, furniture, computer hardware and software, and large and small household appliances.
Because, I’m sure, almost all of these things that I’ll destroy for you are more than a few days old (and, hence, are hampered by wear and tear), you’ll be obliged to replace them with newer versions that are “more economically useful and productive.” You will, by your own logic, be made richer.
Just send me a note with some times that are good for you for me to come by with sledge hammers and blowtorches. Given the short distance between Fairfax and College Park, I can be at your place pronto.
Oh, as an extra bonus, I promise not to clean up the mess! That way, there’ll be more jobs created for clean-up crews in your neighborhood.
Sincerely,
Donald J. Boudreaux