Friday, August 26, 2011

Hurricanes as economic growth generators?

I've actually heard a few talking heads on TV talk about how the hurricane currently bearing down on the Northeastern US could actually spur economic activity if it does a lot of damage. On first thought it sort of makes sense, but think about it a little more.

If I owned a house in NJ and I needed to replace 4 windows due to storm damage, I'd have to buy new windows and put them in, so let's say I spend $2000 to do so. If I don't have insurance, I'm spending that money out of my pocket, so while the window guy is getting $2k that's two grand I'm not spending on something else, like a vacation, or a new PC.

If I have insurance, let's say I have a $250 deductible. That's $250 out of my pocket I don't spend on something else, like a weekend out on the town. The other $1750 is covered by insurance, but my rates and the rates of other customers will go up to offset the losses paid out by insurance. Insurance companies are in business to not lose money, just like every other business.

Any money spent means that money isn't spent someplace else. The only way to truly create new economic activity is to create new jobs and new wealth through designing and creating new products which make our lives better, things that truly innovate. A good example is the personal computer revolution. I'm not sure what the next big thing is, and that's too bad, since I'd try strike it rich working on it.


  1. Wow. This is a really interesting point of view. I'm kinda surprised this hasn't passed my mind. O_o :)

  2. Haven't thought about it that way. Always thought hurricanes = costs.

  3. If a hurracain will be good for the economy would a nucelar explosion also be good?