The tsunami that struck coastal Asia and Africa exposed just how unnecessary the state is for dealing with natural disasters. It also swallowed whole a bunch of incoherent economic theories. The catastrophe could raise havoc with two of the economics profession’s most insidious and embarrassing theories –theories, however, the majority of its members keep defending.

The first manages both to humiliate victims and insult the intelligence of the human species. Over the long term, natural disasters, it contends, are beneficial to the economy of the affected region. Even though millions of people lost their lives or their property or both to the tsunami, this lie has resurfaced and, unfortunately, it must be refuted for the umpteenth time.

In 1919 Ludwig von Mises explained that if “earthquakes represent big business for construction workers and cholera improves business for doctors, pharmacists and funeral homes, no one has ever thought to celebrate earthquakes and cholera for stimulating productive forces for the common good.”

However, what would have never occurred to someone to say in 1919, has been affirmed on innumerable occasions since the great Austrian economist wrote the above lines. “Wars are good for markets” or “natural disasters spur on economic activity” are some of the disgraceful phrases we have gotten used to having assault our ears. The latest wave of these ridiculous statements has washed over us as a result of the tsunami. For example, Fred Bergsten, an American economist at the Institute for International Economics, has argued that the Asian tidal wave, “as is the case with any other disaster, produces a negative effect through the destruction of property and people’s health, but spurs new economic activity to replace them whose results are fairly positive.”

Boiled down, these types of statements claim that the destruction of the means by which human beings reach their goals is, over the long term, a good thing. Why? Because it will require putting into use a number of resources that generate goods and services essential to getting back to satisfying those goals. As anyone well versed in logic or economic theory will know, the trick lies in fixing on the reconstruction and the jobs it creates and forgetting that if nothing had been destroyed, those resources would be used to satisfy new goals and needs. These new goals and needs cannot be achieved because we are too busy trying to recover what we already had. It is the old sophism of the broken window applied to natural disasters. No matter that the great French economist Frederic Bastiat refuted it back in the 19^th century.

Perhaps Mises’ phrase sounds naïve because he wrote it sixteen years before Keynes “general theory” became -to everyone’s misfortune except those using it to rise to positions of academic or political importance thanks to its defense of increased public spending and inflation- the 20^th century’s most influential economic text. This bible of economic interventionism declares, without blushing, that “the construction of the pyramids, earthquakes and even wars, can serve to increase wealth […].”

The revival of these pseudo-theories was inevitable. The Keynesian theory underpinning these gigantic and shameful lies has dominated Economics up to very recently. Even today, it makes up an important part of the mainstream curriculum, usually called neoclassic, taught at the overwhelming majority of universities on the planet. An regrettable state of affairs perpetuated by the state’s control over education in spite of Keynes’ theoretical and practical bankruptcy.

The falsehoods tied to catastrophes do not stop at the imagined beneficial long term impact that material destruction has on economic activity. They dive to worrisome depths rarely explicitly recognized. The death of thousands of human being, they suggest, could have a positive economic effects for disaster survivors’ welfare as long as the market value of destroyed materials and harm to economic activity are not so large as to erase the proportion of wealth left to each inhabitant. In short, if it weren’t for the fact that the tsunami seriously damaged the fishing and tourist sectors of the region, its death toll would, almost certainly, benefit the survivors’ standard of living.

Peter Thomas Bauer denounced such inhuman madness back in the 1970s when he noted that improved health and life expectancy often reduces average income per capita in its conventional form (in comparison with what it would have been otherwise), with the paradox and perverse result that what is clearly an step forward for these people is presented as a step backwards.

A natural disaster’s effect on mankind’s achievements is never positive, not for the economy and not for society in general. What is more, if on top of everything else, the natural phenomenon wipes out human lives, the economic disaster –apart from personal- is immense and, for the most part, irreplaceable. The disconnect between these theories and reality comes from their allowing economic aggregates to supplant data that only makes sense when examined on an individual basis in a specific context; an individual’s ends and means lose their subjective nature and become objective references around which everyone should orient themselves; the individual is substituted for abstract entities like the state as the star player in the social process. The only way to ensure these pronouncements stop offending rational human beings is a radical change in how economics is taught in our high schools and universities. To achieve that, I fear the ocean will first have to wash away the state’s hold on the education of our youth.