Economic impact won't offset loss.

WITH Asian nations from Indonesia and Thailand to India and Sri Lanka still counting the casualties from the killer tsunami, a prominent economist has predicted that the world's biggest disaster in almost three decades would actually be good for economic growth.

"Perverse as it seems, disasters of this type usually do have positive long-term effects," C. Fred Bergsten, director of the Institute for International Economics, a private, non-partisan research institutions based in Washington, said on NPR. "The reconstruction process itself requires a lot of new investment, some of it in this case financed by foreign assistance," said Bergsten, who also advises the Group of Eight industrial nations on their annual summits.

The net result: more jobs and higher growth. Besides, as newer, better beach resorts replace the properties flooded by the giant ocean waves, the Thai coastal province of Phuket, which has hundreds dead and missing, could earn more revenue from holidaymakers than it did before the disaster.

Is Bergsten's thesis plausible? Probably not. For one thing, it may be impossible to separate human tragedy from economic disaster. Secondly, Bergsten's argument may be an example of the "broken window" fallacy, says Christopher Westley, who teaches economics at Jacksonville State University in Alabama. Westley cites 19th century French economist Frederic Bastiat who maintained that the money spent on fixing a broken window merely transfers to the glazier a part of a homeowner's income that would have otherwise bought, say, a new suit.

That the relationship between disasters and economic growth remains an unresolved problem more than 150 years after Bastiat's death is evident from the fact that researchers are still asking the question, "Do Natural Disasters Promote Long-Run Growth?"

That was the title of a 2002 study by economists Mark Skidmore of the University of Wisconsin at Whitewater and Hideki Toya of the Nagoya City University  in Japan, who showed that disasters like floods and hurricanes that occur more frequently do indeed fuel long-term economic growth. Harder-to-forecast and more infrequent events such as earthquakes and tsunamis don't have a beneficial impact.

It's easy to see why that should be. Every time annual floods or hurricanes level a house or factory or some other physical capital, the replacement usually involves some technological improvement, which is good for economic growth.

A one-off disaster, on the other hand, may only create a growth spurt in one quarter or one year. It won't lead to higher economic activity year after year. And then there's the human tragedy.

Andy Mukherjee is a columnist for Bloomberg News.