The mainstream media coverage of the economic impact of hurricanes Harvey and Irma has been very good. There is generally an acknowledgment of the individual human pain and suffering that comes from catastrophic natural disasters. The loss of human life is incalculable from an economic perspective. Upwards of 70 people have died because of hurricane Harvey and it is certainly possible that some people in the United States will lose their lives because of hurricane Irma. The human and economic losses from Irma in the Caribbean are devastating. All of the reports talk about the short term economic problems that occur because of a natural disaster. Businesses are closed temporarily. People are unable to work. Prices rise in the short run.

But then, the discussion occasionally drifts in a myopic bent only an economist could love. In an interview on CNBC New York Fed President William Dudley said: “The long-run effect of these disasters unfortunately is it actually lifts economic activity because you have to rebuild all the things that have been damaged by the storms.” In the months in years following the hurricane we must rebuild the destruction wrought by nature. Surely this has a beneficial effect on the economy? People who are out of work are able to use their gifts to replace what was destroyed. They create wealth in the process. Free market economists often point to Frédéric Bastiat’s essay That Which is Seen, and That Which is Not Seen to counter these arguments. Bastiat argues that the money we use to spend rebuilding would have been used to create new additional wealth.

Bastiat is correct. When we rebuild after a hurricane we are only replacing that which was destroyed. Something of value was taken (a devastating loss to the person / a small aggregate loss to society); rebuilding merely replaces something of value that already existed. The only way you can think this is positive is to think in the narrow way of economists discussing the growth of GDP. Yes, the growth rate of GDP will be higher because of the construction, but it is misplaced and callous (Dudley’s verbiage indicates that he understands this tension) to believe that this is a good thing for our society. George Orwell understood this. In this passage from 1984 Orwell is talking about war, but the ideas are analogous to the distraction that is caused by hurricane.

The essential act of war is destruction, not necessarily of human lives, but of the products of human labor. War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence in the long run, too intelligent.

This quote is taken from chapter IX of 1984. Winston is reading The Theory and Practice of Oligarchical Collectivism by Emmanuel Goldstein. The passage is taken from chapter 3 “War is Peace”. Goldstein is explaining the role of war in the Party’s subjugation of the masses.