Okay, another literary detour. I have had this book, Economics in One Lesson by Henry Hazlitt, for a long time and dipped into it regularly. I has a pretty simple theme, which is illustrated in a variety of situations. The author is a true free-market philosopher. He focuses on what he refers to as a central fallacy in policy-making; looking only at the consequences of the policy for one special group and not considering the consequences to all those affected. A secondary fallacy he refers to is looking only at the results for the entire group, and not considering that it may have particular effects on certain groups, especially negative consequences. I view that second “fallacy” as not so significant, because if you start tailoring policy to remove supposed negative consequences for some groups, you are right back to the first fallacy.
The economics lesson is actually secondary to the general policymaking lesson. The less any government does, the better. If you do as little policy-making as possible, you will do very little harm to the economy or to people’s lives. We have the opposite of that today, with massive bureaucracies trying to control every aspect of people’s lives and interfering with economic activity in every way imaginable. The cost of complying with government dictates is a primary cause of the “affordability” crisis.
Hazlitt uses a series of common policy efforts to illustrate his theme. Government programs like Social Security and Medicare; minimum wage laws; price limits, including rent control; excessive encouragement of debt use; supply controls, as with farm products; tariffs and other import limits, and on and on. In each case it is easy to see how attempting to help or product one particular group hurts the nation’s residents as a whole and how those measures limit savings, investment and production–all those factors which in the end are the surest way to increase supply, lower prices, encourage innovation and productivity growth, so that standards of living rise.
Here is the sad thing, the book was originally written in 1946. Hazlitt wrote a brief update in 1978, saying things had only gotten worse. Imagine what he would say today when we are sitting on $40 trillion in debt and most Americans are addicted to government handouts of every kind, and we have immense regulation of economic activity. His lesson is one politicians will never learn and we all pay the price in a lower standard of living. The really sad thing is that lower-income persons pay the biggest price.
I am a bit of a math-ignoramus: I can split or double a recipe, calculate how many bundles of 100-ft. wire I need to string three wires around a horse corral, and RT fractions to decimals & back, but much more than that is quite beyond me. All of which is in aid of explaining why I avoid “modern” economists who explain concepts using complex formulae (with Greek letter ‘n such.) :- )
So, when I discovered Henry Hazlitt and W. G. Sumner and Sowell and Walter Williams and Jude Wanniski, and others who explain how things in our world work, in narrative form, using plain-language reason, logic and real life examples, I steeped myself in their works. They opened to me another, better, way to read, observe, and try to evaluate incentives, motives, and outcomes (especially the “hidden” ones) in today’s world, where every economic decision involves trade-offs.
…because those guys made sense to me. Even Sumner, who wrote “The Forgotten Man” in 1883 makes more sense today, to me anyway, than most economists writing today.
Thanks for spotlighting good ol’ Henry H. — he deserves far more attention than he gets….
A taste of Sumner:
https://www.forbes.com/sites/markhendrickson/2013/10/30/william-graham-sumner-the-forgotten-man-who-reminded-us-about-the-forgotten-man/
https://mises-media.s3.amazonaws.com/The%20Forgotten%20Man%20and%20Other%20Essays_2.pdf?file=1&type=document
A couple more books that touch on economics, that I found really interesting:
“Against the Gods: The Remarkable Story of Risk,” by Peter Bernstein, and
“The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger,” by Marc Levinson.
Thank you for reading and for the very thoughtful comment
Supply and demand curves, aka Micro economics and Marginal costs vs marginal benefit analysis (not cost benefit analysis which is frequently misleading) are two of the most important concepts in economics. Both economic concepts span across so many disciplines far beyond economics.
Paul Krugman is a well known leftist economist. Virtually everything he states in his commentary directly conflicts with his freshman level economics textbook. Almost every leftist solution to economic problems directly conflict with micro economic theory, including but not limited to minimum wage, rent controls, subsidies, tax incentives, housing incentitives, low income programs, etc
I mention low income programs, such as the earned income credit, housing vouchers, wic program, etc.
Those programs are huge disincentives to move off government assistance. With the phase out of the benefits as a persons income rises, the additional fica/medicare and income taxes (15%ish plus 7.65%), the overall effective tax rate including the reduction in benefits often times ranges between 80% and 110%.