Title & Author: Economics in One Lesson by Henry Hazlitt
My Rating: 7.5
Henry Hazlitt (1894-1993) was an Austrian-school economist who wrote widley for American publications including The Wall Street Journal and The New York Times. He published this book in 1946 and was heavily inspired by Frédéric Bastiat's essay, "What is seen and what is not seen."
According to Hazlitt, economics is the science of studying secondary consequences and seeing general consequences, not just immediate or limited benefits on a single group. Many of the logical fallacies that arise in economics are due to people falling to take into account the whole picture and instead focusing only on the immediate winners and losers. "If we try to run the economy for the benefit of a single group or class, we shall injure or destroy all groups, including the members of the very class for whose benefit we have been trying to run it. We must run the economy for everybody." (139)
Hazlitt addresses many arguments that are still with us, despite the decades that have passed since he wrote this book. One such argument is that the government is able to create jobs and that government loans are helpful to the economy. Hazlitt deftly puts this down. He explains that it is easy for proponents of government expenditure to point to bridges or housing projects that are built with federal funds (i.e. taxes), but one must remember that for every dollar the government spends, the citizens who are taxed have a dollar less to spend on what they would prefer. At best, government spending simply shifts were money is spent. At worst, wealth is destroyed as the government spends recklessly on unnecessary projects simply to "create jobs."
Government loans or grants are also destructive because government bureaucrats are less careful with investments because they have no personal risk or stake in the investment. Thus, rather than worrying about a return on investment and ensuring the people they loan to are worthy for such a grant, they invest poorly and recklessly with tax payers money.
In regard to minimum wage, which has been a hot topic lately, Hazlitt comes down against mandatory minimum wage laws. He says that the first thing that happens when such a law is passed is that workers who are not worth the specified minimum will be unemployed. "You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn." (116)
The argument that higher wages can be accommodated by simply raising prices is not always true. A higher price for the product or service produced may not be possible because it may just cause consumers to buy something else. Or, if consumers to continue to buy the product or service, they will buy less of it. Simply put, "there is no escape from the conclusion that the minimum wage will increase unemployment." The best way to raise workers wages is increase labor productivity through innovations, improvements, efficient management, or more industriousness from workers. "Real wages come out of production, not out of government decrees." (119) He also argues that, "We cannot distribute more wealth than is created. We cannot in the long run pay labor as a whole more than it produces." (118)
Politicians will also often argue that a certain industry (e.g. corn ethanol) require or deserve subsidies. Hazlitt points out, "What is forgotten is that subsidies are paid for by someone, and that no method has been discovered by which the community gets something for nothing." (109) This point is applicable to all government functions. Every dollar government spends is a dollar taken from the people and not spent in some other way. While one industry may benefit from government money, like corn farmers do with subsidies for ethanol, other industries suffer.
In regard to prices, wages, and profits, Hazlitt says, "The best prices are not the highest prices, but the prices that encourage the largest volume of production and the largest volume of sales. The best wage rates for labor are not the highest wage rates, but the wage rates that permit full production, full employment, and the largest sustained payrolls. The best profits, from the standpoint not only of industry but of labor, are not the lowest profits, but the profits that encourage most people to become employers or to provide more employment than before." (139) Thus, we should stop demonizing profits and instead recognize that profits help create more production, and, as Hazlitt repeatedly state, production is the key to real wealth and prosperity.
Hazlitt also discusses how government policy seems to assume that production will continue on no matter what is done to discourage it. One of the biggest limiters of people taking risks and investing capital in starting businesses or hiring new employees is if there is a limited profit potential, such as when the government fixes the price of goods or services or excessively taxes. He states, "The indignation shown by many people today at the mention of the very word 'profits' indicates how little understanding there is of the vital function that profits play in our economy." (141) So true.
When speaking of inflation, Hazlitt observes that the "oldest and most stubborn error on which the appeal of inflation rests is that of confusing 'money' with wealth." (146) Wealth, he explains, is actually made of that which is produced and consumed, i.e. actual services and goods, not paper money. But, because of this confusion, many think that in order to solve our economic woes, all the government has to do is print more money and everyone will then be wealthier. That is a very naïve assumption based on the confusion between money and wealth. Any substantial increase in the quantity of money will of course reduce the purchasing power of each dollar through increased prices and make people, in real terms, less wealthy. "Like every other tax, inflation acts to determine the individual and business policies we are all forced to follow. It discourages all prudence and thrift. It encourages squandering, gambling, reckless waste of all kinds. It often makes it more profitable to speculate than to produce. It tears apart the whole fabric of stable economic relationships." (157)
In sum, I loved this quote speaking of how people are always willing to spend other people's money on things they think are just and good, an act Hazlitt calls "vicarious generosity." "It is C (the middle class, the tax payer, the worker, etc), the Forgotten Man, who is always called upon to stanch the politician's bleeding heart by paying for his vicarious generosity." (179)
You can read my review of Economics in One Lesson here.
“And you owe it to yourself to fight to keep your freedom.”
--From the afterword to The Puppet Masters by Robert A. Heinlein, written by Sarah A. Hoyt
Wednesday, April 20, 2016
Completed: 15 April 2016
Summary & Review:
Economist Henry Hazlitt presents the classical/Austrian economic answers to topics such as inflation, union labor, minimum wage, price fixing, and deficit spending in this short, accessible book. One of the key points in economics, according to Hazlitt, is to ensure that the problem is seen as a whole, and not in fragments "for many things that seem to be true when we concentrate on a single economic group are seen to be illusions when the interests of everyone, as consumer no less than as producer, are considered." (183)
I was able to read this book via a free PDF download from the Mises.org website. Hazlitt very deftly dismantled arguments that are still heard today regarding minimum wage and government monetary policy, among other things. This book was written shortly after the end of World War II in the 1940s, more than 70 years ago, but the same fallacies are still being promoted today. I'll post a longer "Arguments Summed Up" post in a couple weeks to more fully present Hazlitt's excellent points.
Wednesday, April 13, 2016
Genre: Nonfiction—History & Art History
Completed: 3 April 2016
Summary & Review:
During the Second World War, the Nazi leaders of Germany conducting a continent-wide pillaging operation that captured the artistic and cultural treasures of Europe. Coupled with the fact that major ground battles were taking place among the architectural treasures of Western Civilization, the need to protect the cultural patrimony of Europe and the West was pushed by a small group of American and British scholars, curators, and artists. These pioneers formed the backbone of the Monuments, Fine Art, and Archives section of the US Army and were imbedded with the combat units to protect, find, and return the artistic masterpieces the Nazis had stolen.
This book is right up my alley—the Army, Europe, art history, etc.—so I really thought I would have liked it better. Edsel and Witter’s writing style just wasn’t to my liking, especially early on in the book. The narrative thread was very strange and would make random jumps between events and people. It took me a long time to really get into the book, but by the last 150 pages or so I was more into it. Thankfully, the true story presented in the book was enough to keep me reading. In fact, despite not being to keen on Edsel’s style, I think I’ll probably still read his Saving Italy about the Monuments Men’s work in Italy during the war.
Wednesday, April 6, 2016
Genre: Fiction—Historical Fiction
Completed: 2 April 2016
Summary & Review:
When the warrior Dane Ragnar invades Mercia, Queen Æthelflaed turns to Uhtred of Bebbanburg to defend Mercia and the other Saxon kingdoms in Great Britain. After striking a severe blow against Ragnar, Uhtred learns his daughter is under siege in Ireland and goes to save her against the Queen’s wishes. In Ireland, however, Uhtred is able to convince Ragnar’s brother to return to Britain and help cleanse the land of the Ragnar invasion.
I recently watched the BBC America series The Last Kingdom and really enjoyed it so I thought I would start reading the books that inspired the series. Paige was nice enough to get me this one for Valentine’s Day. Thanks, love! While this is the ninth book in the series, so much time has passed since the events depicted in the television series that reading this out of order didn’t really spoil anything.
Bernard Cornwell is a pretty prolific author, but this is the first book of his I’ve read. It will not be the last, however. I loved the historical details included in the story and the action was suspenseful and entertaining.
Wednesday, March 23, 2016
Genre: Fiction—Science Fiction
Completed: 20 March 2016
Summary & Review:
When an emergency departure from Mars goes wrong, botanist and engineer Mark Watney is left for dead alone on Mars. Coming to, he realizes he can either give up and die or dig in and survive in the most inhospitable environment any human has ever been in. Eventually, he is able to reestablish contact with Earth and a courageous and incredibly risky plan is hatched to save the lone astronaut.
Paige and I saw the movie adaptation of this book in theaters on post here in Grafenwöhr a while back and really enjoyed it. We weren’t expecting it to be so funny and entertaining, but it was. So, when Paige was traveling home from the States she picked up the book at CDG airport in France, read it, and recommended I read it too, so I did. Whatever Paige wants, Paige gets :). As I told her, the fact that both the movie and book exist had the synergistic effect of simultaneously making both better. I like the movie more now after reading the book as I saw how true they stayed to the novel and how well they brought the action and story to life, and I liked the book more as I read it than I otherwise would have without the movie because I was able to remember the scenes from the film as I read them and could really picture the environment, drama, and technical mumbo jumbo. I can’t say how much I would have liked the book without the movie, but who cares? With the movie, it was a fun book that I really enjoyed reading.
Wednesday, March 16, 2016
Genre: Nonfiction--Health & Fitness
Completed: 10 March 2016
Summary & Review:
This guide to strength training covers all aspects of the activity. It begins with an explanation of the principles behind strength training including nutrition, training physiology and psychology, and planning. The next section is a fairly comprehensive guide including illustrations and step-by-step instruction of exercises for all the major muscle groups. Finally, the third section presents specialized training programs to meet various needs including sport-specific regimens.
I've never been much of a weight lifter, but I decided to start including it more in my workout to break up the monotony of running and other cardio. This was a pretty highly rated guide on Amazon so I thought I'd try it out. It was very clear, concise yet comprehensive, and easy to read. The workout plans included at the end seem good so I am pretty happy with the guidebook overall.
Wednesday, March 9, 2016
Genre: Nonfiction—Travel & Entertainment
Completed: 5 March 2016
Summary & Review:
The Leavesden studios where over the course of ten years the eight Harry Potter films were made are now an attraction for all Potterphiles. The sound stages preserve set pieces, costumes, props, and more for fans of the books and films to see and experience. This short book is the official guide to the tour and includes pictures of many of the items displayed as well as supplemental information about the tour and movies.
Paige and I just got back from an early anniversary trip to London. So, what did we do as two full-grown adults on a trip without our children? Went to Harry Potter studios, of course! We absolutely loved the tour. It was fun to see so many of the items from the movies, especially the intact Dumbledore’s office set, actual props from the movies, and some of the cool animatronics used. I’m glad we got this guide so we can flip through and remember the fun experience.
Rating: Tour: 10.0 // Book: 7.0