Stupid question about disasters:

When the "cost" of a disaster is a billion dollars, isn't that a billion dollars that gets pumped into the local economy at ground level via cleanup and reconstruction wages and fees?

So on some level, are moderate disasters good for the local economy? :shrug:

Or am I way off in my conceptualization of this? :shrug:

I suppose my follow-up question to that is that whether it's a net good or not would depend on the opportunity cost and what else the money would have been spent on.

If someone spends $1000 repairing a ruined chimney, then a local mason and a local brickyard get the money. If someone invests $1000 in Chevron, or spends $1000 at WalMart, the money will have limited local benefits. However, if the $1000 would have been spent on building a brick path in the yard, then it's probably the same local "benefits" as those "provided" by the disaster.

If money to replaced damaged homes comes from an insurance company outside
the local economy and the homes are repaired using local workers the local
economy could experience a boost at the expense of the economy where the
insurance company had the funds stored.

and second, these are low cost loans that must be repaid, sucking the low interest rate out of the economy once rebuilding has occurred.

It's still a disaster. The only people who profit are the scam artists who invariably swoop in and overcharge for everything and deliver little of it.

It's a common error.

But if you're the guy who replaces windows it ain't all bad. :)

Otherwise, we would never see building demolitions in New York City. but guess what? They happen all the time.

Now... If you could ensure that the next tornado only struck obsolete structures... Then you would have a point.

So who is getting the money? Is it local contractors or foreign companies?

What if you have a factory worth $1 million that is totally destroyed? Somebody is getting money to supply the labor and materials to rebuild it, but the owner is still a million dollars worth of wealth.

Take post-tsunami India, for example. The government of India has spent the last 40+ years building fisheries infrastructure, for example. Increasing capacity through tech improvements, larger boats, species husbandry, etc. But the 2004 tsunami literally wiped out 40+ years of economic gains. If you were to look at many of the initiatives proposed in 2005-2006, they reduplicate development schemes proposed in the 60s and 70s.

You are imagining that all that money that gets pumped into a local economy is getting pumped onto a level field, essentially what the local economy was the day before the disaster struck. But often times communities lose years, if not decades, of development and wealth creation gains.

This is over-simplified, but I hope it helps a smidge.

but I also realized when I wrote the OP that there are some disasters, such as the tsunamis or Hurricane Katrina, that totally wipe out the entire city or region to the extent that there's no local economy to pump money into.

I was thinking more along the lines of the 1989 earthquake in San Francisco or a medium-sized tornado where some buildings and structures are destroyed, but most of the city is still standing and the economy is still relatively healthy.

After a disaster (for example) you might decide to rebuild your city, better than it was. (e.g. http://www.greensburgks.org/">Greensburg, KS.)

Imagine what it might have taken to rebuild Greensburg piecemeal (not just the financial cost, but the political cost) had there not been a tornado…

up and repair are counted in the GDP. The clean up of the Twin Towers was considered economic growth and that did not even include replacement.

There's the personal security industry - guns, pepper spray, self-defense classes.
There's the home security industry - all the stuff you can buy at Lowes as well as the stuff installed by professionals
There's the industrial security industry - security guards, high-tech locks, special construction.

The size of those industries is far, far, beyond the amount that criminals actually steal.

So how many burglars and thieves should we have to optimize their economic impact?