You've been reading your Bastiat, but not paying enough attention. Base closings are Chapter 2, "The Demobilization." Hurricanes and Y2K are Chapter 1, "The Broken Window"; Kyoto is 1 and 3, "Taxes." Read the whole thing, as they say.

Jeb in '08!!

Going rate for day labor is $10 an hour in northern Palm Beach County. For several months after the hurricane, it was $12.

Y2K spending wasn't that great all around. First Data Corporation spent over $300 million fixing its credit card processing software. Not one dime improved the system. And the money was spent in India.

Turned out they still had a flaw. A domestic vendor sent out a patch to FDC customers but didn't stress how critical it was to install it. If a customer charged $50 on Monday, the account was rebilled $50 on Tuesday plus the Monday charge. On Wednesday the total charge was $50 + $100 + $50. Thurday, $50 + $100 + $200 + $50 and so on. People reached their credit limit real fast.

The company was relieved when Dan Rather got the story wrong and said customers were merely double or triple billed.

David:

Yes, it was the sales of new equipment, not the "fixes."

One huge barrier to switching from gasoline-powered internal combustion engines is that nearly all of our infrastructure is based around that platform.
Given high enough gasoline prices, private industry will build out alternatives, but if we for whatever reason want it down anytime soon, it'll have to be a push by gov't.
Gas prices won't be high enough for decades, or possibly even a century, to spur us into doing it otherwise.

We can make them high enough.

The law of unintended consequences is always a factor to keep in mind. YThe aftermath of bubble type markets, always spurred by something like Y2K or 'new economy' paradigm, is never pretty. The object is accomplished and a lot of wealth is created although huge amounts are lost as well. The direct meddling of the coercive power of the state into those decisions tends not to work since politicians and planners always attempt to favor some over others and the natural course of things is thwarted through the misdirection natural to political expediency rather than the incentives of the actual marketplace. There is no perfect solution and the marketplace can be messy and seemingly irrational in the short run. Over the longer term, nothing has ever worked better than the free exchange of products and services absent the attempt of politicians to reward their friends and punish their opponents.

The economy kept growing.

Just barely. Think of Y2K overall as an exogenous shock, and not the good kind. Also you're reading things into Schumpeter that aren't there. When he talks about 'gales of creative destruction' what he means isn't Hurricane Andrew, it's Wal-Mart: a new competitor with better methods who puts the heat to the established players.

It's got nothing to do with Schumpeter. It's post-war Japan and Germany, which reaped a huge benefit from being forced to rebuild with entirely new plants and machinery, just as a forest fire consumes dead wood and produces new growth.

Mr. Judd;

Although you should note that neither Germany nor Japan got started on the road to recovery until the USA spent money to get them started (Japan in particular).

The question is whether the money spent improves capital equipment to increase productivity, or if it's just spent to replace something but has no additional improvement to infrastructure. If it does the first, it may be worth it. If not, then it's just wasted money.

I am highly suspicious that the hurricane destroyed obsolete infrastructure in FL and that the rebuilding has improved things radically. And as for Y2K, I think web sales and internet distribution spurred more innovation than Y2K fixes.

However, I happen to agree with OJ that some environmental objectives could do this, but one could easily choose badly. The best solution is simply to tax externalities and let the market provide the solution. A gas tax could do wonders.

Joe and Chris are correct regarding "Broken Window."

This article's superficial analysis is demonstrated by its failure to assess the alternative uses for the resources soaked up by hurricane remediation.

Chris:

If you replace a five year old computer with a new one you get productivity gains, no?

That depends on what your business is. If you're a game designer, probably; an accountant, perhaps; but if you run an auto body shop, that five year old computer running Quicken is likely just fine: what you really need right now may be a new low-pressure spray gun that wastes less paint. That's why they call it the Broken Window fallacy. Yes, the money you spend to fix the window does help the glazier; but if the old window let in enough light for you to work by, then replacing it doesn't help you.

So the six hours the mechanic spends on his books when it could be done in one doesn't matter? Multiply mechanic times a workforce of however may million...

The fallacy of the broken windows fallacy is the belief that you replace it with an identical piece of glass instead of a new unbreakable pane that's also insulated and saves on your energy bill.

If replacing the window were the best use of the money, they would have done it without the hurricane.

Guy's right about Germany and Japan after 1945, and could have applied the same to Gemany after 1919 if he'd wanted to.

If you give people free capital, they will increase production, unless they live in Africa.

Hurricane Iniki leveled Kauai in 1992, which coincided with a downturn in the overall economy of Hawaii.

For a while, the insurance money flowing into Kauai was sufficient to prevent the overall economic activity of the state to stop dropping.

Fine for sellers of shingles, but not so fine for the people of Kauai, which has still never recovered -- the number of tourists is down around 30% and staying down. Some big hotels are still in ruins.

One unquantifiable, but real effect of the Y2K, panic was that big companies simply stopped purchasing novel software. My physics advisor had a product to manage options, and everywhere he went, he got the same response: I'm not doing anything this year.

When the new wonder glass arrives it will make sense to replace the old whether it's broken or not. The mechanic does his books in an hour on his old computer, because QuickBooks was pretty good five years ago (or maybe he just spends $50 on a software upgrade); he buys a new spray gun because the technology there has come a long way recently; and he knows this because he knows his business better than you do. The fallacy in the fallacy of the broken windows fallacy lies in presuming a steady stream of improvements in all fields of endeavor at more or less the same rate. If that were true, then an outsider might be able to improve my business by throwing random rocks at it (which is pretty much the best you or the government can do); but it's not, so you have to know what I'm doing as well as I do, or else you're just second-guessing me. All of which is just a long-winded way of saying what David just said in one sentence, but the heck with it, I'm posting this anyway.

Harry:

There was no industry.

joe:

Upgrading is the point.

David:

They don't, that's the problem. Inertia beats common sense until something intervenes.

Of course we do. The capital equipment market exists, after all.

Inertia beats common sense until something intervenes

That's the sound of you substituting your own impatience ( I know, common sense) for somebody else's judgement ( I know, inertia) even though they know more about their situation than you do. New Republic types are forever doing this, and when they're right it's just by accident. Patience, Daniel San.

Anon:

You can't have both:

(a) ever had a job

and

(b) think corporations run efficiently

Conservatives have this biuzarre blind spot where they get that government bureaucracy is counterproductive but think business bureaucracy works. The average janitor knowsw better than the average manager the improvements the company could use--it's just a matter of corporate culture.

So does the battery market, but there are flashlights and smoke detectors in every house that need new ones.

Yes, every janitor knows that what the company really needs is a motorized mop.

Anon was me, oj, sorry. Believe me I'm under no illusions about either government or big corporate culture, having spent half a life in the employ of one or the other. But that's just why you need to stop flirting with things like Kyoto, which only serve to tighten the symbiosis between the two.

We could use Kyoto to et standards and require folks to meet them without telling them how to. It would work quite well.

To what end?

To force innovation and adoption of new technologies or methods for reducing pollution.

What does Kyoto have to do with pollution?

Zactly. Now you're trying to play the same game with the tranzi Left that you were trying to play with our auto body guy (trying to outguess them at their own game.) They'll have you for lunch, and the least-damaged survivors will be the big politically-connected corporations you rightly don't like.

joe:

The auto guys game is engines.

David:

To meet our obligations under it we'd require reductions in greenhouse gases, no? Who cares how people get there. Let the free market handle that.

The free market will handle it by getting a lot smaller. If that's what you want, fine; but if it's not what you want, then stop asking for it. Your post did mention something about concern for growth.

joe:

What would get smaller?

Why do you think that the so-called greenhouse gases -- basically water vapor and carbon dioxide -- are pollutants?

The U.S. economy, oj. That's what Kyoto is designed to do.

joe:

just the production and installation of the new equipment would grow the economy.

David:

they're pollutants by definition. I'm agnostic on whether they're harmfiul.

They exist naturally in the atmosphere, are necessary for life to exist and may not cause any harm. I have to say, it seems like a weak case for turning the economy upside down and shaking.

It wouldn't.

I don't know where Orrin thinks there was 'no industry'

A working industrial base needs more than capital equipment. In both Germany and Japan, the main input -- labor -- came through more or less unscathed in 1945. Management, too.

Capital equipment was mostly worn out, but there was still more left in Germany or Japan than in places like Spain or Turkey that sat out the war.

In Hawaii.

You're right though, countries did better by losing the war and having to start from scratch than by sitting it out and keeping old equipment.

It would. Once ratified the only entrepreneurs left will be political ones. Think of an Eliot Spitzer type running the EPA, which would likely be charged with enforcement.

OJ: Which is why Japan and Germany are so far in the lead?

Yes.

joe:

They're far more creative than you give them credit for.

Tourism is an export business, if not exactly an 'industry.' Very capital intensive.

And it requires a huge industrial infrastructure, of airports, refineries, harbors, machine shops, etc., all of which Hawaii has.

Depends on your perspective, I guess. Some years ago, the dean of the Harvard Business School wrote a book about how service industries were taking over the US economy from heavy industry.

Only he treated railroads as service businesses. All previous economists had, correctly, treated railroads as heavy industry.

It may be true that the US will eventually stop being an industrial power. It hasn't happened yet, though, despite the best efforts of some very stupid people.

What do railroads and hotels make?

Railroads, railroad engines.

Hotels, water parks.

You don't travel, so you wouldn't have noticed. A Maui resort is a largish industrial plant, with power generators, farms, garment workshops.

That makes what?