Johnrh's Reviews > Economics in One Lesson

Economics in One Lesson by Henry Hazlitt
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Mar 30, 12

Read in February, 2008

I think this is an excellent book because it explains economics, markets, prices, jobs, et al, in terms of everyday logic and reason, just like you think it should be explained. I for one have always made economics difficult, considering it some mysterious, deep, hard to understand process. It seems that way when you look at the kinds of formulas that economists like former Federal Reserve Chairman Alan Greenspan work with: (fill in) .

It is noteworthy that this book was first published in 1946 and extensively revised by the same author in the mid-1970s. Since he relies mostly on basic logic and employs so few specific references to statistical facts and figures, I find the book as relevant to this early 21st Century as if it was written last year.

Maybe the basics aren’t that hard. If they’re not then I should be able to explain some of this. Let’s see.

Chp. 1: THE ONE LESSON: “From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consist in tracing the consequences of that policy not merely for one group but for all groups.” (Subj. book, p. 17.)

Chp. 2: THE BROKEN WINDOW. Ah, this should be easy enough. A vandal breaks the local Baker’s window. If you look on the bright side, you can say this contributes to the economy, because now the baker will employ the window repairman to fix his window, the glass industry will have a sale of glass, etc. etc. But it is NOT a contribution to the economy. The Baker must now spend money on a window that he did not have to previously. Perhaps he was going to buy new clothes, and now the clothing industry has that much less new business. Or perhaps he was going to buy new equipment for his bakery, improve production, increase his own wealth, and perhaps even be able to drop prices, but now that will be reduced at least by the amount he has spent on a new window. Bottom line, unforeseen catastrophe is NOT a contribution to the economy, it is a drain.

Chp. 3: THE BLESSINGS OF DESTRUCTION. Destruction through obsolescence or natural deterioration is good, through war is not good. War destroys accumulated capital. “Supply creates demand because at bottom it is demand. The supply of the thing they make is all that people have, in fact, to offer in exchange for the things they want.”

Chp. 4: PUBLIC WORKS MEAN TAXES. End of discussion. Any work created by the government is paid for with taxes. Tax money is less money the consumer has for private enterprise (his own or anyone else’s).

Chp. 5: TAXES DISCOURAGE PRODUCTION. Tax money is less money the consumer has for private enterprise (his own or anyone else’s). “If they (taxpayers) lose the whole dollar when they lose, but can only keep a fraction of it when they win, they decide that it is foolish to take risks with their capital. In addition, the capital available for risk-taking itself shrinks enormously. It is being taxed away before it can be accumulated.”

Chp. 6: CREDIT DIVERTS PRODUCTION. Government credit, that is. It subsidizes some to halt production. It provides loans to others who in the private sector might not qualify. All this is done with “other people’s money” (taxpayers) which might otherwise be used for private, not government, consumption and production.

Chp. 7: THE CURSE OF MACHINERY. “Among the most viable of all economic delusions is the belief that machines on net balance create unemployment.” THEY DON’T! “Yet it is a misconception to think of the function or result of machines a primarily one of creating jobs. The real result of the machine is to increase production, to raise the standard of living, to increase economic welfare.”

Chp. 8: SPREAD-THE-WORK SCHEMES. “I have referred to various union make-work and featherbed practices. These practices, and the public toleration of them, spring from the same fundamental fallacy as the fear of machines. This is the belief that a more efficient way of doing a thing destroys jobs, and its necessary corollary that a less efficient way of doing it creates them. Allied to this fallacy is the belief that there is just a fixed amount of work to be done in the world, and that, if we cannot add to this work by thinking up more cumbersome ways of doing it, at least we can think of devices for spreading it around among as large a number of people as possible.” They always raise production costs.

Chp. 9: DISBANDING TROOPS AND BUREAUCRATS. Less money needed by the government for soldiers or bureaucrats means more money for civilians, more “demand” by them, and thus more jobs for the disbanded in order to fulfill that demand.

Chp. 10: THE FETISH OF FULL EMPLOYMENT. “The economic goal of any nation, as of any individual, is to get the greatest results with the least effort. The whole economic progress of mankind has consisted in getting more production with the same labor. … It is for this reason that men used their ingenuity to develop a hundred thousand labor-saving inventions. …this first principle means that our real objective is to maximize production. In doing this, full employment--that is, the absence of involuntary idelness--becomes a necessary by-product. But production is the end, employment merely the means. We cannot continuously have the fullest production without full employment. But we can very easily have full employment without full production.”
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