Hurricane Economics

by Alan Reynolds

Alan Reynolds, a nationally syndicated columnist and senior fellow with the Cato Institute, is a writing a book on income distribution for Greenwood Press.

When it comes to evaluating the economic impact of hurricane Katrina, two errors are constantly repeated. The first is the free-lunch fallacy -- believing that federally financed reconstruction and relief can be a net "stimulus" to the national economy. The second is the price-index blunder -- confusing a one-time spike in the relative price of energy with a broad and lasting change in the rate of inflation.