How has 9/11 affected our society today? Shortly after 9/11, Uncommon Knowledge host Peter Robinson interviewed Milton Friedman on the economic impact of the September 11 attacks. The recording is titled “Economics and War: The Economic Impact of the War on Terrorism.” The September 11 attacks in New York and Washington have already cost America thousands of lives and billions of dollars in damages. But those are only the direct costs. How severe and how lasting will the impact be on our economy as whole? And how will new burdens on the federal government, including a military buildup and a bailout of the airline industry, affect fiscal policy? Should the government cut taxes or increase spending to get the economy moving again? Milton Friedman answers these questions and more:
“Unfortunately, the hardest thing for people to understand is that maybe if you leave things alone, it'll be better than stepping in and trying to do something. The hardest thing in the world to understand is that people operating separately, through their joint relations with one another, through market transactions, can achieve a greater degree of efficiency and of output, than can a single central planner.”
“During the Great Depression, '29 to '33, the market went down roughly 80 percent if I remember right or something like that. But then it shot up quickly in a year or two afterwards. And so usually in these occasions, the market somewhat overdoes it and then quickly reacts. And I wouldn't be surprised if the stock market, I don't know, I'm not predicting the stock market—that's not for me, but—but one of these days the stock market will have overdone it and we'll turn around and start going up again. Maybe it's doing it already.”
“He may be one of the most eminent economists in the world, but Milton Friedman's view can still be summarized very neatly. The best institution for dealing with the economic after effects of the terrorist attack is not the government but the market,” concluded Robinson at the end of the interview.