NYC now says that if you include lost future business income in the cost, the cost is as high as $105 billion:
http://cnnfn.cnn.com/2001/10/04/news/wtc_cost/
I’m not sure I believe that–often, business isn’t destroyed in a disaster, merely diverted to other outlets–but it does illustrate the idea that more than lives and property were destroyed in the attack.
It’s true that the money spent on cleaning up the attacks will increase GDP this year over what it would have been otherwise. This seems counterintuitive, but it’s just the natural consequence of the way we measure GDP. GDP measures income, not wealth. So GDP will not include the negative effects of the destruction of the WTC (a fall in wealth) but it will include the positive effects of spending to clear and replace the WTC (a rise in income.)
Here’s a (possibly) easy-to-understand example. Suppose you own a $600,000 house free and clear, and earn $50,000 a year in your job. Then one day your (uninsured) house burns to the ground. In order to pay for a new house, you moonlight by taking an additional job that pays $20,000 a year.
Your wealth has fallen by $500,000, the cost of the destroyed house, but your income has actually gone up by $20,000 because you’re working extra hard to replace what you’ve lost. If someone was only looking at your income, it looks like you had a good year, even though you’re far worse off because of your lost wealth.
That concludes today’s lesson in national income accounting: we now return to our regularly scheduled discussion, already in progress…
(Thank you, MC!)