Some Keynesians, such as Larry Summers, are claiming that the recent earthquake in Japan - truly a devastating and saddening event that has claimed the lives of thousands - could help that country’s economy:
It may lead to some temporary increments ironically to GDP as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake Japan actually gained some economic strength.
After expressing sorrow for the people of Japan, former White House economics adviser Larry Summers said, “it may lead to some temporary increments in GDP as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake, Japan actually gained some economic strength.” Any economist is dead wrong to claim that there is a silver lining in a natural or man-made disaster. As it turns out, earthquakes and tsunamis are not stimuli. Destruction will not create prosperity.
As economics Professor Steven Horwitz notes, “If one really believes such disasters are good for the economy, even in the short run, then one should positively recommend burning down neighborhoods and destroying farm machinery. After all, think of the demand for construction workers and equipment, as well as the demand for manual labor on farms that would generate. Why we’d be rich as kings in no time, right?”