Flat White

Don’t trendy economic types believe catastrophe is good for the economy? Why are they silent now?

14 August 2020

5:00 AM

14 August 2020

5:00 AM

It is the Keynesians who believe that disasters are good for economic growth. They have suggested that events such as the Fukushima nuclear disaster, the Christchurch earthquakes and even the Australian bushfires are good for the economy because they will result in stimulatory government and consumer spending.

Even the Lord High Priest of modern Keynesian theory, Professor Paul Krugman, has suggested:

If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.

He was not talking about the corona slump, but rather the post-GFC economic malaise.


So, given this is economics Keynesian style, why are these people not suggesting that this coronavirus will be a good long-term economic phenomenon? That is, because of the numerator/denominator effect, and because there will be fewer people walking the planet, GDP per capita will go up as will the per capita effects of government stimulus. 

And the corona-slump presents another Keynesian-Greens-Coalition opportunity because fewer people means fewer carbon emissions.

So where are these people? Don’t they believe their views are timeless? Perhaps they are unable to speak at the moment given they are subject to home detention in Victoria.

Illustration: SBS.

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