Thursday, September 2, 2010
Economic Benefits of Hurricanes
With Earl churning toward the eastern seaboard, let us stop and ponder the effect that a hurricane has on a local economy. In the short run, the economy is destroyed and most capital is ruined. However, the removal of older capital can actually help the economy in the long run. After Katrina, the reconstruction effort generated new jobs and stimulated the local economy. Older gas and oil lines were fixed and facilities were expanded.
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This is true; however, what if the government budget does not allow for reconstruction of the infrastructure or economy on the whole? This means the country is dependent on foreign aid!
ReplyDeleteI agree with Tanvi. Katrina happened in a very different time when the economy was overall much stronger. There is currently little money for investment, and destruction of capital will likely only increase the unemployment count.
ReplyDeleteThis is true but at the same time it does hurt the economy. In the short run, it damages the oil refineries, and when that happens gas prices increase. Not to mention the damage to the infrastructure. Damages are not cheap either, some estimates are that Hurricane Katrina damages cost more than 200 billion. As for the long run, heating and insurance bills will continue to rise due to hurricanes. I think creating jobs is looking at the positive to hurricanes, but overall hurricanes are not good for the economy.
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