Earlier, John discussed the economics of snow removal, focusing mainly on the costs of digging New York out from the Nor’easter. But, are we right to focus on the costs, what about the – gasp – benefits?
It seems almost in bad taste to talk about dollars and cents after such a big blizzard. Nonetheless, we must ask about the economic aftershocks from today’s horrible weather.
These aftershocks need not be major. Ghastly as it may seem to say this, the blizzard — like others that have come before it — could even do some economic good. But there are already ominous indications that some will see this tragedy not as an occasion for true national unity, but as an opportunity for political profiteering. About the direct economic impact: The nation’s productive base has not been seriously damaged. Our economy is so huge that the scenes of inconvenience, awesome as they are, are only a pinprick. There are 375 million snow-covered square feet in Manhattan, but 3.5 billion in the United States as a whole. Nobody has a dollar figure, yet, for the damage.So the direct economic impact of the attacks will probably not be that bad. And there will, potentially, be two favourable effects.
First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new plows. As we’ve already indicated, the destruction isn’t big compared with the economy, but rebuilding will generate at least some increase in business spending.
Second, the attack opens the door to some sensible recession-fighting measures. For the last few weeks there has been a heated debate among liberals over whether to advocate the classic Keynesian response to economic slowdown, a temporary burst of public spending. There were plausible economic arguments in favour of such a move, but it was questionable whether Congress could agree on how to spend the money in time to be of any use — and there was also the certainty that conservatives would refuse to accept any such move unless it were tied to another round of irresponsible long-term tax cuts. Now it seems that we will indeed get a quick burst of public spending, however inconvenient the reasons.
*Note that this essay is not original to the author, but a slight modification of an 2001 essay by a Nobel Laureate. And he wasn’t talking about a big snowstorm, but about 9/11, explaining how that could be good for the economy, too. Still, the same lessons apply.