The Dusty Den Book Club

Discussing Literature and Anything Else We Want

Month: January 2017

Hazlitt’s, “Economics in One Lesson,” Part II

This is the second blog entry on Hazlitt’s book, Economics in One Lesson.  In the first entry we discussed the general format of the work, and some of the basic principals and high points of the first half.  In this entry I aim to highlight only a few more points, discuss some of the recommended reading and credit given by Hazlitt, include some quotes that deserve memorization,  and talk about why this book is important and what place and function it will hold in my personal library.

Working through the rest of part 2 of Economics in One Lesson, wasn’t difficult, but it was more involved.  The principles build on each other in some chapters, demanding a little more patience than the beginning of the book.  Even so, it is probably still the most concise text your going to find on the particular economic questions it discusses.  There are several chapters that highlight current issues facing the United States and other countries around the world today.  The chapters on minimum wage and tariffs come to mind.  The chapter on the price system is very understandable, and praised by Milton Friedman in a quote on the back cover (current edition).  Hazlitt explains why the free market is, “incomparably better than any group of bureaucrats,” at solving questions surrounding the needed amount of commodoties and services in a society, and he explains why the price system shouldn’t be, “vilified.”  There are so many great gems and quotes in the book that it’s difficult to even get started on them.  He discusses the historical, landmark work from Adam Smith, The Wealth of Nations, and has a great excerpt from Grahm Sumner’s essay, The Forgotten Man.

As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X.  Their law always proposes to determine what C shall do for X or, in the better case, what A,B and C shall do for X.                                                                           …What I want do do is look up C….I call him the Forgotten Man.  He is the man who never is thought of.  He is the victim of the reformer, social speculator and philanthropist, and I hope to show you before I get through that he deserves your note both for his character and for the many burdens which are laid upon him.

The references Hazlitt makes always translate clearly back to his original thesis from part 1, encouraging long-term consequences, and all parties of an economic system be given their due consideration, instead of only looking at one group over the short term.  It makes for a clear message and also provides the reader with a spark of inquiry into further exploring different authors discussing similar economic logic.

I think his chapter on tariffs, Who’s “Protected” By Tariffs? pairs well with Bastiat’s, The Candle Maker’s Petition.  Reading both, the later a satire, gives a more complex understanding of the issue, which is today so very relevant.  One of the beauties of the Austrian School of economics is how simply it can be explained and how it can expound to the most complex of market understandings.  The book helps develop the basic lexicon it takes to discuss free market economics with all your classical-liberalism loving friends, or those who opinions differ.  Since reading the book, I have found myself better able to convey a particular point in an economic debate, which I previously believed, but lacked the prowess to properly articulate.

In the final part of the book, The Lesson After Thirty years, Hazlitt takes quick aim at inflation, and insists, “[It] is not only a policy imposed for its own sake, but an inevitable result of the other interventionist policies.”  He questions why modern politicians embrace Keynes’ General Theory, despite its having been, “thoroughly discredited by analysts and experience,” and compares American pressures on other countries to adopt the same inflation inducing policies to, “Aesop’s fox, who, when he had lost his tail, urged all his fellow foxes to cut off theirs.”  He provides some basic figures and calculations which relate to his lessons in a, “I told you so,” succinct finale, but he does it without being condescending.

Ultimately Economics in One Lesson, will take a permanent fixture in my library.  It will serve as a primer-reference text.  By that, I mean if a particular economic subject arises or becomes the target of conversation or topical interest, I will find the corresponding chapter and get Hazlitt’s take.  It will serve as a more than adequate primer to reintroduce the specific topic and provide, not only a basic understanding, but also a further interest and ability to digest more elaborate and involved texts on the subject.  Reading Economics in One Lesson, will make you a more critical thinker in the realms of current economic policy, and you will enjoy the way such an often dry subject is presented by Henry Hazlitt with basic language and relatable, understandable examples.

 

Hazlitt’s, “Economics in One Lesson” Part 1

 

 

There is something about economics, economic literature more specifically, that just makes many people intimidated, bored, or frustrated.  It’s easy to put a book on economics or finances to the back burner.  Economic philosophy…even worse.  Henry Hazlitt, however, in 1946, published the small but mighty, Economics in One Lesson.  It is a masterpiece which holds up incredibly well, and is completely enguaging in the way it breaks down economic ideas.  Hazlitt gives deserved credit to French economist and author Frederic Bastiat who wrote about economics much earlier, but the simplicity in Hazlitt’s work and the clear digestibility it caries makes it a fantastic read, and a must for readers desiring education and enlightenment in overall economic theory.  The Austrian economic view is more enguaging and gives a much clearer picture of the economy as a whole and how it actualy works, and it is represented here with mastery.  This impression comes immediately.  Not even half-way through the book, you understand the crux of the matter.  Hazlitt actually lays out the book in an interesting and simple format that explains economics in everyday language with every day and historical examples.  He makes the subject of economics organic, living and breathing.

The book, in this edition, revamped in 1978, is broken into three parts.  PART ONE: THE LESSON, PART TWO: THE LESSON APPLIED, and PART THREE: THE LESSON AFTER THIRTY YEARS.  Part one is brief and is merely the lesson, which Hazlitt writes in thrift, and eventually boils down to one sentence:

“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

Part two, is subdivided into chapters applying the one sentence theory to different questions of economics.  A few of the chapters for example, some which are titled in the contrary of the Austrian (Hazlitt’s) opinion, are:  The Blessing of Destruction, The Curse of Machinery, and Who is “Protected” by Tarifs?.  There are 24 applications of the lesson based on chapters in Part Two.  It starts off with, The Broken Window.  This chapter is a parable first examined by Bastiat in, Ce qu’on voit et ce qu’on ne voit pas, That Which Is Seen and That Which Is Unseen.  It is a thought experiment exploring what a single action does to the economy following not only the direct parties involves, but also the indirect parties affected, and economic health as a whole.  It adheres to the examination of the lesson, looking at a singular act, and its ripple effect to all groups.  It sets the tone as a text that is relatable and interesting, as well as simple, all without being condescending or juvenile.

It is Hazlitt’s belief that many economists grossly neglect the “unseen” in their economic policy, and therefor they are in violation of the lesson and their theories are unsound.  Hazlitt and the Austrian school are often critiqued by the keyenesian economists.  This beginning chapter, and subsequent chapters, help the reader build on an understanding that the “fallacy of overlooking secondary consequences,” is a much damaging factor of many popular economic principals held by those economists, and he dissects the arguments simply, practically and quickly.      

I am currently only half way through Part Two, and fully disclose that many of the principals of Austrian economics are in my belief system already.  Some of Hazlitt’s concepts are not new to me, but I believe that he lays them out in such simplicity that someone unfamiliar will quickly grasp the material without being bored or confused.  Reading it will actually excite you, because your confidence in discussing economic policy and more closely understanding the full implications of current policy will grow.  I consider myself an “advanced beginner” in the study of basic economic principals, but believe this book reads well across the spectrum of scholarly levels due to its historical examples and simple approach.  It makes thinking about economics and drawing things to their logical conclusion fun!  Even the Keynesian may enjoy it because the examples set forth are well defined and clearly positioned, offering opportunity for rebuttal (which I propose would ultimately be exposed as false).  It will challenge any economic view and even if you are from a different school, provokes critical thinking and demands clear, detailed arguments.

I was listening to a “libertarian” podcast the other day that was philosophical in nature as opposed to current politics, and the host commented that they were not as up to snuff on the understandings of economic parts of libertarian arguments as other parts.  While the host certainly is intelligent, I think this admission, while honest, quickly lends itself to showing a lack of credibility.  Many economic principals are very important, and in fact cornerstones of liberty-based arguments and beliefs.  That is why it is so important for everyone to educate themselves in economics.  Not understanding something so integral to the workings society makes you more susceptible to being fooled by cleverly disguised economic fallacies.

I’ll be back with a part 2 as soon as possible.  Get Economics in One Lesson!  I think you will enjoy it.