Thursday, April 09, 2009

Broken windows, Cajun style 

Over the last weekend the New York Times ran a story on how $51 billion in Federal aid (along with much private generosity) has been poured into post-Katrina Louisiana, and the state has fared rather well in terms of employment. Yet take a look at Gross State Product per capita, which rose in 2006 but stagnated in 2007. (Data for 2008 is due out in June.) Now there's two ways to get more per capita income -- you can have more income in the state, or you can have less population.

You know the story: Many people were displaced from their homes and left for Texas or to the east. All that extra growth they're talking about? It's just getting back to where they were. That big drop is of course Katrina. And that is the reduction in population that lead to the increase in per capita GSP in 2006. They went nowhere in 2007, and for at least state personal income they were around the median growth for 2008.

None of this matters for the Times, though, and this leads Lawrence Reed to muse "[i]ts reasoning is so infantile, its evidence is so transparent, and its economics is so woefully deficient that one can�t help but wonder if it was printed simply to advance somebody�s big government agenda."

A blast from the past on "the broken window fallacy and Katrina."