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Wednesday 23 Aug 2017 | 20:33 | SYDNEY
Wednesday 23 Aug 2017 | 20:33 | SYDNEY

Tsunami: Costs and benefits



1 October 2009 11:51

Fairfax's Peter Martin is one of those relatively rare Australian journos who takes blogging seriously — he posts unique content there (he rarely just copies his newspaper column onto the site, as so many journalists do on their blogs) and uses the technology to interact with readers and other bloggers in a way traditonal journalism does not allow. Andrew Bolt is another dedicated Australian journalist-blogger, and if you're into film, definitely check out The Age critic Jim Schembri's blog.

But I have a bone to pick with Peter Martin's blog today. To mark the tsunami that recently hit Samoa, Martin reproduces a column he wrote after the 2004 Boxing Day Tsunami about the economics of disasters. He recounts what various economists have said about the economic benefits of large-scale destruction, and says that this counter-intuitive thought is one of the things that got him interested in economics.

On one level, it makes perfect sense to argue, as Martin does, that a disaster or a war gives countries the opportunity to replace old plant and infrastructure with state-of-the-art materials. But if that stuff needed replacing, why not do it in a controlled and judicious way rather than indiscriminately at the hands of a giant wave or a fleet of bombers?

And if some destruction is good, shouldn't more be better? The logic of Martin's argument seems to be that an even bigger tsunami would have brought still more long-term economic benefit. But it's hard to believe Indonesia would be better off today if twice or five times as much damage had been done.

Lastly, what about the broken windows fallacy, which surely every economics student learns?

Photo by Flickr user slimmer_jimmer, used under a Creative Commons license.

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