Review: ‘Economics in One Lesson: The Shortest & Surest Way to Understand Basic Economics’ by Henry Hazlitt

Hazlitt,?H.?(1946).?Economics in one lesson: The Shortest and Surest Way to Understand Basic Economics,?Harper & Bros.        

Frederic Bastiat, one of the most fervent advocators of ‘liberty’, in his 1848 essay, stated that “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else” (Frédéric Bastiat & De, 1995). Drawing inspiration from such a classical case of assertion from the libertarian-conservative school of thought in economics, ‘Economics in One Lesson: The Shortest & Surest Way to Understand Basic Economics’ by Henry Hazlitt is a rigorous work against the ideals of government interventionism in the market economy. Whether one agrees with the ideals or not, Mr Hazlitt has presented with a classical rendition in the study of economics that revolves around the central theme of his definition of economics:

“The art of economics consists in looking not merely at the immediate hut 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”.

Calling his work “an analysis of economic fallacies”, the author believes that economics is ‘haunted’ by more misleading arguments than any other study known to humans. While in support of this thesis, the author makes an apparent attack on the ideals of Keynes and Hansen, whose primary emphasis only lies within the domains of short-run effects and the effects on limited socio-politico-economical groups. It is of the belief of the author that the evidence of blunders in economics does not always occur immediately, and it would take years to decades to showcase the disastrous delusions of short-term economic policies. While this argument of long-term, generalised consequences of the author can sometimes be critiqued by claims such as “long term impact is a summation of a series of various short term impacts as a ‘causal loop’”, it is of Mr Hazlitt’s conviction that such an idea flourishes predominantly due to the inability to trace through the policy measures from their immediate impact to much-generalised consequences at the ultimate.

With an excellent presentation of a series of ‘fallacies’ in twenty-three chapters ranging from the broken window fallacy to the theory of over saving, what he calls an ‘assault’ on saving, his primary thematic establishment lies within two very basic principles, in layperson: one cannot get something for nothing, and one cannot pay X without robbing Y. On that note, the author develops a short yet well-developed synopsis on government interventionism with consideration that ‘unnecessary’ governmental public work programs such as credit extension, parity prices, internal tariffs, minimum wages, price-fixing and other free-price economy interventions are nothing but mere aids to a minimal group as a short term policy at the expense of a larger society which will increase the difficulties in the long-run.

While refuting the arguments of any theorist of ‘purchasing power’, the author claims that the demand for products from an industry comes not through the workers alone but through various stakeholders of the generated income. Thus, an increased command over the products from one definite group will proportionately reduce the purchasing ability of others. Furthermore, on ‘rising real wages’, he argues that the union policy of compartmentalising production processes and restricting output tends to reduce the total productivity of the community, and hence, a real rise in wages can occur only through an overall improvement in technology and efficiency in the usage of all available resources. This argument has been evidently sufficed in the nineteenth chapter of his book, ‘Do Unions Really Raise Wages?’:

“But it is easy, as experience has proved, for unions, particularly with the help of one-sided labour legislation which puts compulsions solely on employers, to go beyond their legitimate functions, to act irresponsibly, and to embrace shortsighted and antisocial policies. They do this, for example, whenever they seek to fix the wages of their members above their real market worth. Such an attempt always brings about unemployment. The arrangement can be made to stick, in fact, only by some form of intimidation or coercion.”

While the detailed proposition of the author to set the goal of economics to see problems as a whole and not in fragments is almost irrefutable in the case of an economy where the resources are utilised productively with very minimal unemployment, it does not provide a detailed analysis in cases such as the Indian context where the economy usually runs below capacity and the government spending on public works, which are either taxed or borrowed, are politically driven on the lines of appeasement and usually diverts funds from more productive areas to less productive areas. However, looking at the scope of arguments in the book, it could be highly efficient for the economy of India and its states to set an impermeable target in the long run to establish an economy that drives its scope much beyond political appeasements by its political masters in and out the government.

‘Economics in One Lesson’ is a smooth-flowing, persuasive work moulded in an over-simplified way to trigger the ‘common-sense’ of its readers towards the fundamental problems while slightly moving away from the much complex realities of miscellaneous socio-political backgrounds of people.

Bibliography

1.??????Frédéric Bastiat, & De, G. B. (1995). Selected essays on political economy. Foundation For Economic Education.