[Update: I am relieved to note that the Google+ page referenced below below does not actually belong to Paul Krugman. It is a fake. The author offers an explanation, “hope it will enlighten many…” blah, blah, blah, but it was kind of an annoying stunt. It’s true that Krugman has said similar things in the past, but that’s all the more reason not to make stuff up.]
I first got interested in economics when I read a magazine article about Paul Krugman and decided to check out a few of his books. I read Peddling Prosperity and Pop Internationalism back-to-back, and I still use the phrase Accidental Theorist to refer to people who claim to disdain fancy theories and rely on common sense. Even though I disagree strongly with some his politics, I always assumed it was safe to respect him as an economist. Especially after that Nobel prize, right?
Which is why it pains me to see him say this on his Google+ page:
People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.
There are a number of ways to explain why this is an economically silly thing to say. Perhaps the simplest is to ask, “Why do we need an earthquake?” If the earthquake didn’t do enough damage, why not just send in the Army Corp of Engineers to dynamite a few buildings? Or just ask dissatisfied Americans to riot in our business districts for a few weeks. Maybe tell the fire departments of our major cities not to put out fires so quickly.
Rebulding after a disaster doesn’t turn the disaster into a net economic gain because all the productive output goes into replacing wealth that was destroyed in the disaster. If this sort of thing worked, unemployed people could solve all their problems by waking up every morning and hammering holes in the walls of their home and then paying themselves to spend the rest of the day patching the holes.
, and it’s a really, really well-known error in economic thinking. It grates when I hear pundits and politicians say this sort of thing. But when a trained economist says it, that’s just painful. Seriously, Paul, are you reading what you’re writing?broken windows fallacyThis is known as the
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