the same process of industrial mutation–if I may use that biological term–that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. [Schumpeter sees it as a virtue.]But non-economic forces do the same job of revolutionizing structures. Following Katrina/Rita there have been a scattering of media reports on people who are settling into new lives in new places and doing better, finding the schools are better, jobs better paid, etc. The NY Times today has an article on the New Orleans school system, pre-Katrina one of the worst in the country, post-Katrina being converted to mostly charter schools. Of course, I think a conservative economist should argue that people should have left New Orleans before the hurricanes if they could find better lives elsewhere. And politicians should have pushed the charter schools if that's the way to better education.
But the reality, often not recognized by economists, is that people get in ruts and don't act rationally, at least in the terms that economists can calculate and count. They like tradition and community, they fear change, they find it simplest to do today what they did yesterday. Hurricanes, like economic change, uproot. The law of averages says that some people end up better off, some end up worse off. Over two centuries farm children have been leaving the country for the city: some made fortunes, some failed miserably. (That's an example of Schumpeter's creative destruction--moving resources from uneconomic uses to higher uses. ) By the nature of media, we tend to hear more about the successes than the failures. We must remember both sides: good and bad came out of the disaster, just as good and bad come out of the migration to the city.
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