This book holds a vaunted status amongst libertarians. Not only does it live up to its reputation, it’s a damn shame that this isn’t the go-to text for anyone seeking a rational and clear-headed approach to economics.
Hazlitt builds his case by taking the central fallacy found throughout mainstream economics. This fallacy was famously revealed in the Frédéric Bastiat parable, That Which is Seen and That Which is Unseen, and he proceeds to apply it to each realm of economic life. By applying this logic, he demonstrates how the various manifestations of government intervention destroy wealth, savings, and positive incentives to work and produce.
Stated very simply, the lesson is this: the effects of economic policy cannot be evaluated in terms of its effects on one group, but on all groups.
Not only do these fallacies persist, but they are accumulating strength and being accorded cultish deference.
Hazlitt covers all the bases in his analysis. He opens with the one-two punch of the fallacy of destruction followed by a withering exposé of the production disincentives resulting from taxes. Hazlitt runs a steamroller of truth over every conceivable government policy initiative and deformation. The effects of automation, subsidies, loan guarantees, tariffs, trade quotas, industrial policy, price fixing, rent control, minimum wage, and inflation are all explored.
The opening chapter exposes the perverse obsession with destruction as an economic incentive that persists to this day. One only needs to peruse the pages of Rolling Stone to find this doctrine in the insufferable moronic blathering of Jesse Myerson. He openly praises rioting as some kind of economic boon and mutates the broken windows fallacy into an ugly article of faith.
The chapter pertaining to the rise of automation is particularly fascinating since fantasies of a “post-labor” economy are gaining traction in the media. The widespread belief of the imminent arrival of a world in which robots displace human labor hinges on the assumption that there is a finite amount of work to be done in the first place. Or perhaps the public fails to grasp the role price floors on labor may have played in hastening the creation of the automation in the first place. Either way, the belief of a Star Trek-like world of plenitude has taken root.
On the issue of free trade, Hazlitt argues that people are correct to be suspicious of free trade agreements like the TPP and NAFTA, but are mistaken to attribute any benevolence to the very idea of a managed trade agreement in the first place. Especially if it’s cloaked in gauzy rhetoric about workers and the environment.
Just what the government planners mean by free trade in this connection I am not sure, but we can be sure of some of the things they do not mean. They do not mean the freedom of ordinary people to buy and sell, lend and borrow, at whatever prices or rates they like and wherever they find it most profitable to do so. They do not mean the freedom of the plain citizen to raise as much of a given crop as he wishes, to come and go at will, to settle where he pleases, to take his capital and other belongings with him. They mean, I suspect, the freedom of bureaucrats to settle these matters for him. And they tell him that if he docilely obeys the bureaucrats he will be rewarded by a rise in his living standards. But if the planners succeed in tying up the idea of international cooperation with the idea of increased State domination and control over economic life, the international controls of the future seem only too likely to follow the pattern of the past, in which case the plain man’s living standards will decline with his liberties.
His analysis of minimum wage is as elegant a refutation of minimum wage as you’ll ever read. He argues that the minimum wage is more correctly viewed as a minimum price law. If the price of labor is artificially raised, the price of production is raised. Populist politicians always attempt to sell minimum wage law as a boon for low skill labor and ignore the adverse effects. Sadly, the fervor for this boondoggle remains as strong as ever.
The most potent analysis by far is the section dealing with inflation. As we enter our 10th year of ZIRP administered by our allegedly benevolent overlords at the Fed, the ill gotten gains and economic perversions abound. While politicians beat the drums of hate and envy, they draw more support for further expropriation as a corrective.
Economics in One Lesson is a timeless classic and the lesson contained in its pages burns with even greater urgency. It’s easy to look at the current state of affairs and despair, but Hazlitt ends with an optimistic note. The principles for which Hazlitt fought are indeed proliferating, but the voices agitating for socialism grow louder as well. The best defense against the lazy and callous recriminations of apparatchiks and statists is this righteous lightsaber of reason left for us by a Jedi master of economics.