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EBC Book #1 - Economics in One Lesson by Henry Hazlitt
Posted on 6/10/17 at 12:02 pm
Posted on 6/10/17 at 12:02 pm
Welcome everyone to the official thread for the Book Board's first selection in our Economics Book Club (EBC) series. Over the two week period starting Monday June 12th, we will be exploring American journalist and "Austrian School" proponent Henry Hazlitt's seminal work, Economics in One Lesson. We will then pivot to Thomas Sowell's Applied Economics, which I've recently realized to be an accidental stroke of genius since Hazlitt was one of Sowell's key influencers. But, first, more on Hazlitt:
Hazlitt was born in 1894 and had published his first book, Thinking as a Science, by the age of 21. While this was more of a philosophical treatise that could just as appropriately be entitled How to Use Your Brain for Dummies, it primed his mind (and the minds of his readers) for his later works on economics and really established him as a serious thinker. I've looked into this book enough and found it interesting enough to add it to the back of our current EBC reading list as our only "Philosophy" book in the queue. Here are a few quotes from that book:
I chose these quotes as I believe the first and third tell us an awful lot about Hazlitt's hunger for knowledge and commitment to seeking the truth at all costs (even at what many perceive to be the most expensive - shattering a pre-determined opinion on something). I challenge this group to take on every topic with this same mindsight. The second quote highlights the importance of actually applying what we learn from this book series. Again, by another accidental stroke of genius, that's what Mr. Sowell will be talking to us about in a couple of weeks.
Hazlitt's logical thought process coupled with the fact he wasn't "overeducated" (he didn't complete college) gave him an uncanny ability to relate something as complex and "dry" as economics to the masses. American journalist and English language scholar, H.L. Mencken, called Hazlitt "one of the few economists in human history who could actually write." At one point, he was chosen by Berntrand Russell to write Russell's official biography (although Russell later decided he wanted to write his own). Ayn Rand and Ludwig von Mises were admirers of Hazlitt and even though Mises was the biggest influence in Hazlitt's life, it was Mises who credited Hazlitt with being the "economic conscience" of the United States.
The Mises Institute would later call Hazlitt the most important intellectual within the Austrian School tradition. Hazlitt was also influenced by French economist Frederic Bastiat and Thomas Sowell himself has been cited as following in the "Bastiat-Hazlitt" tradition. Ron Paul has ranked Hazlitt on par with Bastiat and F.A. Hayek, and Hazlitt is often credited with introducing Hayek's The Road to Serfdom to the American public. Suffice all of this to say we are starting our series with the work of an intellectual heavyweight who, conveniently for our intermediate reading level, also happens to be one of history's most articulate.
The final bit I'd like to add is on the topic of "Austrian economics." For the uninitiated (which would certainly include myself), Austrian economics is so called as it arose in Vienna in the early 1900s. While likely considered outside of the "intellectual mainstream" nowadays, that's probably something its adherents would pride themselves on. At its core, this school of thought tends to promote individualism, is skeptical of the role of governments and central banks in economic affairs, and is highly critical of socialism and the Marxist tradition. There's a lot more in terms of technical characteristics, but I'll let Mr. Hazlitt (and any of you) take things from here..
Hazlitt was born in 1894 and had published his first book, Thinking as a Science, by the age of 21. While this was more of a philosophical treatise that could just as appropriately be entitled How to Use Your Brain for Dummies, it primed his mind (and the minds of his readers) for his later works on economics and really established him as a serious thinker. I've looked into this book enough and found it interesting enough to add it to the back of our current EBC reading list as our only "Philosophy" book in the queue. Here are a few quotes from that book:
quote:
“A man with a scant vocabulary will almost certainly be a weak thinker. The richer and more copious one's vocabulary and the greater one's awareness of fine distinctions and subtle nuances of meaning, the more fertile and precise is likely to be one's thinking. Knowledge of things and knowledge of the words for them grow together. If you do not know the words, you can hardly know the thing.”
quote:
“The only way we could remember would be by constant re-reading, for knowledge unused tends to drop out of mind. Knowledge used does not need to be remembered; practice forms habits and habits make memory unnecessary. The rule is nothing; the application is everything.”
quote:
“The only way we can get rid of this desire to cling to our prejudices, is thoroughly to convince ourselves of the superiority of the truth; to leave not the slightest doubt in our own minds as to the value of looking with perfect indifference on all questions; to see that this is more advantageous than believing in that opinion which would benefit us most if true, more important than “being consistent,” more to be cherished than the comfortable feeling of certainty.”
I chose these quotes as I believe the first and third tell us an awful lot about Hazlitt's hunger for knowledge and commitment to seeking the truth at all costs (even at what many perceive to be the most expensive - shattering a pre-determined opinion on something). I challenge this group to take on every topic with this same mindsight. The second quote highlights the importance of actually applying what we learn from this book series. Again, by another accidental stroke of genius, that's what Mr. Sowell will be talking to us about in a couple of weeks.
Hazlitt's logical thought process coupled with the fact he wasn't "overeducated" (he didn't complete college) gave him an uncanny ability to relate something as complex and "dry" as economics to the masses. American journalist and English language scholar, H.L. Mencken, called Hazlitt "one of the few economists in human history who could actually write." At one point, he was chosen by Berntrand Russell to write Russell's official biography (although Russell later decided he wanted to write his own). Ayn Rand and Ludwig von Mises were admirers of Hazlitt and even though Mises was the biggest influence in Hazlitt's life, it was Mises who credited Hazlitt with being the "economic conscience" of the United States.
The Mises Institute would later call Hazlitt the most important intellectual within the Austrian School tradition. Hazlitt was also influenced by French economist Frederic Bastiat and Thomas Sowell himself has been cited as following in the "Bastiat-Hazlitt" tradition. Ron Paul has ranked Hazlitt on par with Bastiat and F.A. Hayek, and Hazlitt is often credited with introducing Hayek's The Road to Serfdom to the American public. Suffice all of this to say we are starting our series with the work of an intellectual heavyweight who, conveniently for our intermediate reading level, also happens to be one of history's most articulate.
The final bit I'd like to add is on the topic of "Austrian economics." For the uninitiated (which would certainly include myself), Austrian economics is so called as it arose in Vienna in the early 1900s. While likely considered outside of the "intellectual mainstream" nowadays, that's probably something its adherents would pride themselves on. At its core, this school of thought tends to promote individualism, is skeptical of the role of governments and central banks in economic affairs, and is highly critical of socialism and the Marxist tradition. There's a lot more in terms of technical characteristics, but I'll let Mr. Hazlitt (and any of you) take things from here..
This post was edited on 6/14/17 at 4:38 pm
9
Posted on 6/10/17 at 1:00 pm to RedStickBR
I'm an economics virgin. I picked up this book last week after following the thread for a few days, and I have been extremely surprised by how easy it reads.
I have read the first 8 or 9 chapters, but I am going to start over on Monday. Not a lot has set in for me at this point - probably because the ideas are so new to me. I'm hooked though. Love that the primary purpose of the book is debunking economic fallacies. The examples he uses to reinforce his ideas are easy to picture in your head. It makes the book read like a collection of stories.
I have read the first 8 or 9 chapters, but I am going to start over on Monday. Not a lot has set in for me at this point - probably because the ideas are so new to me. I'm hooked though. Love that the primary purpose of the book is debunking economic fallacies. The examples he uses to reinforce his ideas are easy to picture in your head. It makes the book read like a collection of stories.
Posted on 6/10/17 at 5:51 pm to RedStickBR
Your synopsis has me excited to start reading. Looking forward to discussing this book with everyone.
Posted on 6/12/17 at 6:08 pm to RedStickBR
I'm not sure how far we should be going before bringing up any discussion topics.
But I've made my way through chapter 4 and haven't come across anything I disagree with or think that others might disagree with. But it's noteworthy that we still have politicians that spout some of the same talking points about creating jobs through government spending, just as there were back in the author's day.
There is this passage in chapter 4 that might be discussion worthy:
During the stimulus spending rollout in 2007 and 2008, this extra spending was not proposed to come from additional tax revenue, but through the effect of inflation by increasing our debt (also called printing more money).
It's interesting that we hear lamentations about tax cuts for the rich, when tax payers are permitted to keep more of their income, but we never hear about tax increases on the poor when inflation has a more adverse impact on the poor.
But I've made my way through chapter 4 and haven't come across anything I disagree with or think that others might disagree with. But it's noteworthy that we still have politicians that spout some of the same talking points about creating jobs through government spending, just as there were back in the author's day.
There is this passage in chapter 4 that might be discussion worthy:
quote:
Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers.
During the stimulus spending rollout in 2007 and 2008, this extra spending was not proposed to come from additional tax revenue, but through the effect of inflation by increasing our debt (also called printing more money).
It's interesting that we hear lamentations about tax cuts for the rich, when tax payers are permitted to keep more of their income, but we never hear about tax increases on the poor when inflation has a more adverse impact on the poor.
This post was edited on 6/12/17 at 6:10 pm
Posted on 6/13/17 at 5:43 am to RedStickBR
So far I haven't disagreed with anything but I do think he makes some thinks far too black and white. His idea of the government helping out those who can't get a loan on their own etc is sound in theory, but if 1/3 of those government loans is paid back and that individual becomes successful, then there will be more total at the end of the day long term. Both will be able to buy a coat as he likes to say.
That is not true in year 1 but potentially in year 5
That is not true in year 1 but potentially in year 5
Posted on 6/14/17 at 1:16 pm to RedStickBR
I read through chapter 4 and I have been pondering public works and how different people view the success of tax payer funded projects. I agree that their is a necessity of basic taxation to be used on projects that Hazlitt mentioned (infrastructure, policeman, fireman).
It may just be me but because of my background I think the perfect balance of doing charitable works to benefit the community is the governments responsibility but that of the Churches regardless of denomination.
I tend to see people that don't have any religious affiliation be more prone to praise a government undertaking when according to Hazlitt the government has no business doing.
I feel as though a fundamental pillar of the American economy prospered on this ideal that government provides necessary services and a common framework and that the Churches provide help to the common man of their respective communities through charitable endeavors.
It may just be me but because of my background I think the perfect balance of doing charitable works to benefit the community is the governments responsibility but that of the Churches regardless of denomination.
I tend to see people that don't have any religious affiliation be more prone to praise a government undertaking when according to Hazlitt the government has no business doing.
I feel as though a fundamental pillar of the American economy prospered on this ideal that government provides necessary services and a common framework and that the Churches provide help to the common man of their respective communities through charitable endeavors.
This post was edited on 6/14/17 at 1:22 pm
Posted on 6/16/17 at 11:19 pm to RedStickBR
If I may be so bold, and not to hijack but support, Gwartney and Stroup's "What Everyone Should Know About Economics And Prosperity" is a spoon fed treatment of the same concepts. It assumes zero knowledge of economic understanding, thus its relevance to many law schools et al
Posted on 6/19/17 at 2:53 pm to RedStickBR
Glad to see you're enjoying what I recommended to you in that other thread RedStickBR 
Really glad to see an economics book club on here, because economics is something that I've really gotten into within the last year or two. So I'm gonna follow along here, although it's been a year or so since I've last read Economics in One Lesson.
EIOL is heavily based on Bastiat's That Which is Seen, and That Which is Not Seen which I read directly after I read EIOL. For those of you considering reading it, I'd suggest skipping it unless you really want to read it--EIOL is much easier to read and pretty much covers TWISATWINS.
I'll be reading Applied Economics with you guys (I haven't read it before). I hope we do The Road to Serfdom soon, as I've got a copy and it's been on my list but I haven't gotten around to it.
Really glad to see an economics book club on here, because economics is something that I've really gotten into within the last year or two. So I'm gonna follow along here, although it's been a year or so since I've last read Economics in One Lesson. EIOL is heavily based on Bastiat's That Which is Seen, and That Which is Not Seen which I read directly after I read EIOL. For those of you considering reading it, I'd suggest skipping it unless you really want to read it--EIOL is much easier to read and pretty much covers TWISATWINS.
I'll be reading Applied Economics with you guys (I haven't read it before). I hope we do The Road to Serfdom soon, as I've got a copy and it's been on my list but I haven't gotten around to it.
Posted on 6/30/17 at 9:27 am to RedStickBR
My take aways (Which after re-reading have a very political undertone. For some reason, every economic idea makes me relate it back to governmental policies. I don't know how to take it out.):
1: TRANSFER OF WEALTH. The broken window analogy was so simple, but made a lot of sense. Essentially, every action is a transfer of wealth. This got me thinking more about taxes, etc. The government taxes its citizens to provide services, but every single tax is taking spending money out of the hand of the consumer. I believe the quote was something along the lines of "a dollar of spending is a dollar of taxation." Every dollar the US government and LA government spend has to come from somewhere. I'm fine with the government existing and taking up tasks that no one else can handle efficiently, but I think most people fail to realize that the money the State and Federal governments spend comes from the pocket of a citizen.
My issue with government spending is that I don't believe the government is efficient. Go sit in a DMV or any other state office. Then go sit in the office of a private corporation trying to make money. The differences are night and day. Because of the inefficiencies, I'm a big believer that the government shouldn't pick winners and losers. But the transfer of wealth from the consumer to the government and then from the government to a winner got me thinking about two different scenarios.
Scenarios
Bailing out the banks: Was this a good use of the public's money? What if that money had been given back to the consumer? I'm not a banker and I don't understand the intricacies, but I've read a decent amount about the decision and it seems like the decision makers believed it was the only way to save the financial system. But the free enterprise person in me would have been willing to sit back and watch the world burn. What am I missing? Is there ever a good excuse for government intervention through use of people's money?
2008 Stimulus: Along the same lines of the bailing out banks inquiry. In the abstract, it makes a lot of sense to have the consumer determine which industries win and lose and ultimately driving up the economy through the consumer. The only issue that I had was that the money could have been saved or put to use on the black market. I haven't figured out a way to circumvent that issue.
2: ENDING PUBLIC JOBS IS BENEFICIAL BECAUSE IT FORCES PEOPLE INTO PRIVATE ENTITIES. This was really interesting. It assumes that all of the money that was being used to pay excess government employees is given back to the citizens to invest in the private enterprises of their choice. These enterprises will then expand, hiring the government workers. It makes perfect sense on paper. However, there are some major issues practically. One, the government isn't likely to fire a ton of people. Second, if they do, they aren't going to give the citizen's the excess money. Third, there has to be some kind of lag between the firing from the government agency and the hiring in private industry. At that point, you have an increased unemployment rate and more people on the government dime not working. Is there a more practical application of this principle?
4: IF IT DOESN'T MAKE SENSE FOR A FAMILY, WHY DOES IT MAKE SENSE FOR A COUNTRY. This was in the tariff chapter, but it makes a lot of sense in terms of general governmental policies, as well. I know there is a balance budget proposal or attempt in most state houses and the US Congress, however, it always seems like a tough sell. How can a country live outside of their means or take actions that would not be considered financially responsible if a family of 4 took the same actions.
5: GOVERNMENT PRICE FIXING. This was a bulk of my econ classes in college. A non-stop rant on rent control and minimum wage. My belief has always been that a company who pays more than the minimum wage will have better employees than the business who pays the minimum wage. However, if a business is capable of functioning with the employees who work for $4 an hour (people who can't get any other type of job), why should they be forced to pay more than $4 for the work. Further, this would open up jobs in the higher tier for people who actually deserve the higher paying jobs- instead of being crowded out by bad employees.
1: TRANSFER OF WEALTH. The broken window analogy was so simple, but made a lot of sense. Essentially, every action is a transfer of wealth. This got me thinking more about taxes, etc. The government taxes its citizens to provide services, but every single tax is taking spending money out of the hand of the consumer. I believe the quote was something along the lines of "a dollar of spending is a dollar of taxation." Every dollar the US government and LA government spend has to come from somewhere. I'm fine with the government existing and taking up tasks that no one else can handle efficiently, but I think most people fail to realize that the money the State and Federal governments spend comes from the pocket of a citizen.
My issue with government spending is that I don't believe the government is efficient. Go sit in a DMV or any other state office. Then go sit in the office of a private corporation trying to make money. The differences are night and day. Because of the inefficiencies, I'm a big believer that the government shouldn't pick winners and losers. But the transfer of wealth from the consumer to the government and then from the government to a winner got me thinking about two different scenarios.
Scenarios
Bailing out the banks: Was this a good use of the public's money? What if that money had been given back to the consumer? I'm not a banker and I don't understand the intricacies, but I've read a decent amount about the decision and it seems like the decision makers believed it was the only way to save the financial system. But the free enterprise person in me would have been willing to sit back and watch the world burn. What am I missing? Is there ever a good excuse for government intervention through use of people's money?
2008 Stimulus: Along the same lines of the bailing out banks inquiry. In the abstract, it makes a lot of sense to have the consumer determine which industries win and lose and ultimately driving up the economy through the consumer. The only issue that I had was that the money could have been saved or put to use on the black market. I haven't figured out a way to circumvent that issue.
2: ENDING PUBLIC JOBS IS BENEFICIAL BECAUSE IT FORCES PEOPLE INTO PRIVATE ENTITIES. This was really interesting. It assumes that all of the money that was being used to pay excess government employees is given back to the citizens to invest in the private enterprises of their choice. These enterprises will then expand, hiring the government workers. It makes perfect sense on paper. However, there are some major issues practically. One, the government isn't likely to fire a ton of people. Second, if they do, they aren't going to give the citizen's the excess money. Third, there has to be some kind of lag between the firing from the government agency and the hiring in private industry. At that point, you have an increased unemployment rate and more people on the government dime not working. Is there a more practical application of this principle?
4: IF IT DOESN'T MAKE SENSE FOR A FAMILY, WHY DOES IT MAKE SENSE FOR A COUNTRY. This was in the tariff chapter, but it makes a lot of sense in terms of general governmental policies, as well. I know there is a balance budget proposal or attempt in most state houses and the US Congress, however, it always seems like a tough sell. How can a country live outside of their means or take actions that would not be considered financially responsible if a family of 4 took the same actions.
5: GOVERNMENT PRICE FIXING. This was a bulk of my econ classes in college. A non-stop rant on rent control and minimum wage. My belief has always been that a company who pays more than the minimum wage will have better employees than the business who pays the minimum wage. However, if a business is capable of functioning with the employees who work for $4 an hour (people who can't get any other type of job), why should they be forced to pay more than $4 for the work. Further, this would open up jobs in the higher tier for people who actually deserve the higher paying jobs- instead of being crowded out by bad employees.
Posted on 8/21/17 at 10:53 am to RedStickBR
Good read on automation and wages in the National Review today that is relevant to our Hazlitt reading:
LINK
LINK
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