Paul Jacob

What’s certain, though, is that shopkeeper would have added to his pleasures in the unbroken window scenario. In the broken window scenario, he tries to recover as much as he can of his old position.

And the murmurs of optimism in the village, about the event? They are callous. They are unseeing.

That is, they see the advantages to those who get the advantage. They strategically forget about the advantages of the other chain of events. And they callously discount the shopkeeper’s loss.

When economists do this, you have to shake your head.

But it’s not Larry Summers who’s in the wrong here. It’s the reporter who stressed this element. Not Summers himself. He began his talk by saying that the tragedy of it all is “the most profound and important thing.” And he reiterated, in understatement, that whatever gains in GDP might appear, blipping onto the econometricians’ radar, was something “the Japanese did not need.”

He merely fleetingly noted the painfully obvious: That, after a massive and tragic disaster, people get to work to put things back as much into order as possible. It’s measurable activity. It shows up in GDP statistics.

But that’s not what is important, and Summers recognizes this. That one reporter repeated a small element in what he said, out of context, shows only the well-known journalistic preference for the “sexy” and the “shocking,” and that they find it in odd places.

Even in economic fallacy.

Still, Summers’ innocence notwithstanding, it’s perhaps worth noting one of the tragedies of modern economics: economists too often forget their real job, looking at the unseen and unmeasurable as well as the seen and measurable.

All the rush to recovery does not increase the wealth and welfare of the Japanese people. It can’t. Because too many are dead. Too many are hurting. As the Japanese brace up and endure the sad task of diverting resources from productive and “in-other-circumstances-more-valued” consumption activities to processes that alleviate horrible pain and sorrow, both economists and non-economists should have the decency not to mistake rescue’s obvious hubbub for real progress.

Catastrophe isn’t really good for us.


Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.