Wildfires continue to rage in Los Angeles and Southern California. Paul Krugman, a Nobel Prize laureate economist and author of the recently launched Substack, "Krugman wonks out," joins Catalysts with Seana Smith and Madison Mills to discuss the economic impact of the wildfires.
The US economy is almost inconceivably big," Krugman explains. "And big economies can absorb even really large natural disasters without much visible sign."
"It's an enormous human tragedy, and for the state of California, obviously, its biggest metropolitan area has been really severely damaged, but again, people always make the mistake with the US [economy] ... $1 million or even 1 billion or even $100 billion — those are all small sums compared with America," the economist says, as some estimate the fires are the most costly in US history.
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This post was written by Naomi Buchanan.
Paul, I want to end on the wildfires. I know you published a piece on this this morning, an obviously horrific devastation that we were seeing out in California, but I wonder about the macro economic impact. Is there a potential risk to something like the deficit, which you brought up earlier, that we're not necessarily thinking about accurately in the wake of those fires?
Okay, yeah, I did, you know, great thing about Substack is I can post sort of in real time on stuff. And um, the I mean, this is a huge shock. It's enormous devastation. Um, historically, however, the US economy is almost inconceivably big, uh, the whole national economy. And big economies, uh, can absorb even really large natural disasters without much visible sign. I mean, I remember looking at Japanese macro data around the time of the Kobe earthquake, which was much more lethal than anything we're seeing in in in LA and the property damage relative to Japan's economy might be comparable. Uh, and you cannot see it. You can't see it even in the quarterly growth numbers. So I would say probably it's not that big a deal for, you know, for national GDP. It's probably not that big a deal for inflation. I mean, it's an enormous human tragedy and what uh, for for the state of California, obviously the its biggest metropolitan area has been really severely damaged, but uh, again, people always make the mistake with the US. You look, you you you talk about a number, you say, you know, Dr. Evil, $1 million or even $1 billion, even $100 billion. Those are all small sums compared with America.
Paul, it's always great to get some of your time. Thanks so much for hopping on with us. We look forward to continuing the conversation again soon. Paul Krugman, thanks so much.
Thanks.