Sandy and broken windows

Preparing for disaster may have "economic benefits". But it doesn't have real benefits.

A panel from today's Saturday Morning Breakfast Cereal. Image: www.smbc-comics.com

Slate's Matt Yglesias makes a very important point with regard to the economic benefits of adapting to climate change:

The basic issue is the same as the one where jobs installing iron gates on windows and alarm systems in houses are economic activity just like jobs installing refrigerators and AV systems. Living in fear of crime is annoying all on its own, and needing to expend real resources on private crime-mitigation efforts rather than improving your quality of life is annoying, but as far as "the economy" is concerned a job is a job and a sale is a sale. Much the same is true for a wealthy society's response to adverse weather shocks.

Of course, the same can be said, to a certain extent, for the economics of fighting climate change. While environmentalists are right to trumpet the economic benefit of putting huge amounts of effort into efforts to decarbonise the economy, some of those benefits may follow a similar sort of logic to that described above. If there is no intrinsic advantage to wind farms over gas power stations other than ameliorating climate change, then decarbonising the economy may "boost GDP", but it is still using real resources on something which will have no effect on quality of life.

Except, of course, if it succeeds in preventing climate change.

Coincidentally, the comic Saturday Morning Breakfast Cereal made the same point today in a rather different manner. And it's all really just a rephrasing of Bastiat's 1850 elaboration of the broken window fallacy. But still worth a mention.