Is a hurricane or other natural disaster good for the economy? No is the answer. And here is an explanation.
A natural disaster destroys wealth in the economy. Wealth is equal to homes, cars, bridges, seawalls, and more man-made things. Also, wealth includes natural things, such as forests and estuaries. With the destruction of these things, we have to spend money to replace them. Instead of building a second home, or buying a second car, we have to take our money to rebuild the one that was destroyed by the disaster.
The construction industry will see a boost in demand after the storm. For example, after Hurricane Charlie traversed the State of Florida in 2004, roofers were in great demand.
The important thing to note is that though the amount people spend may increase after a disaster, our overall wealth has decreased. If a disaster didn’t decrease our wealth, it would make sense to evacuate cities and destroy them. Then we could rebuild to improve the economy.
The fallacy that a disaster is good for the economy is found in Henry Hazlett’s book, Economics in One Lesson.