Hurricane Draws Out Political and Economic Fallacies
by Gary Gibson
by Gary Gibson: Review
of Ron Paulís Liberty†Defined
the next few days in the aftermath of Hurricane Sandy you will repeatedly
hear two great untruths:
government to protect us from natural disasters.
disasters are good for the economy.
first fallacy, let us consider today's New York Times op-ed
commentary, which is predictably fawning about centralized political
Americans have never heard of the National Response Coordination
Center, but they're lucky it exists on days of lethal winds and
flood tides. The center is the war room of the Federal Emergency
Management Agency [FEMA], where officials gather to decide where
rescuers should go, where drinking water should be shipped, and
how to assist hospitals that have to evacuate."
I must have
missed something. Can the National Response Coordination Center
actually stop the lethal winds and floods? Can the market not provide
emergency response experts or drinking water or medical care? It's
the typical "If the state doesn't do it, it won't get
done" line of thinking that cripples most minds on the planet.
The Federal government extracts (by force) about half of its citizens
incomes and then gives them these "essential" services
while convincing them that these services would be either unavailable
in a freed market or too expensive for the average citizen to afford.
Papers like the Times help reinforce this myth by reminding
the lumpenprole just how lucky they all are that the feds stole
their money in the first place and will continue to steal it in
perpetuity. It never seems to occur to anybody that in a freed market
privated insurers would provide things like protection and emergency
services (because prevention is more economical, i.e. profitable,
than repair or remuneration).
And in fact,
in our yearned-for stateless world, private insurers would probably
provide a lot of the essential services the state claims only it
can provide. Plus economic considerations will tend to make people
act cautiously and responsibly. Insurance companies in a freed market
would restrict payouts for damages incurred because of truly foolhardy
decisions in the face of a natural disaster. We remain confident
that evacuation and safety can be privately worked out and
with greater efficiency and at lower cost without a centralized
And why is
it people are starting to wake up to the fact that consumers and
producers can communicate effectively through the pricing mechanism
to meet demand...yet they can't imagine that this system would
hold up when an impending emergency increases demand? Maybe because
the average person is so befuddled with loaded nonsense phrases
like "price gouging" that they can't hope to understand
the vital importance of rising prices in spurring increased supply.
In brief, rising prices reflect rising demand and induce greater
supply as producers rush in to take advantage of higher prices.
Prices move back down either because of the increased number of
competing providers. In the case of a temporary spike in demand
due to emergency, prices subside once the emergency does and demand
returns to previous, normal levels. Forbid "exploitative"
price increases and all you are doing is guaranteeing shortages.
that the largesse of centralized political force is the ONLY way
to handle disasters...it's just so bewildering. I suppose it's
born of the same programming that makes people believe that roads
can only be built with money that's been extracted from "taxpayers"
goes on to bash Mitt Romney and conservatives and Republicans in
general for wanting to get rid of FEMA...
still blinds Republicans to its value. Many don't like the idea
of free aid for poor people, or they think people should pay for
their bad decisions, which this week includes living on the East
say that the NYT isn't full of clever writers. Too bad
they use their wits for state propaganda. Now we here at TDV aren't
"conservatives" or Republicans, but we do know that human
beings don't need thieving men with guns and a monopoly on the
use of force to coordinate their movements in the event of an emergency.
Last we checked, most people (at least the ones who haven't
been completely crippled by dependence on the state) have a pretty
healthy sense of self-preservation. The individual also has more
information about his immediate needs than a central planner hundreds
of miles away possibly can, and can therefore make more informed
choices inherently more suited to his particular situation.
(As it stands
right now, the government is indeed encouraging some very bad decisions
and outcomes by forcing the hands of both buyers and sellers in
the insurance market. Insurers
are forced at gunpoint to sell insurance to people living in risky
areas. On the other hand, FEMA
reclassified a bunch of properties as risk-prone and forced those
property-owners to buy insurance. Ah, government...always willing
to point guns to cause economic distortions...)
As to the second
fallacy, why wait for natural disasters to destroy things if it's
so good for economic growth? Why not just create disasters of your
this is exactly what war is. Government goes out and destroys other
people's stuff in other countries. Because government is spending
on war (the one activity in which governments will always have the
free market beat), GDP is going up! Governments won't generally
blow up their own subjects or knock down their houses...but their
court economists spend an awful lot of time convincing the government's
subjects that there is a bright side when Mother Nature breaks their
stuff and kills a few of them: GDP will go up because of the clean
This was already
dealt with in Henry Hazlitt's classic Economics
in One Lesson. It's the "Broken Window Fallacy"
all over again. You'd think this bit of idiocy would have died
a long time ago...but then again we live in a world where most people
think that printing money is the same as creating wealth.
wait for the hurricane? Why not regularly just run around breaking
stuff? Bring the tanks and bombers back from the Middle East and
set them loose in downtown Chicago, Los Angeles, New York...or even
better, Washington, DC? We don't do it because when it comes
to our own stuff we reflexively understand that that kind of vandalism
would make us poorer, despite the "economic activity"
the rebuilding would generate. Yet the vast majority of people just
nod their heads when the mainstream Keynesian on television or in
print explains says that war and natural disasters breaking stuff
and killing people is good for the economy.
mainstream economists only think in terms of "aggregates".
Their pet figure, GDP, for example, ignores all the stages of production
in which wealth is actually created. They only look at final output
with an equation that paints government deficit spending as the
greatest possible good. That's why Keynesians can say with a
straight face that government spending money on building bombs that
will blow up people, buildings and infrastructure is an economic
positive. It's a wonder that the comical Paul Krugman hasn't
lauded convicted arsonists and suggested putting them on the government
essentially comes from the addition of value toward increasing amounts
of conveniance, physical comfort and quality of life. Wealth is
the value adding chain whereby man shapes the raw natural world
into something more to his liking. Ceteris paribus, a man is wealthier
when he has air conditioning in the hot and humid summer and heating
in the dead of winter than when he does not have either of these
things. Same goes for refrigeration, electric lights, motorized
transport and whatever other wonders are coming our way thanks to
free market-driven innovation. In may ways, the "poor"
of today's First World countries are richer than the kings of
the pre-Industrial era. When governments and natural disasters blitz
away the supply of clean running water and the electrical supply
that powers modern conveniences, they aren't "stimulating
the economy." They're destroying wealth.
does indeed boost "aggregate" demand and spurs economic
activity. But wealth and progress have very little to do with the
Keynesian aggregates and GDP. The destruction of wealth (buildings,
infrastructure, productive lives) may induce economic activity with
all the rebuilding and funerals. But wealth has still been destroyed.
The resulting economic activity is energy that could have been used
better elsewhere to actually keep building upon existing wealth.
That energy is no better spent because nature did the damage as
opposed to an arsonist having done the damage. Again, why this isn't
obvious is testament to the thorough ability of indoctrination to
warp very basic cognitive ability.
fail to understand what wealth really is and therefore they have
no hope of understanding how it's created. That's no surprise
really, though. Keynesianism isn't an attempt to understand
economics as human action and interaction (you know, like the praxeology
of the Austrian School of economics does) with the goal of increasing
quality of life. No, Keynesianism is an apologia for government
action. And despite the press they try to give themselves, governments
aren't actually concerned with human progress, just human obedience.
We must never
forget that economics is actually moral philosophy. Unlike hard
sciences and mathematics, economic theory will be shaped by worldview.
If you start with the premise that freedom and non-aggression are
good, then you end up with a very Austrian school understanding
of economics. If you think that people can't produce food, educate
their children, get out of a hurricane's path or tie their shoes
without politicians pointing guns at them, then you end up with
a Keynesian view of things and editorial spots in The New
For a more
economically and morally sensible view of the world and corresponding
ways to add to your own financial standing— turn away from
the likes of The New York Times and take a look at TDV's
Weekly Dispatch. Every week we offer a decidedly Austrian School
macro analysis along with very specific plays to help you prosper.
Learn more here.
is an editor and contributor at The
Dollar Vigilante. He joins the team after four years as managing
editor of the similarly-themed Whiskey & Gunpowder newsletter. After
years of fighting his way out of the Matrix, Gary has made the leap
out of the US to join the TDV team in Acapulco.