If someone steals my car, is there is no “economic damage” because the thief is now better off to the extent of my loss? I would say I suffered economic damage and someone else got a benefit; the existence of that benefit does not negate the damage I incurred.
There is economic damage, but not necessarily equal to the headline number. It is reduced by netting against the gains to the thief, but increased by things like stress, required investments in security, disruption to plans, degraded incentives, and so on. In this case I would guess the economic damage is very large but still less than $8bn. In the case of a personal mugging I would guess the economic damage far exceeds the value of the contents of your wallet.
You might also reasonably object that the gains to the thief shouldn’t count because they are illegitimate. However, in the FTX case many of the gains seem to have gone to other traders who profited without being guilty.
I feel pretty confused by this and would love better estimates of the actual amount of money that was “lost” in the FTX situation. It seems plausible to me (though not likely) that it’s above $8B, since a lot of people made plans conditional on FTX being legitimate in a way that now wiped out a lot of economic gains, and the long-term trust that was lost in the markets was worth more than $8B.
My best guess number for this is something in the $3-4B range, but that’s really very much an ass-number.
As usual, the best definition depends of the term on the use you want to make of it.
From a social welfare standpoint, if the thief values the car as much as you did, and he doesn’t spend resources covering up his crime, and you don’t incur an expense in filing police reports etc., there is no social loss.
I wouldn’t want to, e.g., count the FTX blowup as an 8 billion dollar loss in making cost effectiveness analysis comparisons to something like GiveDirectly.
If someone steals my car, is there is no “economic damage” because the thief is now better off to the extent of my loss? I would say I suffered economic damage and someone else got a benefit; the existence of that benefit does not negate the damage I incurred.
There is economic damage, but not necessarily equal to the headline number. It is reduced by netting against the gains to the thief, but increased by things like stress, required investments in security, disruption to plans, degraded incentives, and so on. In this case I would guess the economic damage is very large but still less than $8bn. In the case of a personal mugging I would guess the economic damage far exceeds the value of the contents of your wallet.
You might also reasonably object that the gains to the thief shouldn’t count because they are illegitimate. However, in the FTX case many of the gains seem to have gone to other traders who profited without being guilty.
I feel pretty confused by this and would love better estimates of the actual amount of money that was “lost” in the FTX situation. It seems plausible to me (though not likely) that it’s above $8B, since a lot of people made plans conditional on FTX being legitimate in a way that now wiped out a lot of economic gains, and the long-term trust that was lost in the markets was worth more than $8B.
My best guess number for this is something in the $3-4B range, but that’s really very much an ass-number.
As usual, the best definition depends of the term on the use you want to make of it.
From a social welfare standpoint, if the thief values the car as much as you did, and he doesn’t spend resources covering up his crime, and you don’t incur an expense in filing police reports etc., there is no social loss.
I wouldn’t want to, e.g., count the FTX blowup as an 8 billion dollar loss in making cost effectiveness analysis comparisons to something like GiveDirectly.