Jane Galt has a righteous rant on economic illiteracy, and specifically the bizarre notion that disasters (like this week's blackout) are good for the economy, because they create jobs for people who have to clean up the mess. As I said in her comments section, this is due to an inability to distinguish between wealth creation, and job creation.

The two are, in fact, entirely independent of each other.

Jane's example (which I often use myself) of hiring people to move holes from one location to another provides jobs, but it creates no wealth at all.

On the other hand, if I write a story, and put it out on the net for people to read, and people enjoy reading it, then I've created wealth in the sense that I've improved their lives, but no jobs were created.

Sadly, it's a fallacy to which space enthusiasts (and particularly NASA enthusiasts) are prone as well. Often, when touting some program, they talks about how many "jobs" will be created in Houston or Huntsville, or in the district of some California contractor. And when someone says that "money is wasted by sending it into space," they assume that the critic is stupid, or confused, and respond, "Not a single dime is sent into space. We don't fill up the rockets with bushels of money and send it off to Mars. Every dollar is spent right here, on good old Mother Earth." And even more amazingly, they say it as though it's a useful rejoinder.

But of course, they're attacking a strawman, because no serious critic of the space program literally believes that we are shipping currency to the heavens.

As Jane said, it's all about opportunity costs. Any government expenditure is going to create jobs. The issue is whether it will create anything of value, other than paychecks for favored people.

It's really just a reprise of Frederic Bastiat's "broken window" fallacy demonstration. But don't expect more than about one person in fifty even to have heard Bastiat's name.

Sigh. Economics was once held to be the "layman's science," the one approachable through verbal logic alone, with no need for highly specialized tools of analysis or thought. I suppose we've lost the verbs and the logic as well.

I often wish, mightily, that we could get basic economics taught in High Schools.

Alas, have you ever even looked at some college economics textbooks? [shudder]

Just for laughs, I'll play devils advocate.

Imagine the following scenario where disaster might be the stimulus for economic growth.

Start with a quasi-gov't monopolistic electrical industry that has insufficient investment in its infrastructure. Notice that investment doesn't flow in for adequate maintenance, safety measures or upgrades as the driving force for funds is political and the electricity industry is weak politically relative its competitors. No competition (remember its a monopoly) assures that alternatives aren't presently available.

Enter our crisis, the blackout; instant political attention to the electricity industry, which results in reallocation of funds from somewhere else in the political arena (debt, social programs, environmental expenditures). Since the rest of these uses of money don't have as many positive economic effects as investing in the electricity grid the net effect on the economy may be positive.

You might then evaluate the effect of the disaster to be economically positive because it (perversely) affected future public investment decisions positively. To be fair, one should include the negative effects of the disaster on the balance sheet, but even so the net might still be up.

Of course, I don't believe those that espouse the "disasters are good for us" look at it in the way I just described, but I would think twice about jumping to conclusions as to its final effects.

I'm all for getting Basic Economics taught in the high scholls.

...