Review: Economics in One Lesson

{By Taylor Turner}

You have an economic ideology.

economics in one lesson

Now you may say, “No, Taylor, I don’t. I do not even like economics.”

The interesting part is that when the government takes part of your income on April 15th every year, you don’t just sit there and say to yourself “I seem to have a little less money this year in my bank account.” That simply does not happen. We do have feelings and opinions about economics. But how do we know if they are actually correct and work?

Where do we start? Where do we go to discern good policy from bad policy? Contrary to the prevalent sentiments of modern American education, going to Harvard University for a year of 400-level economics courses is altogether unnecessary for a solid grasp on the topic. I would venture to say that doing that would be detrimental.

Understanding the basic fallacies of economics and how to rebut them is a good place to start. We don’t have to search through a 200 year old book to learn about the fallacies. In fact, there are two fallacies according to Hazlitt that are a big reason for the mess we are in. Hazlitt says that ‘nine-tenths of the economic [policies] that are working such dreadful harm in the world today are the result of’ their implementation. In 1946, Henry Hazlitt published an entire book on this entitled “Economics in One Lesson.” He was an economist, author, and journalist, writing for The Wall Street Journal and The New York Times many times. In “Economics in One Lesson,” Hazlitt provides the lesson that everybody needs to learn. Unfortunately, many people were never taught it which is part of the reason we have a screwed up economy. Hazlitt not only provides the key to understanding the shortcomings of the different economic thoughts but also the correct economic route to take.

So what is the one lesson?

Hazlitt’s lesson is this:

 “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.” 

The two fallacies are self-interest and that of overlooking secondary consequences. Simple enough? They are simple, but often times the simplest things are the hardest to apply and when they are not applied they impact us the most. In fact, Hazlitt says that in these two fallacies lie “almost the whole difference between good economics and bad,” which is why the majority of economic policies we see today are not successful because  “nine-tenths of the economic [policies] . . . are a result of” their implementation.

Since knowledge without application is useless, lets look at an example of these fallacies in a real life.

In the world of economics the best known example is that of Frederic Bastiat’s ‘Broken Window’ fallacy from his work entitled “That Which is Seen, and That Which is Not Seen.”

economics in one lesson

Basically it is this: a kid throws a rock and breaks a baker’s window and after the ruckus, a crowd gathers outside and tells the baker to look on the bright side because now a glazier (i.e. a fancy word for a window fixer) will get paid by the baker to fix the window. Sounds good. But this first situation only looks at one route. But we can not only look at the glazier because if we do the ultimate conclusion is that breaking windows is good, which is nonsense. The second perspective and the one we should have is that of looking at secondary consequences. If the window had never been broken, the baker could spend that money toward getting a new suit from the tailor while still enjoying a good window. We can see through this simple example that looking at immediate consequences leads to thinking that breaking windows is economically profitable. However, both immediate and secondary consequences must be observed to start having good policy.

Besides a few economics books, my only exposure to economics was one class in my last year of high school. I did learn the rudimentary concepts of economics, which was good; but I had never learned how to determine good verse bad policy. For example, I keep up with the news intensely, and after reading Hazlitt’s book I am better able to pick out the problems with different economic policy that I read about and hear people discussing.

You can not go wrong reading Henry Hazlitt’s “Economics in One Lesson”. Hazlitt is a wonderful economist. But his ability to eloquently explain big issues succinctly so that the layperson can make sense of it in light of daily issues gives him a edge over other economist.

Get it. Read it. Learn.

If you are interested in delving more into economics, I highly recommend the works of Thomas Sowell and Ludwig von Mises – both solid economists.

 

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