Economics in One Lesson

Rating:
Summary: Best intro to economics ever written.
Review: I have read at least 5 of the newer intro to economics books around and this classic is still the best. It is just barely 200+ pages with big easy to read letters, in one weekend this book can transform you from average ignorant american to inspired concerned citizen. The chapter on inflation was worth the price of the book by itself . I have noticed how the reviews for this book have increased dramatically over the last 6 months. It is happening, something wonderfull is about to happen...

Rating:
Summary: In Response to David Willis and SnappyCrabs reviews
Review: Reviewer David Willis' attempts to rebuke Hazlitts point about tearing down factories and SnappyCrab's attempt to revive the broken window fallacy may come off as looking intelligent, but most certainly are not.

Willis writes.

"Hazlitt mentions that if it were productive for a society to have its factories destroyed by war, then all factory owners would destroy their factories. But this is not so. In the real world, there are costs to tear down plants - and these are generally borne by the factory owners. If those same plants were destroyed by external forces, those costs are borne by others. We'll use a simple analogy to stay on Hazlitt's level. Suppose a man owns a factory that produces net present value profits of $1000. Suppose that he could build a new factory that would earn NPV profits of $1200 on the same land. But the costs for tearing down the old factory would be $300. He won't do it. But if the factory were destroyed by external forces, then he no longer has to pay the $300. Now, he will build the new factory. Those costs to destroy the factory may in fact be borne by others, but that is irrelevant to the point. Hazlitt ignores the costs associated with tearing down the plant altogether, and therefore reaches an erroneous conclusion. And so it goes."

Hopefully, this was a result of sloppy thinking and not deliberate ledgerdemain. Willis accurately restates Hazlitts condition of the destruction of plants being beneficial to society at large, but then "debunks" a completely different condition, a straw man that he fabricates.

There is a significant difference between the conversion of certain factories being productive for society, and the productive capacity of a new factory exceeding that of the old one. The difference is precisely the conversion costs that Willis is so adamant about.

Lets use Willis' example to illustrate this point.

Lets assume that the Discounted marginal value product (the illusory terms of "NPV" and "cost to tear down" will be replaced with DMVP and conversion costs, while still retaining the exact meaning) of a present factory is 1000. A possible new factory that can be built is 1200, and the opportunity cost for conversion is 300.

Tearing down the factory will not, as willis correctly states, be profitable for the factory owner. However, it won't be beneficial for society either. If the conversion costs are externalized to society, and they must be borne by someone, society still nets a loss.

This situation obviously does not meet Hazlitt's original condition.

Now, on to snappythecrab's unbeleivably fallacious review.

His review is inherently flawed becuase every single point he makes relies on the assumption that Keynes is correct. But lets look at what I think he is saying.

If the Baker must spend money on repairing his window that he would have on a suit, the resulting situation is definitely negative. We may certainly say, which was actually what Bastiat was attempting to point out, that the Suit makers lost gain is off set by the windowmakers gain, but in the AGGREGATE (perhaps this will catch the Keynesian's eyes), society loses.

Why? Because the baker loses. He now only has a window when he could have had a window AND a suit.

Rating:
Summary: Definitely a great primer!
Review: If you are even remotely interested in what can be a sometimes boring and usually complex subject, this is a fantantistic introduction. Sure, there are going to be those who point out it's fallacies but the book was written more for the laymen, not graduate studies. Readable and concise.

Rating:
Summary: The criticisms of this book are flawed
Review: Rather than explaining why this is a good book (other revierw's do that), I'll explain why some of the idiotic criticisms levied against this book are wrong.

The most silly criticism of Hazlitt (and other Austrian free-market economists) is that they aren't "scientific" and in short "don't use enough math". This is an absurd criticism. Firstly, human beings are not deterministic particles who's behaviour can be predicted by simple equations. Any attempt to reduce human behaviour to some mathematical equation is pure non-sense. We must consider human beings as individual entities who can choose, not fixed constants in mathematical formuli.

Secondly, there is a mathematics that is relevant to Austrians. It is chaos theory and network theory. Chaos theory is currently used to predict the weather. The calculus used by Keynes and other idiots like him is completely useless for describing the behaviour of chaotic systems where individual choice is involved. Hazlitt may not mention Chaos Theory. For that, see Murray N. Rothbard, "Choas Theory: Destroying Mathematics from Within?"; and Gene Callahan, "Why Austrians Should Care About Network Science". Anyone with any sympathy for Keynes and his idiotic followers should note that Keynes put forth a "treatise" before General Theory, which was demolished by Hayek. Hayek then made a strategical mistake in not demolishing General Theory, feeling that the book's idiocy stood for itself. Also note that while Hayek recieved a Nobel Prize for work which was basically an extension of Mises business cycle theory (Mises died the year before Hayek's Nobel), Keynes received no Nobel, showing that even the dimwits awarding that title realized Keynes work was inherently worthless.

The next criticism is related to the first: that Hazlitt doesn't discuss game theory. The reason for this is that game theory is particularly unworthy of discussion. Nash, founder of Game Theory, showed that in any finite game, there's an equilibrium in which no player can improve his or her outcome given the other player's strategies (the Nash Equilibrium). This is problematic in several ways. Firstly, there is absolutely no relation between the playing of games (which are less than net-zero, with one winner and one or more losers) and economics. Secondly, only Game Therorists behave in real situations in the ways in which Game Theory predicts. Thirdly, strategies are not data, but choices. Fourth, it is possible to break out of the specified game to achieve a superior result.

One particularly ignorant reviewer says that in a completely unhampered free market, monopolies form, destroying competition. This is non-sense. Empirically, Ancient Ireland was a completely Stateless society for a thousand years, with a completely unhampered free market, and no-such thing occured. And of course it is a bunch of non-sense that can't happen in reality anyeways. A monopoly is only harmful if you have monopoly prices. But in a completely free market, even if someone obtains 100% of all (say) rail-roads, there is still competition between that form of transportation and other forms, thus monopoly prices cannot be charged. The only time real monopolies with monopoly pricing have emerged is because of State interference.

This may not be the best book on economics that you can read (look to Mises' "Human Action" for what is most likely the strongest treatise on "economics" [actually praxeology, a much larger field]) ever written.

Rating:
Summary: An essential look at introductory economics
Review: "The whole of economics... can be reduced to a single sentence. 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."

So begins the brilliant and controversial work of Henry Hazlitt. As it is not the purpose of this forum to debate economic theory, let me simply suggest that you obtain this book and draw your own conclusions from it. The richer understanding of trade policy, taxes and tariffs, and government regulation you will obtain from spending a lazy afternoon with this book will provide more long-term value than its price... in short, buying Economics in One Lesson is sound fiscal policy.

Rating:
Summary: A Simple Book for the Simple Man
Review: I am not a giant fan of Hazlitt's works, however I will say that EIOL is very simply and succinctly written. However his criticism of the unnamed "brilliant economists"(p. 28)- read: Keynes-is certainly baseless and an attempt to debase another economist's (though I struggle to put Hazlitt in such a class) work for the reason that their works are difficult to read is quite contemptible. Are the works of Shakespeare less valuable, less brilliant because they are not easily interpreted by the average man? I think not, and it is from whence which we are lead to the largest, if not only, redeeming quality of EIOL: it is easy to read. A simple book by and for the simple man. True economics is fare more complicated that Hazlitt would have the reader believe, and despite what others might say, is fairly math intensive. However, I digress...

EIOL, as such, a fallacious title, begins with what is a brief comment on economic theory and policy. However, as he sums up his point by saying that "The art of economics consists of looking not merely at the immediate but at the longer effects of any act or policy; it consists of tracing the consequences of that policy not merely for one group, but for all groups."(p. 17) All right folks, that's it. There is your one lesson. Go forth and spread the word. Those who are not versed in the study of economics I'm sure may arrive at the conclusion that this is something new, somehow ground breaking. However to anybody who is well-read in economics, to those who are a student of this subject, this seems to be, and is, nothing more than a pointing out of the obvious. Thanks for letting us know though, Henry. I thought all that stuff about the long run, short run, micro and macro economics was all fiction. Glad he told us.

One could write an entire book refuting that which Hazlitt postulates, pointing out the errors, miscues, and theory which Hazlitt left out. I'm sure it was a mistake. Really. I am. I will note a few lines here, adding to that which has already been said by like-minded reviewers.

Hazlitt ultimately ignores aggregate demand in chapters 2 & 3. Did he not say that we were supposed to be examining this with the perspective of "all groups" in mind? Furthermore, he attempts to use chapter 2, an examination into microeconomics, and apply it to aggregates and macroeconomic situations. Economists have long learned that this is not feasible. In the broken window example Hazlitt has us assume, only for the
reason, we can suspect, to illustrate his point, that the Baker in question will spend the $250 on a suit. However, what fails to mention is that the possibility of savings exists. Had the Baker been planning to save the money, Hazlitt would struggle to make his point.

In chapter 3, Hazlitt again ignores aggregate demand, but also the consumption function, and goes on to assume full employment, which is again, a special case which cannot be applied to the whole. In a number of instances he contradicts himself, though this is not limited to chapter 3. It would be a waste of time here to list all of them, however, consider the following: if the destruction of a building is a harm to all of those in a community (p. 28), and no demand is created, and more importantly, lost, where then is the harm? If my $250 which I would have spent a spent on a suit now goes to repairing my house, how then does the demand of the community suffer? Again on 28, when examining the farmer, can his demand not be greater, or less, than the available quantity of wheat he is able to supply? Could the demand on wheat not be less or greater than that which the farmer is able to supply? But we are supposed to believe that supply is equal to demand? I think not. On the subject of contradictions, returning to Lesson 1 for a second, Hazlitt criticizes the "terms of abuse" (p. 19), but uses the term "new economics", as his favorite whipping boy, falling into the same trap with which he assumes he has ensnared Keynesian economists. He blindly rejects all of Keynesian, or "new economic" theory, not crediting its merits or following reasoning. For shame, Henry. For shame.

Students of economics do not read this book because it holds little value...except perhaps in showing how to present a poor argument. Hazlitt is guilty of employing reactionary "reasoning" to that of Keynesian theory, as noted by the multiple insults and jabs at Keynes and his followers, though he oft fails call them as such. This book makes some interesting, bordering on valid, points at times, however the degree to which it fails far outweighs the benefits. Readers of this book who are not economics students should not that this is certainly note the end-all and be-all of economic works or theory, and that every work on economics will be flawed to some degree. Economics students who reject Keynesian theory, read "The Failure of the New Economics: An Analysis of the Keynsian Fallacies" by Hazlitt. You need to read it with The General Theory though.

In closing, somebody suggested putting this book in your bathroom. I'd suggest that too, though I suspect our reasoning behind doing so might be different.

Rating:
Summary: Fatally flawed, but a useful guide to free market fallacies
Review: OK - no "ad hominems" here. One bitter reviewer mentions that many of the "one star" reviewers don't discuss content. But several do. And many of the "five star" reviewers don't discuss content either. So let's stick to the issue - is this a "good" book?

Two major positives for Hazlitt: First, he writes well. His prose is usually easy to understand, and he takes pains to create simple models and analogies for the reader. Second, he elucidates most of the arguments put forth by "free market" apologists, so if you want to know how these people think, this is a great place to get started.

The negatives...ah, where to begin?
1.) The simplicity of his models and analogies is of course the greatest flaw. The real world is never as simple as Hazlitt suggests it is. Even the classic (and flawed) broken window analogy is a dramatic oversimplification. And even the most extreme positions that he takes are flawed. FOr example, at one point, Hazlitt mentions that if it were productive for a society to have its factories destroyed by war, then all factory owners would destroy their factories. But this is not so. In the real world, there are costs to tear down plants - and these are generally borne by the factory owners. If those same plants were destroyed by external forces, those costs are borne by others. We'll use a simple analogy to stay on Hazlitt's level. Suppose a man owns a factory that produces net present value profits of $1000. Suppose that he could build a new factory that would earn NPV profits of $1200 on the same land. But the costs for tearing down the old factory would be $300. He won't do it. But if the factory were destroyed by external forces, then he no longer has to pay the $300. Now, he will build the new factory. Those costs to destroy the factory may in fact be borne by others, but that is irrelevant to the point. Hazlitt ignores the costs associated with tearing down the plant altogether, and therefore reaches an erroneous conclusion. And so it goes.

2.) As another reviewer notes, Hazlitt also conveniently ignores all of the following: externalities, public goods, frictions in labor markets, game theory (especially relevant in discussing tariff policy), monopolies and oligopolies, etc. In short, his reasoning is completely circular: if you assume away all of the real world complications that gave rise to various regulations and welfare policies, then OF COURSE you are going to conclude that those regulations and policies are unnecessary and destructive. Rather than being used for economics 101, Hazlitt's book should taught as a primer in logic 101 - he makes all of the classic mistakes.

3.) Hazlitt does not deal at all with the horribly destructive economic beast that is the modern corporation. Kudos to the one pro-Hazlitt reviewer that pointed this out (and see his review for more detail). But the point for readers to understand is that Hazlitt, by wanting to end all government intervention,implicitly gives even more power to the corporations. This is not Adam Smith's small-farmer, local-shop-owner economics. Multi-national corporate economics is a far different game, requiring a far different set of rules.

There are other problems as well. Read Hazlitt for a thorough grounding in the fallacies of the libertarians, think through his arguments for yourself and you'll soon find yourself refuting almost every conclusion that he reaches. Then you'll be well poised to do battle with your closest misguided Republican friends, not to mention the truly bizarre followers of Ayn Rand.

Rating:
Summary: Very clear, well argued, and timeless economics lesson
Review: Hazlitt has a gift for clarity. His arguments simply cannot be misunderstood. With nearly unassailable logic he explains the subtle economic implications of many government policies in terms the simplest novice can follow. This is an awesome book for any reader.

This book was not at all what I expected when I ordered it. I expected a textbook like approach to all the classic concepts of economics (supply/demand curves, law of diminishing returns, effects of shortages/gluts on prices, etc.) Instead, Hazlitt simply states that true economics involves tracing both the seen and unseen consequences of each action or policy. This is primarily a book about government policy in economics, but it scope reaches to every choice we make with regard to the economic well-being of our nation.

I had many 'Ah ha!' moments while reading this book. I felt I had a fairly good grasp on many economic prinicples after reading Skousen's 'The Making of Modern Economics', but Hazlitt has a way of crystalizing thoughts that are still fuzzy. One thing that comes through consistently is how money confuses and distracts people from a true understanding of wealth. Money is not wealth. True physical wealth lies in the products (goods and services) you have or can afford to buy. The wealth of a nation lies in the aggregate products it produces. If you want economic prosperity, increase production. Not senseless production, but production of things people actually want. When all is said and done, money is just the "medium of exchange". Ultimately, all products are paid for by other products.

Despite my high regard for this book, at times it dragged. Many topics are similar, and it seemed at times repetitive to go over the same ground again.

I wish every American (especially politicians and aspiring politicians) would read this book.

Rating:
Summary: Easy to Read; Right on the Money
Review: This should be required reading for every high school student. its easy to read, but right on the money. The clarity of the book belies its depth and accuracy. Hazlitt has written a wondrous book about the true nature of people and money, and how things should work.

Rating:
Summary: economics for non-economists.
Review: In fact, I think most economists need to read Hazlitt's classic too. And if they've already read it...they should read it again, because I think quite a few of them need to be reminded of some simple truths.

I am a graduate economics student and I have trudged through extremely technical economic literature in my time. Most leading economists these days become hyperspecialized and esoteric in some paltry technical issue to the point where their work is practically useless to the average person. This is a very terrible thing. Because knowledge of economics is so crucially important to our understanding of human behavior and the world, I think it *should* be accessible to more people. For this reason, I am always on the lookout for books that help people understand economics easily. That way, we can have a much better world.

I have found few books better for the beginner than _Economics in One Lesson_. Henry Hazlitt's book here is very highly regarded and for good reason: it's an excellent, simple look at economic issues that teaches an important lesson. That lesson? That good economics entails looking at the long-term effects of economic policies on *everyone*, rather than the short-term effects on one group. With this, we can see that when the government intervenes in the economy, there are always consequences that not immediately evident.

Although the book was originally published in 1946, the topics covered by Hazlitt are pertinent and explore issues that still confront us more than 50 years later. Topics include inflation, tariffs, taxation, price fixing, labor unions, savings, the importance of profits, rent control, and more. Hazlitt writes well and doesn't obfuscate the truths of matters with cumbersome graphs and math.

Please ignore James McDuffie's fatuous review. Most of the "implicit assumptions" Hazlitt makes are unassailable facts of reality established a priori. (Except for the assumption that government can be the *only* provider of some services, like roads, "health officers," police, etc.) Also, mathematics is all but useless in economics. The Keynesian paradigm no longer deserves any serious attention since it has been so thoroughly refuted a hundred thousand times over. Inflation as being beneficial to the economy is a fallacy that is easily destroyed by someone with a basic knowledge of money & credit theory. Alan Greenspan a free market proponent? That's ridiculous -- he definitely was 40 years ago but he has since become anathema to the economic prosperity. In fact he's probably the most destructive Federal Reserve Chairman in history.

Pick up this book and Gene Callahan's _Economics for Real People_ and you'll probably have a better economic education than you will find with any undergraduate degree in neoclassical economics. I'm serious.