Wednesday, June 3, 2009

Economics in One Lesson by Henry Hazlitt

Henry Hazlitt may never be hailed as one of the world's greatest economists, but judging from today's dominant theories, neither would Ludwig Von Mises. Indeed, these disciples of Adam Smith hold little that would appeal to today's economists except for one disturbing fact: they have been predominantly right in exposing the fallacies and consequences of socialism and central planning.

Henry Hazlitt's short book, ECONOMICS IN ONE LESSON may never be hailed as a classic, but neither would Mises’ HUMAN ACTION. Galbreath s THE NEW INDUSTRIAL STATE would grab all the honors, even though it is predominantly wrong.

If you want to find a book that gives a quick view of what economics is about, don't look in your local book store. The book needed most by today's thinking American is not going to be there. Yet, Hazlitt's ECONOMICS IN ONE LESSON is truly a classic of economic literature.

Hazlitt expounds on one example, the broken window that brings business to the glazier and consequently to others who deal with him. Hazlitt uses this example to show how people can convince themselves that the vandal who breaks the window is providing a service by making countless transactions necessary. But the broken window analysts neglect the fact that the owner of the window is out the cost of the repair, so that the gain for the glazier is a genuine loss to the owner.

Hazlitt takes the broken-window fallacy and shows how it applies to economic principles, and he shows how many economic analysts use the fallacy in justifying their own pet schemes. "...the broken-window fallacy, under a hundred disguises, is the most persistent in the history of economics." says Hazlitt.

For instance:

-Wars do not spur economic activity by making replacement of the goods destroyed necessary.

-Government spending does not cure economic ills but diverts funds to generally non-productive activities.

-New machinery introduced into industry does not create unemployment.

-Full employment schemes launched by government end in more unemployment.

-Minimum wage laws assure that those they are designed to help do not get jobs.

Hazlitt's style is so much to the point that he has managed, in a minimum number of pages, to destroy virtually every fallacy adhered to by John Kenneth Galbreath in all of his voluminous writings. In fact, Hazlitt refutes Galbreath in one breath: "Economics, as we have now seen again and again, is a science of recognizing secondary consequences. It is also a science of seeing general consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run." (The Lesson Restated, Page 135)

ECONOMICS IN ONE LESSON is a defense of reason in economics. As a consequence of his approach Hazlitt defends "the Forgotten Man ... He is the man who is never thought of. He is the victim of the reformer, social speculator and philanthropist (Quotation from William Graham Sumner.)"

The reader of ECONOMICS IN ONE LESSON will quickly learn that he is that Forgotten Man.

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