Economics in One Lesson: 50th Anniversary Edition Hardcover – 1 Jul 1996
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About the Author
If you want to know where American supporters of free markets learned economics, take a look at Economics in One Lesson by Henry Hazlitt. A brilliant and pithy work first published in 1946, at a time of rampant statism at home and abroad, it taught millions the bad consequences of putting government in charge of economic life. College students all across America and the world still use it and learn from it. It may be the most popular economics text ever written.
Mr. Hazlitt--journalist, literary critic, economist, philosopher--was one of the most brilliant public intellectuals of our century. He was born on November 28, 1894, and died on July 8, 1993, at the age of 98. In his final years, he often expressed surprise that Economics in One Lesson had become his most enduring contribution. He wrote it to expose the popular fallacies of its day. He did not know that those fallacies would be government policy for the duration of the century.
Hazlitt also wanted to be known for his other contributions, which include a novel, a trialogue on literary criticism, two large treaties on economics and moral philosophy, several edited volumes, some sixteen other books, and countless chapters in books, articles, commentaries, reviews. He once estimated that he had written 10 million words and that his collected works would run to 150 volumes. --This text refers to an out of print or unavailable edition of this title.
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Hazlitt proceeds to apply the above lesson to numerous government actions. By drawing the reader's attention to the unseen effects, the failure of socialism is exposed. Take for example government "jobs programs." If the government employs 500 people, one might think that government has "created" 500 jobs. However, government had to tax its citizens to fund these jobs. Had the money been left in the hands of taxpayers, their spending would have resulted in an equivalent number of employed individuals. Government didn't "create" jobs - it merely destroyed jobs in the private sector. On issue after issue, Hazlitt demonstrates that government intervention in the economy fails to achieve its stated goals (although its real goal - an increase in government power - is always achieved). In addition, many basic economic falicies are refuted, such as "machines destroy jobs," and workers need "to earn enough money to buy back the products."
If you are new to the study of economics, don't stop here. Be sure to read Rothbard's "Man, Economy and State"; Von Mises' "Human Action"; and Reisman's "Capitalism." They are the twentieth century's "big three" works in economics.
If you're taking an introductory high school or college economics course that doesn't use this book, buy it and read it as a supplement to your coursework. It's very easy to read an essay a day and you'll be intellectually armed, no matter what tripe they try to force down you in class.
As a follow-up book, may I suggest Ayn Rand's "Capitalism: The Unknown Ideal," which lays a moral foundation for a free market, an essential step and one lacking in most economists' view of life. After all, capitalism is not some system devised by experts, it is what naturally occurs when free men are able to trade goods and services...
And if you really want to be versed in the subject, get "Capitalism" by George Reisman, who should win a Nobel prize for this brilliant text. Just having this 1046-page volume on your bookshelf will keep the statists at bay.
If you have already read and learned from "Economics in One Lesson", consider buying a copy for a friend. Spread capitalism and spread the wealth!
This book basically introduced me to the Austrian School of Thought on Economics. The "Austrians" vindicate the market economy's spontaneous order as the surest way to have optimal prosperity, opportunity, and individual liberty for the masses. The verbal logic and reasoning of the Austrian school is generally easy to understand and makes sense to the reader. Needless, to say my interest in the laissez-faire perspective grew - and I read and amassed a library of hundreds of interrelated books on various disciplines from economics to history to political theory. I also recommend any books by other "Austrian" luminaries such as Ludwig von Mises, F.A. Hayek, and Murray Rothbard. Hidden Order by David Friedman and Capitalism by Ayn Rand are also worth mentioning.
Most high schools do not teach economics. And most colleges do not require any economics courses to be taken. However, with this book, you can learn all the major basics.
The most important thing that this book does is that it rebukes and counters all of the majorly popular misconceptions about economics. According to the book, the two main reasons that most people don't understand economics when they look at a certain policy are, #1 they only look at how the policy affects its targeted group of people, and avoid considering how it affects the population as a whole and #2 they only look at the short term consequences of the policy, and ignore the long term effects.
For example, let's say that foreign companies are selling cheap steel to the U.S. So in order to protect jobs in the U.S. steel industry, the U.S. government creates import restrictions on steel that gets imported into the U.S. (These import restrictions could be either tariffs, quotas, or a combination of the two. The net result will be the same either way.)
So because of these trade barriers, the U.S. steel industry is saved. The jobs of thousands of steel workers are saved. We see reports on the TV news and in the newspapers that these jobs have been saved. Supposedly, the country is better off. Supposedly, these trade barriers were a good idea.
But most people will ignore the other affects of these trade barriers. Because the price of steel is higher, this will harm the U.S. industries that make things out of steel. The automobile industry, the washing machine industry, the refrigerator industry, the construction industry, and many other industries, will all have to pay higher prices for steel. So these industries will not be able to afford to employ as many people as they otherwise would, and so some jobs in these industries will be lost. Consumers will have to pay higher prices for things made of steel, so these consumers will have less money to spend on other things, such as food, clothing, entertainment, furniture, and other things, so some jobs in these industries will be lost. Since the U.S. is importing less steel from other countries, then these other countries will have fewer American dollars to buy goods from the U.S., so U.S. exports will go down, so U.S. jobs in these industries will be lost. The overall result of this trade barrier policy is that the net number of U.S. jobs remains the same, but that the average purchasing power of the average citizen is reduced. So overall, the average citizen has a lower standard of living. But most people will ignore the negative effects of the trade barriers.
This idea can be applied to other economic polices, too. Yes, farm subsidies do indeed benefit specific farmers. Yes, various labor laws do indeed benefit specific workers. Yes, laws that restrict competition in certain areas do indeed benefit certain people. The problem is that most people only look at the benefits of these kinds of policies. What most people ignore is that all of these policies have negative effects on other people, and that the total negative effects outweigh the total positive effects. So the overall result is that these kinds of policies make the average person worse off.
So why do most people only see the benefits of these policies, and ignore the negative effects? Because the direct benefits for the intended beneficiaries are usually very concentrated among a relatively small group of people, and so the benefits are very visible. But the negative effects of such polices are usually spread out over a much larger group of people, and so this harm is not always very easy to see. For example, if trade barriers against imported steel raise the prices of things made of steel (automobiles, refrigerators, washing machines, etc.), so that people have less money to spend on other things, such as, say, going to the movies, and, as a result, a movie theater has to close down, then it is very hard to trace the closing of the movie theater to the fact that the government had placed trade barriers against imported steel.
Hazlitt also explains that in the long run, many economic policies end up hurting the very people that the policies were intended to help. In the long run, price controls on beef lead to a shortage of beef, minimum wage laws cause unemployment among low-skilled workers, and rent control leads to a shortage of low-cost housing.
This book very strongly supports the idea that actions have consequences. And these consequences affect a much larger number of people than most people would expect to be affected. If everybody read this book, the population of the U.S. would be much better educated in the area of economic policies, and then, hopefully, they would act more logically when it came to choosing our elected representatives in government.
Having read a number of books about economics and banking, history and politics, I believe that Economics In One Lesson stands out as the most important book on the subject area.
It is setup as a series of 23 different examples describing everyday occurrences to illustrate fundamental economic principles. How a broken window impacts the overall wealth of the community is among the most famous of these examples. Others address the value of public works projects, the importance of exports, the impact of taxation on production, the relationship of employment to the minimum wage and the inflationary result of printing money.
Though written more than 50 years ago, the examples remain all too relevant today, unfortunately. In fact, for nearly every example, I was able to clip an article from the newspaper or print one from the Web documenting how the same issues are sadly alive today. "Price Controls Hamper Rise of Generics", Wall Street Journal, for example, revealed how the government of the Philippines set price controls on branded drugs to lower their cost only to find the artificially reduced profits caused retailers to cancel planned store openings and stop hiring. Hospitals raised other prices to recoup the loss of revenue from drugs and the once-growing generic drug manufacturing industry stalled since the spread between its prices and the now-lower branded drugs has been cut. Now there are more people unemployed and less medicine available. If only government officials in the Philippines had read this book before causing so much needless and predictable suffering.
In "The New Cannery Row", for a second example, Wall Street Journal editors reveal what happened to the tuna industry in American Samoa when our Congress required the U.S. territory to raise its minimum wage from $3.26 an hour to $7.25 an hour by 2015. Well, what do you think happened? Chicken of the Sea closed its plant. StarKist cut more than half its workforce. Thousands were put out of work. The minimum wage hike pushed unemployment from 10% to 30%. Seems workers in Thailand are willing to clean fish for $.75 an hour. Since our Congress failed to grasp this, we get to send $18 million of our taxes to Samoa as compensation. Oops.
Had our Congressmen read Hazlitt's analysis of each occurrence and his predictions for the outcomes of each occurrence under different economic policies they would've understood how raising and lowering the minimum wage affects employment. In fact, the answers to nearly every economic challenge that seems to confound everyone from TV talking heads to Federal Reserve members and the President's team of economic advisors are in this book, quickly and simply laid out for anyone to understand - regardless of a passing grade in Economics 101.
In fact, the policy answers are so obvious that my 10-yr. old, upon noticing the "50th Anniversary Edition" sticker on the cover, was baffled that the world could be in such economic chaos when the answers have been right here for 50 years. He'd thought we were reading a new book -it was unfathomable that most of our political leaders have ignored the obvious for so long while continually throwing money at policies that are proven to fail everywhere they've been implemented.
After reading Economics In One Lesson, it's easy to see through all of the fear and hysteria driving today's pseudo-journalists on the news. I highly recommend Economics In One Lesson. This book needs to be at the top of your reading list.