The only lesson the average person will ever need

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	• Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics Henry Hazlitt Three Rivers Press, 1988 - 218 pages average customer review:based on 113 reviews view larger image
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highly recommended

"Winners" vs. "Losers"

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I must comment that I find the dialogue between hard-line libertarians and hard-line socialists to be very amusing! I mean... libertarians speak as though the game is over and they have "won" in that the correctness of their theory has been fully confirmed.

The ancient Greeks during the period of the Athenian empire were the proponents of the most archetypal (and one of the earliest) forms of democracy. Imagine if, after the Peloponnesian war and the fall of the Athenian empire to a Spartan puppet state, someone had declared that democracy was a failed experiment! The course of history certainly does not bear out that presumption. I hear echoes of this sentiment among the hard-line right wing, who speak as though the entire course of human history has culminated in modern times and has now been vindicated in the form of democracy.

The socialists don't fare any better. The arguments against them are grounded in such common sense and indisputable fact that they scarcely need to be listed. People like to own stuff. Plus, J. M. Keynes still owes me $2... the cheapskate.

The fact is that socialism is an inevitability in a world where the ever-increasing world population renders individual choice more and more meaningless. As powerful as a relatively few individuals may become, those few will always depend on the masses more than vice versa.

Marx and Engels foolishly sought to bypass the democratic/free-enterprise/industrial step in economic development, and in so doing rendered their brand of socialism ineffective and that school of thinking has taken on an air of anachronism. You can't side-step the aformentioned phase in socio-economic development any more than you can side-step learning to add before attempting to multiply! Before the proletariat has any reason to overtake the plutocratic "haves", they must be beaten down and humiliated for generations.

I am personally neither a socialist or libertarian. I am an observer who tends to shy away from systematic doctrine simply because it is useless in explaining such ineffable phenomena as human choice and behaviour. I respect those economists who embrace the chaotic nature of such phenomena and attempt to use them to their advantage.

I just ordered this book from Amazon, and I can't wait to read it! Perhaps the game isn't over just yet.

EDIT: Having read the book many times over now, I have to say I am truly impressed. It is much more unbiased than you might assume. If I could change my rating it would easily get 5 stars.

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A window into Economics

The last comprehensive review for this book was in 2001 and the world has changed considerably since then. Much of the book is a breezy, but substantiated rebuttal of the many flaws in economic polocies. The author makes a very readable case for the removal of tariffs and subsidy crutches for sick industries. But the author pays no attention to human-fallibility factor in ecomonics. The author notes that sick-industries need to die out to provide breathing space for more nascent ones. This, according to the author, is also essential for freeing workers for the new industry. This statement does not say anything about the disruptive nature of this change or the difficulty and time-consuming nature of such a transition. Skills become obsolete in a matter of a few years or even months in the current marketplace and re-learning new skills at a considerably advanced age is no small issue. A basic comprehension of this fact and its treatment is missing from the book, but this is no fault of the author. The book was written in a time when the only major transitions were from the cottage-textile industry to the industrial, and the sunset of the agricultural economy. All said, this book is still the best introduction I've read. Understand the basic concepts as simple parables. The beautiful complexity and nuanced points can be explored later

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The only lesson the average person will ever need

This is the easiest book that the average person can use to grasp economics, and in particular, the economics of all groups of people over an extended time period - ie: government policies.

The book is a single, simple, practical example, followed by a series of examples of how governments break with the lesson and the outcome of doing so. It is a simple lesson, followed by simple examples, for people who have no experience with economics, or those who find the mathematical approach in college either overwhelming or irrelevant.

For the average person, there may not need to be much else one needs to consider when weighing matters of import as a voter.

Some of the reviews that are negative seem to express a dissatisfaction with the structure of the argument as being polemic. But, this is either nonsensical or a misunderstanding. When one wishes to illustrate the impact of a single idea, and the consequences of abusing it, and to do so on a vast scale, against those things which we assume daily to be successful, then one can choose to be Adam Smith, and drag the reader through tortuous detail with which he is unfamiliar, or one can paint broad debates, with which one is quite familiar, and which can be applied to one's daily experiences.

This is simply the strategy one uses to communicate such ideas to a population that requests such an approach. It is not that such ideas cannot be conveyed through more detailed means, or that such a thing has not been done by other authors elsewhere, such as Hayek, Mises and Schumpater.

For those on the left, who are in a long term campaign to destroy individual property rights, and those who deny that there is a necessary ignorance in individuals, groups or institutions, in a complex division of knoweldge, production and labor, this entire line of thinking appears either faulty or disingenuous. But it is not only honest, but true.

For those that think government policy over the past 100 years has been successful, it has been successful in the same way that an inheritance given to a college student, allows the student to spend down the work of his predecessors. Money is not the only capital that must be earned and produced, so is knowledge and especially that knowledge which one cannot gain of one's own accord, but only through the experience of those who came before him. In particular, his family and culture.

It took thousands of years to develop the capital-store of knowledge in European civilization, of which we are a part, and this knowledge resides in very simple ideas that we are surrounded by every day. This knowledge is a set of principles by which we can exist and prosper in an ever-expanding division of knowledge and labor, producing more and more complex goods and services in a larger and larger population, most of whom do not know each other, and who may not even know the end consumer, or what use their goods are put to or why. In a world of this complexity, we are necessarily ignorant, we must face an uncertain and ever changing future.

It is expressly NOT a community of similar people all of whom know each other and share equally in production and it's results - which is the philosophy of a village or tribe. It is a simple primitive economic strategy for use by those who know little, and have few options.

This evolution is the process of making peasants into princes. It is the process of transforming primitive social capitalism, which involves economic units of villages and families -- who do the same thing repeatedly and are certain of it, into modern western capitalism which involves economic units of families and individuals -- who do different things all the time, and are uncertain of everything. It makes all men into entrepreneurs. And in doing so, makes all men service all others, even if he does not know them.

No man who has risen from poverty by building a business through discipline and hard work in the productive economy (versus the political, religious or academic economy - which are consumptive) and who would have his childen do the same, does so without learning this lesson.

When a government prints money or redistributes money, it interferes with the process by which the generations in the population learn those habits traditions, ethics and behaviors that allowed them to raise from one economic strata in the division of knowledge and labor, into another. A loan to start a business is one thing, for it is the same as financing an education. A gift to make your life easier is something else altogether. It is giving a man a fish, not teaching him how to.

This process works from the opposite direction as well. Even charity, which was the material obligation of those who were wealthy before government interference in the economy, and the traditional obligations and social pressure for the wealthy has been eroded.

In the act of redistribution, the goverment indirectly manufactures economic ignorance in it's populace. Hazlitt does not say this directly, but he still says it.

Our economy fell apart in the 1960's and 1970's, with what in the future will be called a great depression of the 1970's. It has been wealthy enough to tolerate this behavior since the 1980's, largely because of technological innovation and the prosperity that came from the competitive need to adopt it. But our position in the world is changing. European redistribution of wealth and social programs is failing now, and will of demographic necessity fail in the next two decades. It will fail here as well. Why such ponzi scheme's are comprehensible to the investment community, and not to the body politic will be a question to answer for sociologists for years to come.

The peasants need to develop trust in one another, need to earn that trust in one another. They need to become comfortable with an uncertain future where they cannot understand all that happens in the vast universe of human cooperation, and to think longer term than their traditions tell them. And they must save. Because the future is uncertain in either case, and the repetitive certainty of the peasant philosophy was always an illusion. The had little to learn and learned little. There was little change and they changed little. They knew those close to them and knew others little. People starved. They died in ignorance and poverty. In a division of knowledge and labor, everything is so cheap, and increasingly so, that they instead, prosper and populations increase accordingly. And the price we all pay for this luxury is constant change, constant learning, and psychological uncertainty.

There are means by which such inter-generational economic knoweldge can be imparted to a population, and by which the people can be compelled to adopt it despite the fact that they do not understand it. One can use religion and social ostricization as did the calvinist protestants and european jews, one can use ideological government by way of force and violence, as did the communists, socialists and facists. These methods remove choice from the individual and prescribe how we should act. But one can also achieve this end by using property rights alone, and a judiciary who does not prescribe anything at all, but only resolves differences in conflict over property, and nothing else is necessary. No politicians, prophets, intellectuals, sages. The population learns to serve on another without direction and prescription. This is the lesson.

This is a conflict between princes and peasants. It is between property rights, individual responsibility for himself, savings, entrepreneurship and courage in the face of uncertainty, versus communal property, perpetual dependence, poverty and the comfort in the certainty of that future.

We can all be princes of countries of one, or peasants in a country of billions. Hazlitt tells us the one lesson we need to know if we would all be princes.

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Best Single Work on Economics

This is a marvelous, easy-to-read, and alarming short book. As I read through the consequences of all the tinkering government has done to our "mixed" economy, I grew increasingly alarmed at governmental intervention in every domain of our lives, both private and economic. As Hazlitt demonstrates in chapter after chapter, too little attention is paid to the long-term consequences of economic and political decisions. Over and over again, special interests get their way over the common good. When government steals from the taxpayer to reward special interests, the consequences are more like dominos than a straight win-lose transaction. It's time we all took long-term consequences into consideration before more damage is done.

Take for example the "energy" bill that, as I write, passed Congress. With more than $10B in "financial incentives," "tax breaks," and "direct subsidies" to oil producers, all this measure does is (1) further increase our dependence on oil, (2) continue our reliance on foreign imports, and (3) further delay the time when alternative fuels are used to replace polluting gases into the environment. What's temporarily good for the oil companies is not good for the rest of us over the long haul. So, this "energy bill" will take $10B out of taxpayers' pockets and line the oil companies pockets so that the cost of gasoline will go down. Does this make sense? We pay either way, obviously.

Take another example: Rent control. I live in a city that has had it for over 20 years. Not one new apartment complex has been built in all those years. Not one! In addition to rent control, the city has imposed a moratorium on houses over three-storeys tall. While population is exploding, housing is scarce and affordable only to the extraordinarily wealthy. Meanwhile, I pay half the rent my neighbor next door pays, but I couldn't afford to "move up" because there are no new apartments to choose from! They also are occupied by "sitters" under rent control. The poor have already moved out, and now there's an exodus of the middle class. San Francisco is only for those under rent control or the very wealthy who can afford million-dollar homes. All because of two policies meant to help the public: (1) Rent control, and (2) building moratoria.

Capitalism, obviously, is not a perfect system, but it certainly is the best system compared to the alternatives. Hazlitt, while showing the deficiencies of the alternatives, does not address some of the crucial problems with capitalism itself. Take for example wealth. The rich capitalist can afford to take risks, while the middle class can't afford much risk at all, and the poor are lucky to survive. How does one break out of the vicious circle of haves and have nots? Otherwise, the rich stay rich, the poor stays poor, and everyone remains financially the same. Only venture capitalists, who already have the money, can offer those who don't some chance of improving their lot. Is this the only way to get ahead?

Even with questions like these unanswered, this is an important book and a critical read for every citizen. We all need to think "ahead" and not just think provincially. We must think of the "domino" consequences of all our temporary fixes. They usually beget more problems than they solve. Hazlitt tackles them all: Public works, taxation, foreign aid and "credit," bureaucracy, spread-the-work schemes, the export-import disputes, tariffs, pricing parity, saving obsolete industries, ignoring the pricing system, stabilizing commodities, minimum wage, inflation, and others. All under 200 easy-to-read pages. Highly recommended.

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reviews: 1, 2, 3, 4, 5, 6, 7, page 8, 9, 10, 11, 12, 13, 14, 15, 16, 17

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