Henry Hazlitt just might be the most brilliant economist you’ve never heard of. Accomplished in the fields of economics, philosophy and literary criticism, perhaps his greatest legacy is what I believe is the finest text on economics ever penned for laymen: Economics in One Lesson.
Hazlitt’s “one lesson” is simple, takes less than ten minutes to read, and is laid out in the book’s very first chapter. He boils the crux of the lesson down to these two sentences:
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. Nine-tenths of the economic fallacies that are working such dreadful harm in the world today are the result of ignoring this lesson.
In the chapters that follow, Hazlitt then lays out 22 lessons (stories, really) wherein the “one lesson” is applied to many different situations involving human thought, action and economic policy.
Short and sweet, explanatory and enlightening, Economics In One Lesson is also astutely perceptive and timeless in the way it deconstructs so many of the economic fallacies that have infiltrated the econo-political landscape of contemporary America. Though this book was originally published in 1946, it is amazingly fresh and relevant; for example, in the course of reading it, you will be hard-pressed not to notice that the political pathways and economic policies that led to our recent economic meltdown were foretold over 60 years ago.
Consider this statement from Hazlitt’s chapter on public works:
There is no more persistent and influential faith in the world today than the faith in government spending. Everywhere government spending is presented as a panacea for all our economic ills. Is private industry partially stagnant? We can fix it all by government spending. Is there unemployment? That is obviously due to ‘insufficient private purchase power.’ The remedy is obvious. All that is necessary is for the government to spend enough to make up the ‘deficiency.’
An enormous literature is based on this fallacy, and, as so often happens with doctrines of this sort, it has become part of an intricate network of fallacies that mutually support each other.
Or how about this gem, where Hazlitt argues that “saving” is actually a positive form of “spending”:
“Saving,” in short, in the modern world, is only another form of spending. The usual difference is that the money is turned over to someone else to spend on means to increase production. So far as giving employment is concerned… ‘saving’ and spending combined give as much as… spending alone, and put as much money in circulation. The chief difference is that the employment provided by… spending can be seen by anyone with one eye; but it is necessary to look a little more carefully, and to think a moment, to recognize that every dollar of… saving gives as much employment as every dollar that [is] throw[n] around.
Economics in One Lesson is a must-read and it may very well alter the way you look at economics, politics and the government. Best of all, you can download it in .pdf form for free, courtesy of the Ludwig von Mises Institute.
Henry Hazlitt explaining his One Lesson: