For example: For a common man, if a natural disaster occurs and destroys a commercial building. There is heavy loss incurred. People lose their jobs. The profits of the company go down and this impacts the economy as a whole. Whereas, on the other hand this gives business to the construction companies. They will profit by some else’s loss.
But according to the French economist, Frederic Bastiat, if the commercial building did collapse then it would be doing some much more business and would progress at a faster rate. And the cost of rebuilding does not stimulate production activities that would profit the business.
This theory is not true, because natural and man-made disasters are beyond the control of anyone. If disaster strikes then the government cannot sit quiet and let it continue to affect the economy. The government will have to take a stand and try to rectify things. Even though, the economy has suffered losses and someone has suffered it will definitely come up with the help of the government. This will