Earthquake Economics

In class on Friday we talked a bit about the economic impact of the earthquake in Japan. One person mentioned the possible impact on the chip market. I hadn't heard about that but it's in the news:

SanDisk, which sources flash memory from a Toshiba manufacturing facility in Yokkaichi (see map), reported a shutdown but resumed production, according to Jim Handy, the principal analyst at Objective Analysis. (This was confirmed by SanDisk, which has co-ownership of the facility.) That Yokkaichi complex is the largest NAND flash producer in the world, Handy said.

By comparison, in December, Toshiba reported a relatively tiny split-second outage in Yokkaichi that the company said would impact production by as much as 20 percent for up to two months.

Elsewhere, the broken window fallacy has shown up again.

And natural disasters can actually end up having some positive impacts, as well as negative ones, when it comes to a country's economy, Lincoln points out.

"There's going to be a lot of rebuilding -- a lot of jobs created -- and it could serve as a major economic stimulus," he says, adding that the earthquake will also prompt Japanese residents living in the quake-ravaged areas to shop for replacement items for their homes.

The assumption is that the spending wouldn't have occurred without the disaster. That of course is incorrect. Without the disaster, the spending would have been on things that added to their standard of living. With the disaster, they get to spend money on replacing broken stuff just to get back to the standard of living they had before.