November 2012 Archives

from the Deseret News, Tuesday Nov. 20th.

Every time there is a significant natural disaster I eventually hear from someone that there is at least one upside: the disaster will be good for the economy.  And every time I respond, "Wrong!"  Inevitably this supposed economic stimulus is called a "sliver-lining."  To quote on of my favorite demotivational thoughts from Despair.com, "Pessimism: Every dark cloud has a silver lining, but lightning kills hundreds of people each year who are trying to find it."

Natural disasters are bad.  They destroy lives and wealth and that has no upside.  After the disaster is over, people are unambiguously worse off than before and while their quality of life inevitably recovers, on average they are not better off in the long-run for having lived through the disaster.

An excellent case study in rent seeking:

Will Supreme Court answer monks' prayers?

"In the 1960s, Louisiana made it a crime to sell "funeral merchandise" without a funeral director's license. To get one, the monks would have to stop being monks: They would have to earn 30 hours of college credit and apprentice for a year at a licensed funeral home to acquire skills they have no intention of using."

from Glenn Harlan Reynolds column at USA Today, "Katrina on the Hudson"

Then there are the gas shortages. These are primarily the result of storm damage. But they've been made worse by New Jersey Governor Chris Christie's effort -- joined by New York Attorney General Eric Scheiderman -- to crack down on "price gouging." This politics hurts victims. It's elementary economics that holding prices down depresses supply. If you could sell gasoline for $15 a gallon, lots of people would load pickup trucks with gas cans and drive to the storm area, alleviating shortages. (And at that price, people wouldn't buy more than they needed.) If doing that risks arrest, they won't. Political posturing over "gouging" leads to gas lines, further economic disruption and possibly lost lives.

Authors

  • Richard W. Evans is an Assistant Professor of Economics at Brigham Young University

  • Jason DeBacker is an Assistant Professor of Economics at Middle Tennessee State University

  • Kerk L. Phillips is an Associate Professor of Economics at Brigham Young University