28 ms·

Economics in One lesson - Henry Hazlitt

72 points by mrlebowski 17y ago

mrlebowski 17y ago
As the title says: The Shortest and Surest Way to Understand Basic Economics! I love the way author uses simple language to describe complex economics concepts.
bcl 17y ago
This is an excellent book, I read it a number of years ago in print form. Is this html version legal?
- mrlebowski 17y ago
  I am not sure, is there some way to find out ?
- benatkin 17y ago
  I like to think someone who owns jim.com, a very good domain name, and puts up good content with nice, clean formatting, knows what he's doing.
- nazgulnarsil 17y ago
  libertarians don't believe in intellectuial property. see Mises.org for hundreds of textbooks on economics (including this one) free.
dantheman 17y ago
I can't recommend this book highly enough. I own multiple copies so that I can lend them out; it highlights fundamental economic fallacies, and introduces holistic/systems thinking to the general population by reminding the reader to focus on all those affected.
- nas 17y ago
  Seconded. It's a bit idealistic but is also very simply and dramatically demonstrates how poorly most people understand economics. Politicians are especially serious offenders, possibly because even if they know better, solutions that are economically silly are often publicly popular. For example, the "Cash for Clunkers" car programs are not a good idea. Although this book was written years ago, the exact same boneheaded policies are implemented today, advanced by the exact same nonsensical arguments. This book will make you very frustrated when you have to listen to politicians talk about economics. :-)
  - nazgulnarsil 17y ago
    the idea of politicians as people who learn about all the impacts and nuances of legislation so we don't have to has been proven false for thousands of years. the greeks knew that this representative democracy idea was crap. for an example of a functioning government please see the Venetian Republic (the birth place of proto-capitalism).
- lionhearted 17y ago
  It's a fantastic book - changed my outlook on economics and politics. The rent control chapter was really, really illuminating. If anyone here is in favor of rent control, I strongly recommend this. It's only a 5 minute read or so, very worth it: http://jim.com/econ/chap18p1.html http://jim.com/econ/chap18p1.html Rent control does help some people - but who is hurts is pretty insightful. The post-war examples in particular.
tybris 17y ago
It could have been a great book if he had put his own views and opinions more to the background. Put in a modern setting he's clearly a libertarian economist with little regard for the success of the modern European system in ensuring availability of essentials (food, health care, housing), while stimulating competition on non-essentials (mobile phones, internet access, commercial real estate). Still a good read though.
- philwelch 17y ago
  It always bothers me when people who are obviously pushing a libertarian agenda market "economic arguments for libertarianism" as "economics". I'm vaguely libertarian, and even mainstream economics implies a lot of scary libertarian things (minimum wages and rent controls have terrible side effects!) but fundamentally, economics is an "is" and libertarianism is an "ought". Seeing them mixed together is broken. This book has lots of good things in it, but it's clearly trying to push you in one direction rather than simply educate you.
  - mrlebowski 17y ago
    tybris & philwelch: I am new to economics, your comments make me feel I am started with the wrong book! Can you recommend some places to start learning ? Thanks!
    - philwelch 17y ago
      Keep in mind you're getting one side of the picture from Hazlitt. Hazlitt's a libertarian--he thinks less government is better. So he's not very prone to give you much evidence that sometimes, governments can do desirable things, just because that's not his bias. The best advice I can give you is to try and separate facts from judgments. Take the minimum wage. It's well understood that minimum wage laws cause unemployment. It doesn't necessarily follow from this that you don't need a minimum wage, though. Without a minimum wage, you might have twice as much unskilled labor working for half the pay, but all of them are below subsistence level and require government assistance. Whereas a higher minimum wage means some people can be dropped from the rolls entirely while others have to collect more. Or maybe you change the welfare system. It's a judgment call which tradeoffs you want to make, just like engineering. There are obvious things (command economies are pretty crap, just like bubble sort is a crap algorithm) but there are more subtle things (like time/space tradeoffs that dictate different algorithms for different applications) that depend on what you're trying to do. Likewise, consider health care. Some people think it's a moral imperative that a wealthy society provide health care to everyone. Economics asks some tough questions--at what cost, what level of care do we provide--but it also provides answers--what are different ways of doing this, and what are the cost-benefits? Economics at its best is a science. It doesn't dictate your goals to you, it just warns you of some natural constraints. You might say, "I believe in minimal taxes and don't care about poor people who need housing and health care but can't afford it." Well, economics tells you that's very feasible. You might say, "I believe in minimal taxes and a robust welfare state." Economics tells you there's no free lunch. You might say, "I believe everyone should have health insurance that meets these requirements." Well, economics says, you could give everyone health insurance, or you could have a market in health insurance and give people vouchers to pay for it, or do any other thing you can think of, but here are the effects and tradeoffs of those policies. In terms of what in economics to study? Microeconomics seems better grounded than macro. Behavioral economics seems promising. Austrian is a mixed bag--there's some stuff that promotes good economic reasoning but then there's also gigantic apologias for anarcho-capitalism based upon some moralistic conception of natural law that totally mix up the science of causes and effects with the moral aspect of goals and intentions. I find that separating causes and effects from goals and intentions is a big problem not only in economics but also in ecology. There's a difference between saying "I want to sustainably maintain an environment that is good for human life" and "I want to preserve the environment mostly the way it is without human tampering", and an environmental scientist will recommend different policies based upon which goal she implicitly has in mind. Maybe some endangered species can go extinct if there's a better tradeoff for humans, or maybe not. Likewise with economics: there's no such thing as "economics says policy X is bad", only "economics says policy X has effects Y".
tome 17y ago
That's not so much a lesson as an idealized (and in practice unachievable) mission statement.
pbhj 17y ago
How long is that lesson, 25 pages of at least 1000 words. I'd say in "25 short lessons". TLDR.
- nova 17y ago
  Spoiler!!!!: "The art of economics consists in looking not merely at the immediate but 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." The rest is commentary and application examples.
  - pbhjpbhj 17y ago
    In the same way that "eat food" is a lesson on wilderness survival. Or the way that Schrodingers equation tells you all you need to know about Quantum mechanics. The rest is just commentary and examples. The lesson is a clever device by the author, he pwns marketing 101, but is "to grok economics consider future global effects" really that inciteful? Seems to be a nice book though.
    - nova 17y ago
      It sure seems simplistic, but again and again we suffer from policies against that simple rule. It's amazing (and depressing) how many problems can be explained by it, like politicians implementing myopic short-term reforms in order to win the next election (and the future be damned), or to appease some selected and influential group (and be the rest ones left to pay it)
justin_vanw 17y ago
>The first thing that happens, for example, when a law is passed that no one shall be paid less than $106 for a forty-hour week is that no one who is not worth $106 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. Ok, I can't let logic like that slide by. I'll just list off why it is totally junk reasoning: - Assumes that worker is getting 'what he is worth to an employer' currently. This would assume that the worker and the employer are on an equal footing, both in power (workers can be coerced and intimidated into lower wages), and intellect (workers can be tricked and bamboozled), and in information (workers know less about the going rates for labor than an employer, if only because employers have lots of employees, but an employee has only one employer usually). - Assumes the worker is optimally employed to maximize earnings. Lots of people work in fields because they fell into that sort of work, and learning a new language or new skills is hard or unnatural to them. Being fired from such a low paying job may make developing other skills a necessity. Think of the guy working at McDonald's who could be trained to be a lineman for the electric company or a truck driver, or the truck driver who could (if he had more ambition, and was willing to give up an income for a few months to go to trade school) be a mechanic on jet engines. - If everyone is held to the same minimum wage, everyone's costs, therefore the price they charge, goes up. Charging more money lets them afford the more expensive workers. - If workers get more expensive, long term investments in mechanization become more attractive. This lowers costs in the long run, and creates jobs that pay more than the original menial job. All that extra money everyone has because the price of everything is so low due to mechanization means they have plenty of money to spend on luxuries they would never have previously considered, this is called 'Starbucks' and employs lots of people. - Even if the worker does lose his job, modern unemployment insurance schemes will make that relatively painless to the old 'free market' system of going to debtors prison or indentured servitude. A-priori economic arguments are bullshit. It is perfectly possible to prove convincingly that in a system without a government private security firms would enforce law and order. We can be convinced of this because we don't know all the reasons this fails in practice, due to our imperfect understanding of the world. The fact that in every single instance that there has been a lack of a functional police force for more than a few hours things go totally batshit insane should render any such 'convincing' argument totally absurd.
nazgulnarsil 17y ago
if anyone is looking for even simpler material to introduce economics to a broad audience I'd recommend the comic written by peter schiff's father: How an economy grows and why it doesn't Peter is reworking it for reprinting. I plan on buying multiple copies to lend out. PDF warning: http://freedom-school.com/money/how-an-economy-grows.pdf http://freedom-school.com/money/how-an-economy-grows.pdf
- tome 17y ago
  An entertaining comic which covers the basics well but throws in the complexities of reality as an afterthought stated as fact with no justification: "Basic economic principles do not change with the size of the economy ... direct relationship between self sacrifice, savings, credit, investment, economic incentive, social and economic progress is always the same!" Yeah right. As an introduction to basic economic principles this comic is great, but it takes a firm position on aspects of economic theory that are very much up for debate. I'd call this propaganda.
  - nazgulnarsil 17y ago
    in the absence of strong evidence that magic properties "emerge" as a result of dealing with larger scales I tend to believe the simplest explanation.
mhb 17y ago
Also delightful, but significantly more advanced is David Friedman's Price Theory: http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC.html http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC...

72 points by mrlebowski 17y ago

As the title says: The Shortest and Surest Way to Understand Basic Economics! I love the way author uses simple language to describe complex economics concepts.

bcl 17y ago

This is an excellent book, I read it a number of years ago in print form. Is this html version legal?

mrlebowski 17y ago
I am not sure, is there some way to find out ?
benatkin 17y ago
I like to think someone who owns jim.com, a very good domain name, and puts up good content with nice, clean formatting, knows what he's doing.
nazgulnarsil 17y ago
libertarians don't believe in intellectuial property. see Mises.org for hundreds of textbooks on economics (including this one) free.

dantheman 17y ago

I can't recommend this book highly enough. I own multiple copies so that I can lend them out; it highlights fundamental economic fallacies, and introduces holistic/systems thinking to the general population by reminding the reader to focus on all those affected.

nas 17y ago
Seconded. It's a bit idealistic but is also very simply and dramatically demonstrates how poorly most people understand economics. Politicians are especially serious offenders, possibly because even if they know better, solutions that are economically silly are often publicly popular. For example, the "Cash for Clunkers" car programs are not a good idea. Although this book was written years ago, the exact same boneheaded policies are implemented today, advanced by the exact same nonsensical arguments. This book will make you very frustrated when you have to listen to politicians talk about economics. :-)
- nazgulnarsil 17y ago
  the idea of politicians as people who learn about all the impacts and nuances of legislation so we don't have to has been proven false for thousands of years. the greeks knew that this representative democracy idea was crap. for an example of a functioning government please see the Venetian Republic (the birth place of proto-capitalism).
lionhearted 17y ago
It's a fantastic book - changed my outlook on economics and politics. The rent control chapter was really, really illuminating. If anyone here is in favor of rent control, I strongly recommend this. It's only a 5 minute read or so, very worth it: http://jim.com/econ/chap18p1.html http://jim.com/econ/chap18p1.html Rent control does help some people - but who is hurts is pretty insightful. The post-war examples in particular.

tybris 17y ago

It could have been a great book if he had put his own views and opinions more to the background. Put in a modern setting he's clearly a libertarian economist with little regard for the success of the modern European system in ensuring availability of essentials (food, health care, housing), while stimulating competition on non-essentials (mobile phones, internet access, commercial real estate). Still a good read though.

philwelch 17y ago
It always bothers me when people who are obviously pushing a libertarian agenda market "economic arguments for libertarianism" as "economics". I'm vaguely libertarian, and even mainstream economics implies a lot of scary libertarian things (minimum wages and rent controls have terrible side effects!) but fundamentally, economics is an "is" and libertarianism is an "ought". Seeing them mixed together is broken. This book has lots of good things in it, but it's clearly trying to push you in one direction rather than simply educate you.
- mrlebowski 17y ago
  tybris & philwelch: I am new to economics, your comments make me feel I am started with the wrong book! Can you recommend some places to start learning ? Thanks!
  - philwelch 17y ago
    Keep in mind you're getting one side of the picture from Hazlitt. Hazlitt's a libertarian--he thinks less government is better. So he's not very prone to give you much evidence that sometimes, governments can do desirable things, just because that's not his bias. The best advice I can give you is to try and separate facts from judgments. Take the minimum wage. It's well understood that minimum wage laws cause unemployment. It doesn't necessarily follow from this that you don't need a minimum wage, though. Without a minimum wage, you might have twice as much unskilled labor working for half the pay, but all of them are below subsistence level and require government assistance. Whereas a higher minimum wage means some people can be dropped from the rolls entirely while others have to collect more. Or maybe you change the welfare system. It's a judgment call which tradeoffs you want to make, just like engineering. There are obvious things (command economies are pretty crap, just like bubble sort is a crap algorithm) but there are more subtle things (like time/space tradeoffs that dictate different algorithms for different applications) that depend on what you're trying to do. Likewise, consider health care. Some people think it's a moral imperative that a wealthy society provide health care to everyone. Economics asks some tough questions--at what cost, what level of care do we provide--but it also provides answers--what are different ways of doing this, and what are the cost-benefits? Economics at its best is a science. It doesn't dictate your goals to you, it just warns you of some natural constraints. You might say, "I believe in minimal taxes and don't care about poor people who need housing and health care but can't afford it." Well, economics tells you that's very feasible. You might say, "I believe in minimal taxes and a robust welfare state." Economics tells you there's no free lunch. You might say, "I believe everyone should have health insurance that meets these requirements." Well, economics says, you could give everyone health insurance, or you could have a market in health insurance and give people vouchers to pay for it, or do any other thing you can think of, but here are the effects and tradeoffs of those policies. In terms of what in economics to study? Microeconomics seems better grounded than macro. Behavioral economics seems promising. Austrian is a mixed bag--there's some stuff that promotes good economic reasoning but then there's also gigantic apologias for anarcho-capitalism based upon some moralistic conception of natural law that totally mix up the science of causes and effects with the moral aspect of goals and intentions. I find that separating causes and effects from goals and intentions is a big problem not only in economics but also in ecology. There's a difference between saying "I want to sustainably maintain an environment that is good for human life" and "I want to preserve the environment mostly the way it is without human tampering", and an environmental scientist will recommend different policies based upon which goal she implicitly has in mind. Maybe some endangered species can go extinct if there's a better tradeoff for humans, or maybe not. Likewise with economics: there's no such thing as "economics says policy X is bad", only "economics says policy X has effects Y".

tome 17y ago

That's not so much a lesson as an idealized (and in practice unachievable) mission statement.

pbhj 17y ago

How long is that lesson, 25 pages of at least 1000 words. I'd say in "25 short lessons". TLDR.

nova 17y ago
Spoiler!!!!: "The art of economics consists in looking not merely at the immediate but 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." The rest is commentary and application examples.
- pbhjpbhj 17y ago
  In the same way that "eat food" is a lesson on wilderness survival. Or the way that Schrodingers equation tells you all you need to know about Quantum mechanics. The rest is just commentary and examples. The lesson is a clever device by the author, he pwns marketing 101, but is "to grok economics consider future global effects" really that inciteful? Seems to be a nice book though.
  - nova 17y ago
    It sure seems simplistic, but again and again we suffer from policies against that simple rule. It's amazing (and depressing) how many problems can be explained by it, like politicians implementing myopic short-term reforms in order to win the next election (and the future be damned), or to appease some selected and influential group (and be the rest ones left to pay it)

justin_vanw 17y ago

>The first thing that happens, for example, when a law is passed that no one shall be paid less than $106 for a forty-hour week is that no one who is not worth $106 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. Ok, I can't let logic like that slide by. I'll just list off why it is totally junk reasoning: - Assumes that worker is getting 'what he is worth to an employer' currently. This would assume that the worker and the employer are on an equal footing, both in power (workers can be coerced and intimidated into lower wages), and intellect (workers can be tricked and bamboozled), and in information (workers know less about the going rates for labor than an employer, if only because employers have lots of employees, but an employee has only one employer usually). - Assumes the worker is optimally employed to maximize earnings. Lots of people work in fields because they fell into that sort of work, and learning a new language or new skills is hard or unnatural to them. Being fired from such a low paying job may make developing other skills a necessity. Think of the guy working at McDonald's who could be trained to be a lineman for the electric company or a truck driver, or the truck driver who could (if he had more ambition, and was willing to give up an income for a few months to go to trade school) be a mechanic on jet engines. - If everyone is held to the same minimum wage, everyone's costs, therefore the price they charge, goes up. Charging more money lets them afford the more expensive workers. - If workers get more expensive, long term investments in mechanization become more attractive. This lowers costs in the long run, and creates jobs that pay more than the original menial job. All that extra money everyone has because the price of everything is so low due to mechanization means they have plenty of money to spend on luxuries they would never have previously considered, this is called 'Starbucks' and employs lots of people. - Even if the worker does lose his job, modern unemployment insurance schemes will make that relatively painless to the old 'free market' system of going to debtors prison or indentured servitude. A-priori economic arguments are bullshit. It is perfectly possible to prove convincingly that in a system without a government private security firms would enforce law and order. We can be convinced of this because we don't know all the reasons this fails in practice, due to our imperfect understanding of the world. The fact that in every single instance that there has been a lack of a functional police force for more than a few hours things go totally batshit insane should render any such 'convincing' argument totally absurd.

nazgulnarsil 17y ago

if anyone is looking for even simpler material to introduce economics to a broad audience I'd recommend the comic written by peter schiff's father: How an economy grows and why it doesn't Peter is reworking it for reprinting. I plan on buying multiple copies to lend out. PDF warning: http://freedom-school.com/money/how-an-economy-grows.pdf http://freedom-school.com/money/how-an-economy-grows.pdf

tome 17y ago
An entertaining comic which covers the basics well but throws in the complexities of reality as an afterthought stated as fact with no justification: "Basic economic principles do not change with the size of the economy ... direct relationship between self sacrifice, savings, credit, investment, economic incentive, social and economic progress is always the same!" Yeah right. As an introduction to basic economic principles this comic is great, but it takes a firm position on aspects of economic theory that are very much up for debate. I'd call this propaganda.
- nazgulnarsil 17y ago
  in the absence of strong evidence that magic properties "emerge" as a result of dealing with larger scales I tend to believe the simplest explanation.

mhb 17y ago

Also delightful, but significantly more advanced is David Friedman's Price Theory: http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC.html http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC...