Tsunami could Jump Start Sri Lankan Economy.

The tsunami that devestated parts of Southeast Asia could lead to growing economies in the reigon. An article by the South Asia AFP says that the disater could be a blessing in disguise. Broken Record, Broken Record, Broken Record, Broken Rec... is a blog which disputes this strange point of view. It refers to the "Broken Window Fallacy" to help pinpoint the error in the thought that the tsunami is good for the the economy of Sri Lanka.

The Broken Window Fallacy states that a bad economist confines himself to what is seen and a good economist takes into consideration both what can be seen and what must be foreseen. If a window is broken the owner must pay to have it repaired. That money will go to the window glazer and stimulate the economy, that is seen. What is not seen is that had the window not been broken the owner would have used the money to buy something else, therefore enjoying two items not just one, the window. The money that he paid to the window glazer would have gone to some other merchant stimulating the economy that way. Basically, destruction is never profitable because it causes lost utility.

The blog says maybe we should destroy most of the United States to stimulate our economy. A far fetched idea by anyones standard, but similar to what the conclusion in the AFP article. The fact is obvious that even if the economy of Sri Lanka has picked up a little bit it is not a good thing that the majority of the nation was decimated. What is seen is that the economy seems to show signs of growth, what is not seen is the total cost to the nation due to the devestation. What the nation could have enjoyed from its money is now lost; it has to spend all of the money available to build what was previously there.

There is a saying, "all publicity is good publicity". While a company may have intitial signs of growth due to a scandal or bad publicity, destruction is never profitable. What is not seen in the future might be more devestating to the company than the immediate positive effects of any given occurance.

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