Economics in One Lesson by Henry Hazlitt

The study of economics has been essentially abandoned at public high schools in America, and based on what they are teaching in the field at public universities, we can probably be grateful they have delayed the “instruction”. No social science or scholastic discipline is more woefully misunderstood in contemporary academia than economics, and all indicators are that this problem is getting progressively worse, not better. Out of the library full of books on economics that I have read, and out of the dozens that I could heartily recommend, no book is more profoundly important than Henry Hazlitt’s 1946 masterpiece, Economics in One Lesson.

What modern readers will immediately detect is that the book must have been written by someone with a crystal ball, if it were really written in 1946. Indeed, while Hazlitt was busy critiquing the post-war economic nonsense coming from New Deal Democrats in the states and Keynesian elites across the Atlantic, the book reads as if it were written to address the needs of our generation. How little we learn, and yet how accurate his treatise proved to be!

The underlying theme of the book is that all bad economics amounts to some version of the “broken-window” fallacy. A hoodlum throws a brick throw the window of the town bakery, and a handful of on-lookers comment how good this will be for the economy, because the baker will have to hire the glazer to repair the glass, and this will lead to economic growth and activity, etc. As reasonable readers would reply, the on-lookers fallacy is that they fail to understand that the funds the baker is now giving the glazer to repair his glass window are funds he would have bought a suit with, and funds that the tailor who sold the suit would have used to buy other goods and services, etc. What was good for one group (the glazer), was not good for the others (the baker, who is now without a new suit, and the tailor, who is without the money he would have made from selling the new suit). This fallacy can be illustrated in countless ways, but what Hazlitt does from the outset of this book is elaborate upon this fallacy, and use it as foundational wisdom throughout the book. As the book rigorously tears apart such economic failures as rent controls, minimum wage laws, price controls, and trade protectionism, he eloquently demonstrates how each and every one of these policy horrors are really just rehashed illustrations of the “broken window fallacy”. As Hazlitt so perfectly summarizes, all bad economics essentially is “looking only at the immediate consequences of an act or proposal, and looking at the consequences only for a particular group to the neglect of other groups”.

I am amazed every time I re-read this gem at how needed its message continues to be through time. The trade protectionism rhetoric (and job protectionism rhetoric as well) of the last ten years has been appalling (from both the left, and sadly even pockets on the right, such as Pat Buchannan, Duncan Hunter, etc.). Hazlitt intellectually explained sixty years ago that to look at what is bad for factory workers, while ignoring what is good for consumers, or good for shareholders, is bad economics. The heated debates we currently engage in on national health care were academically satisfied in Hazlitt’s work decades ago, yet our debate rages on. I can not understate my contention that parents and educators who value the free market, yet struggle to locate a book to summarize its basic value and mechanics, need to embrace this work. It is the economic summary work for any interested student of economics.

The book of Ecclesiastes says that “there is nothing new under the sun”. If the economic masterpiece, Economics in One Lesson, does anything at all, it reinforces that ancient truth in a profound way.|