Good point and I heard yesterday that not only will cash for cluckers cost expend $1billion of taxpayers money, but the HOUSE of REPS voted 3 to 1 for allocating an additional $2 billion for this uncreative destructoin.

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Good point and I heard yesterday that not only will cash for cluckers cost expend $1billion of taxpayers money, but the HOUSE of REPS voted 3 to 1 for allocating an additional $2 billion for this uncreative destructoin.

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The act of disposal, where something is removed from the market, is a loss of wealth. The subsequent purchase of a replacement or substitute is a separate transaction, and merely an exchange of goods, which, per se, is not a creation of new wealth.

The issue is the effect on subsequent productivity. Is the replacement more productive? Skidmore claims that certain natural disasters tend to accelerate adoption of more productive technology and that the result is more rapid economic growth in regions with more natural disasters.

Naturalists will also tell you that occasional forest fires are healthy for an ecosystem and that artificially limiting these fires can have unintended consequences, like more explosive and destructive fires ultimately.

Nor is the profit made by the supplier of the new product a creation of wealth.

The greater productivity of the new technology supplied creates greater wealth.

Only if the new product was produced with greater efficiency, or as you say, using less resources, would it constitute new wealth and only by the marginal difference between the resources required to produce it before and after.

The “products” I’m discussing are capital goods, goods involved in producing other goods, rather than final consumption goods. Many goods are both to some extent.

Technological innovations are a main cause of the intensification of the division of labor. You are treating these as if they aren’t related.

No, I’m not. I’ve said nothing about the division of labor. If more advanced technology requires a greater division of labor, then more rapid adoption of this technology accelerates the division oflabor, regardless of people’s motives for adopting the technology.

Skidmore’s only point is that natural disasters accelerate the adoption of new technology as a matter of fact, so that regions with more natural disasters adopt new technology more frequently and thus experience greater rates of economic growth. He nowhere says, and I nowhere say, that the division of labor is not accelerated.

If the rate of technological advancement happens not to be so great, then adopting new technology more rapidly isn’t such an advantage and might not result in higher rates of growth, so we might expect natural disasters not to have the same effect on growth in the dark ages, when technology advanced less rapidly, for example.

My description is the all inclusive one.

You flatter yourself. Few descriptions of anything are all inclusive. Even Newton’s Gravity turned out not to be all inclusive. The only all inclusive statements are tautological, like “all poodles are dogs”.

In every case of wealth creation, the division of labor intensifies.

I don’t know what sort of tautology you’re constructing here, but I can easily imagine wealth creation accelerating as a division of labor becomes less intense. I’ve already given one example. “In every case” seems hyperbolic

Again, only a few years ago, you needed to know a lot about web technologies to create a blog. Blogging was highly specialized, and most blogs were created by geeks for geeks. [I'm a geek myself btw, so I'm not insulting anyone here.]

Now, practically anyone can create a blog, and blogging has exploded. Because some blogs are valuable, the value of blogs generally has also exploded, but this explosion does not result from more intensive division of labor. It results from tools enabling non-specialists to create blogs as easily as specialists. Specialization is part of this process, because specialists create the tools, but the trend is actually toward less division of labor, not more.

It is technological innovation that doesn’t necessarily create new wealth.

Sure. Different technology isn’t necessarily more productive. Change for its own sake isn’t necessarily valuable.

Your havest example is valid only to the degree that new methods of harvest are marginally better than prior ones, …

Obvously.

… but it doesn’t prove that growing a new harvest replaces the wealth lost from the flood, nor does it prove that had a flood never happened, the yields wouldn’t have improved anyway on future harvests.

I’m not asserting any general law of nature here, and neither does Skidmore. He only observes empirically that regions with more frequent natural disasters have higher economic growth rates, and he attributes this correlation to a higher rate of adopting more productive technology.

Again, in a different age, with a different rate of technological advancement, the effect of natural disaster on these regions could be different. We happen to live in an age of truly staggering technological advancement. Much of the technology I use on a daily basis hardly existed when I was born. My whole job description didn’t exist when my father was born.

In other words, your point made no sense because increased yields have nothing to do with the loss of wealth from a flood.

That a point makes no sense to you could indicate something about your comprehension of the point.

Increased yields have to do with more productive technology adopted after hurricanes and similar natural disasters. Skidmore and Toya claim to have found this result empirically. You can dispute their finding if you want, but you aren’t doing that here. You’re only arguing the semantics.

You did not address the issue that the flood caused a loss of wealth.

I address the issue that the article addresses. No one denies that floods destroy things. The issue is what replaces the things destroyed. When technology advances rapidly, a broken window isn’t simply replaced by an identical window. It can be replaced by a superior window, and replacing many windows (and other things) can increase the productivity of a region compared with a similar region that didn’t experience the disaster.

Labor and capital were lost to nature and there is no replacing them free.

No one says anything about replacing anything “for free”, but the benefits of adopting more recent technology can ultimately exceed the cost of replacing technology destroyed by a natural disaster, and Skidmore and Toya say this often does happen in practice, so that regions with more frequent natural disasters can actually grow more rapidly than regions with less frequent disasters, because the disaster prone regions are forced, by acts of God, to adopt advancing technology more rapidly.

I suppose recommending anything by Hayek would be unnecessary given where we’re posting, huh? =P

Technological innovations are a main cause of the intensification of the division of labor. You are treating these as if they aren’t related. My description is the all inclusive one. In every case of wealth creation, the division of labor intensifies. It is technological innovation that doesn’t necessarily create new wealth. For example, innovation could happen in components used in products that are becoming obsolete for other reasons.

Your havest example is valid only to the degree that new methods of harvest are marginally better than prior ones, but it doesn’t prove that growing a new harvest replaces the wealth lost from the flood, nor does it prove that had a flood never happened, the yields wouldn’t have improved anyway on future harvests. In other words, your point made no sense because increased yields have nothing to do with the loss of wealth from a flood. You did not address the issue that the flood caused a loss of wealth. Labor and capital were lost to nature and there is no replacing them free.

Man is not systematically lazy.

Since you’ve broken my “laziness”, I’ll replace “lazy” with “risk-averse” here. I’m betting that the new argument is more productive than the old.

Experimenting with new windows is risky, and people are systematically risk averse. We don’t know and can’t know that replacing old windows with newer windows is more profitable ultimately. We can only experiment, and some experiments in profitable organization necessarily fail to profit; otherwise, they aren’t really “experiments”.

So a hurricane creates many experiments in productive organization that systematically risk averse proprietors would have avoided otherwise.

Man is not systematically lazy.

You may simply define “laziness” out of existence if you want, but your usage is irrelevant to my point. Men could systematically fail to maximize the productivity of resources they govern. You may argue that some writ handed down by God on stone tablets entitles established proprietors not to maximize the productivity of their resources, but that’s a separate issue.

Personally, I have little faith that God ever hands down titles to property. Statesmen do that. My theology distinguishes acts of statesmen from acts of God, but God does raise hurricanes from the sea in my way of thinking.

There is a difference between wealth and value.

There is a difference between market value and one proprietor’s value. Proprietors don’t decide the market value of their resources.

If I decide to buy new clothes and throw out old clothes, this is a loss of wealth.

Not necessarily. The new clothes could be more attractive to potential consumers of your services and so raise your value in the market. For example, you might be a professional actor, and the clothes might be your costumes, and you might have exhausted the market for some Shakespearean play. In this scenario, replacing costumes for the Shakespearean play with other costumes might increase your value as an actor.

If you’re entitled to decide that ground suited to grow cotton should lay fallow instead, that’s a loss of cotton potentially valuable to the market. You may decide that leaving the land as a nature preserve is more valuable by some other measure, but when we discuss “profit” in this economic context, we discuss a market’s valuation, not your personal valuation.

Anything thrown out or destroyed that has value to someone is a loss of wealth.

No. A dynamic, growing, market economy continually replaces the old with the new. Often, it transforms the stuff of the old into the new. Destroying the old to replace it with the new is not necessarily a loss of wealth.

Replacing it is not a creation of wealth.

Replacing the old with the new can be a net creation of wealth.

Wealth is created when less labor or capital are required to produce things in the present than in a prior state of time.

Wealth grows as more productive resources replace less productive resources. The more productive resources are more valuable. At some point, the value of horse drawn carriages becomes negligible compared with competitive modes of transportation. At this point, simply leaving all the horse drawn carriages sitting in museums to “preserve their value” is folly. A few carriages might be valuable in this way but only a few.

This phenomenon is the intensification of the division of labor.

More intense division of labor is one possible mode of this development, but it’s not the only possible mode. Technology can also progress so that less specialization is more productive.

For example, only a few years ago, creating a blog required highly specialized skills. Now, with tools that earlier web developers have created, practically anyone can create a blog, and blogs have exploded as a consequence.

If a flood wipes out all the crops of a village, replanting and harvesting is not a creation of new wealth.

But if villagers use more productive techniques to plant and harvest after the flood, their yield after the flood could increase, so that in only a few seasons, their cumulative yield is greater than it would have been without the flood. This effect on growth is what Skidmore’s research tries to establish.

There is a difference between wealth and value. If I decide to buy new clothes and throw out old clothes, this is a loss of wealth. The value of the old clothing to me was less than what time it would have taken me to find a buyer for them. Further, giving them away would also not gratify my ego enough to expend the time to do so. However, the old clothing would have had “value” to someone and is a measure of “wealth”, however subjective.

Anything thrown out or destroyed that has value to someone is a loss of wealth. Replacing it is not a creation of wealth. Wealth is created when less labor or capital are required to produce things in the present than in a prior state of time. This phenomenon is the intensification of the division of labor. If a flood wipes out all the crops of a village, replanting and harvesting is not a creation of new wealth. New wealth is only created when less people and capital are employed in the process than before.

The point that Don and many other have made is that the window would have already been broken and replaced if this was a net positive on the economy …

To an empirical economist, it’s not a point. It’s a question, because optimally profitable decisions are not logically necessary in reality. No inviolate law of economics implies that people always replace windows that could be replaced profitably as soon as they can be replaced profitably. I know for a fact that people don’t always behave this way, because I don’t always behave this way myself.

Furthermore, no law of economics implies that people even know that replacing windows is valuable until after many windows have been replaced. Market economics is not simply about rational actors calculating the most valuable course. It’s often about people tossing dice and markets selecting the best toss for economic survival. In other words, market organization is like evolution by natural selection rather than “intelligent design”.

… so we can de facto be sure that destroying someone elses property without their consent destroys wealth.

No, we can’t. No law of nature or of economics implies it. The statement assumes that proprietors are perfect predictors of the future, but they aren’t. Central planners aren’t better predictors of the future, but that’s beside the point here. A hurricane is not a central planner. It’s just a roll of the dice.

The amount of wealth it destroys might not necessarily be the entire perceived price of the original or new window, but we must still conclude wealth was destroyed.

No, we need not conclude it. The conclusion is not logically necessary. It’s entirely possible that many people systematically avoid replacing windows that could be replaced profitably, because they are oblivious to the potential profit or for other reasons. Maybe people are just systematically lazy by nature.

When you write, “we must conclude”, you simple assume the answer to the question that Skidmore and Toya address with their research. You don’t logically deduce the answer without any research. Your “logic” doesn’t trump their data, regardless of the validity of their conclusions. Your application of Bastiat’s reasoning here is simply misplaced.

Markets aren’t always efficient, otherwise we would never say that they have to correct themselves, but they are MOST efficient. They lead to less of a waste of resources than central planning.

Stalled economies don’t stay stalled long, when left to their own devices.

The point that Don and many other have made is that the window would have already been broken and replaced if this was a net positive on the economy, so we can de facto be sure that destroying someone elses property without their consent destroys wealth. The amount of wealth it destroys might not necessarily be the entire perceived price of the original or new window, but we must still conclude wealth was destroyed.