Caroline Baum and Summers' "General Theory of Nonsense"

Earthquakes Don't Add Up to Wealth of Nations: Caroline Baum

By Caroline Baum - Mar 15, 2011 8:00 PM GMT-0300

It takes a crisis, such as the financial meltdown in 2008, to rally support for a Keynesian style fiscal stimulus.
It takes another kind of crisis, specifically the earthquake and tsunami that devastated the northeastern coast of Japan last week, to expose the Keynesian fallacy that the government can spend its way to prosperity.
For that reason, Acts of God provide a teaching moment. They make the distinction between spending and wealth so blatantly obvious that even the most dyed-in-the-wool believer in the value of digging holes and filling them up will be hard pressed to deny it....
Yet some economists still see a silver lining for Japan’s economy in the wake of the disaster, claiming reconstruction efforts will create jobs and stimulate growth.
They’re not optimists; they’re just misinformed.
Larry Summers managed to put his foot in his mouth last week when asked about the effect of the earthquake. The former top economic adviser to President Barack Obama, former Harvard University president, former Treasury secretary and now ordinary professor at Harvard’s Kennedy School of Government, told CNBC the earthquake and its aftermath “may lead to some temporary increments, ironically, to GDP as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake, Japan actually gained some economic strength.” General Theory of Nonsense.
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Comment: It used to be that the nutty professor was often a genius. Now we have nutty professors who lack any genius but dabble in public opionion and walk the corridors of power. No wonder we're at where we are.