At Mises.org today I start from Bastiat and go through this whole thing. However, after the preliminaries I take on the “idle resources” argument too. After all, doesn’t Gene Callahan have a point, that (under the right circumstances) a hurricane might lead to more jobs and GDP in a certain area, than would otherwise have been the case?
Yes, that’s right, but in that case “employment” and “total output” aren’t signs of economic goodness. (This is the position that Silas Barta has been taking all along when arguing in the comments.) Here’s the fable I used to try to illustrate the point:
[S]uppose Jim sees his neighbor sitting in a lounge chair, sipping a martini on a Saturday evening. Jim then decides to set his neighbor’s house on fire. Obviously, the neighbor jumps up out of his chair, and spends (let us say) the next hour putting out the fire and minimizing the damage the best he can. Would anyone in his right mind say of this scenario, “Sure, Jim caused some physical destruction of wealth, and that is a bad thing; however, let’s not lose sight of the upside: the neighbor used more of his labor than would otherwise have been the case”?
Then the only mopping-up operation is to go from “Jim’s neighbor” to “the whole economy.” (There’s a subtlety because some construction workers etc. really might benefit on net from the hurricane; i.e. they would be happy to give up their leisure in order to get a job.)
All in all, I think the Austrian/libertarian types are 99% right, and the Keynesians/nitpicking Callahans are 1% right. There’s no “upside” to natural disasters, alien invasions, terrorist strikes, etc., in terms of the economy. Maybe those events remind us of the truly important things, maybe they bring you closer to God, etc., but they don’t “boost the economy” in any meaningful way.