Big Books of 2026
Economics in One Lesson

Questions About Economics in One Lesson

by Henry Hazlitt

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Answered Questions (2)

Now half way through, I am wondering if there is a book that would represent the counter of Hazlitt's theories here? Interested to get both sides of the coin.
Jef it is a credit to your intellect and education that you feel the need to evaluate both sides of an argument.
Keynesian economic theory is the dominant …moreit is a credit to your intellect and education that you feel the need to evaluate both sides of an argument.
Keynesian economic theory is the dominant theory taught in universities and practiced by governments world wide. I'd guess because Keynes' perspective that (grossly oversimplified) spending is good and saving is bad, allows The State to extend an ever greater number of social welfare and warfare programs, the sorts of promises which garner votes for politicians, and tenure for professors who preach Statism. Austrian economics, the dominant form of economic thought for centuries prior to Keynes, and thus considered "classic economics" with its emphasis on self-reliance, private property, and investment of capital into a business as the primary pathway(s) to prosperity is far less sexy, so has sort of taken a back seat to Keynes for the past 80 or so years. However, the failure of credit and resultant bubbles has sparked a newer interest in a system with greater sustainability.
So, to answer your question, about any book on economics that you can't find at mises.org is likely a Keynesian text.(less)
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Could anyone with good economics knowledge help explain section 3 of "Enough to Buy Back the products" chapter? I am new to economics and especially confused on the "wage and salaries in US averaged 69 percent of national income" part.
Eric He is debating the argument that increasing the money supply to accommodate an increase in wages would increase the general price level less than the …moreHe is debating the argument that increasing the money supply to accommodate an increase in wages would increase the general price level less than the wage increase, effectively making workers wealthier.

Because raising wages arbitrarily without an increase in money supply adds to the real cost of inputs, it is necessary for a company to increase prices to cover this added overhead. If they can't increase prices without losing sales, then they have to reduce overhead, usually labor.

Some would argue, at least back then, I don't know if anyone still believes this today, to for example increase the money supply by 5% and mandate a 5% increase in labor wages. This way while the nominal cost of labor goes up, the real cost does not, and they would say that a 5% increase in the money supply would not increase the general price level the same amount. This is an important distinction because if you get a 5% raise, but the price of everything you buy goes up 5%, you didn't get a raise. You are back where you were before. This is what purchasing power means when he refers to that. If you get a 5% raise and prices go up 10%, then you lost purchasing power. If you took a 5% pay cut, but prices go down 10%, then you got a raise in purchasing power.

His comment about the national income was just using government numbers to come up with an estimate of the cost of the labor part of production. Wages made up 69% of the cost of production (GNP, or national income, was the total economic output of the United States).

I'll use some basic round numbers to try to illustrate his point. Let's say GNP was $1,000,000. If wages were 2/3 of the cost of production, that would make wages $670,000 and everything else $330,000.

If we want a 30% increase in wages, changing nothing else, that takes wages up to $871,000, making the new GNP $1,201,000. Nothing else has changed, so a 30% increase in wages increased prices by roughly 20%. That appears good for the people making the prior argument, but it doesn't see all of the consequences.

The people that aren't labor have lost purchasing power. Prices have gone up 20%; their income did not increase at all. Investors would change where they were putting their money. You will have other people that just got hit with a 20% pay cut try to find jobs in labor, flooding that labor supply, bringing down wages. Self employed people closing down their own companies creates unemployment and costs society the service or good they provided.

So while labor may or may not end up with a small net benefit, everyone suffers from the lack of productivity caused by the adjustment period, society is not better off in the long run.

Incidentally, it's also a perfect illustration of how increasing the money supply works. In this case, labor was enriched 30% by increasing the money supply, where non labor lost purchasing power. It essentially stole money from non labor to give it to labor.(less)
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