How Milton Friedman Can Help Us Get Through Hurricane Milton
Hurricane Milton is set to make landfall on Wednesday between Cedar Key and Naples, Florida, threatening significant damage along the Gulf Coast. The region is still reeling from Hurricane Helene, which claimed at least 234 lives and caused over $30 billion in property damage, according to CoreLogic, a real estate information services provider. Despite expensive emergency aid programs, too many Americans remain in dire straits. Instead, policymakers would be wise to consult the teachings of Nobel laureate economist Milton Friedman: “you don’t let prices rise, you destroy the system…which coordinates the activities of different people.”
It’s understandable to call for government assistance when faced with the havoc wreaked by natural disasters. But the government is just one kind of human institution—one that often lacks sufficient information to help people. To deliver disaster victims the goods and services they desperately need, it’s better to rely on market mechanisms.
In the early and mid-20th century, so-called market socialists Oskar Lange and Abba Lerner argued that centrally planned economies are theoretically more efficient than capitalism. But Ludwig von Mises and Friedrich Hayek disabused technocrats of such fatal conceits, winning the calculation debate and elucidating the knowledge problem. The historical record has empirically substantiated the superiority of markets to create, allocate, and innovate.
“But,” the stubborn statist objects, “markets only work under normal conditions; in emergency situations we need the government to resolve the crisis.” While such arguments are politically popular, they are economically vacuous.
The state does not become omniscient during times of crisis and the price system that conveys information about local circumstances is especially useful during such times. Recognizing their lack of knowledge, governments should adopt the following laissez faire policies to allow those with the know-how to recover from disaster.
Before: Don’t create moral hazard
The federal government should not distort the single most reliable signal of risk: homeowners insurance. By subsidizing the
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