Once you have a good understanding of economics, it’s easy to recognize where government economic policy, economic misconceptions, and economic fallacies arise. But how do you get to that point? Where do you get a good understanding of economic concepts? Most people (myself included) fall victim to economic misconceptions at some point. There is no shame in that, especially considering a wide range of authorities – politicians, media types, teachers, professors, etc. – encourage and promote a distorted view of economics.
The prevalence of entrenched misconceptions is not easily broken. It takes a special communicator to be able to break through the tumult of advocates of unsound economic thought. There are, thankfully, a few special people that have crafted resources so valuable, they have become staples in the economic canon. Henry Hazlitt’s Economics in One Lesson is one of those staples. It is virtually indispensable in terms of the innumerable amount of people it has no doubt helped clarify their understanding of the economic world.
Nine-tenths of the economic fallacies that are working such dreadful harm in the world today are the result of ignoring this lesson. Those fallacies all stem from one of two central fallacies, or both: that of looking only at the immediate consequences of an act or proposal, and that of looking at the consequences only for a particular group to the neglect of other groups.
That lesson is taught in the first chapter. Hazlitt spends the next 22 chapters of his book applying this basic lesson to real-world claims and hypothetical situations destroying fallacies and dispelling myths in the process.
He begins the applications of the lesson by retelling Frederic Bastiat’s classic illustration of the broken window fallacy alluding to the “seen and the unseen” – a perfect example of how someone can believe one action can be an economic benefit if only the immediate effect – and not the full effect – of an action is examined. Hazlitt also ends his applications of the lesson with Bastiat. He uses an illustration of two wealthy brothers, one a “spendthrift” and the other “a prudent man”. The example shows us savings – sometimes thought to be a drag on an economy – is actually necessary for capital production and wealth creation because savings, when invested via banks and other lending institutions, acts as both spending and saving. Spending can only act as spending.
In between the first and the last applications of the lesson, Hazlitt dispenses with some of the most persistent economic misunderstandings including beliefs about tax and tariff policies, minimum wages and other price controls, the effect of technology on jobs, how unions impact wages, and many others.
For over half a century, Hazlitt’s Economics in One Lesson has been a staple in the free-market economist’s canon. If you have not read it, and you want an easy-to-read, clear and concise primer on a proper understanding of economics, it’s hard to find a better book to recommend. If you don’t have a copy. I suggest getting two. One to keep on hand for your own reference, and one to pass around to your friends. You’re going to want to share this great piece of economic literature!