Apropos Austrian Aphorisms : henry hazlitt

Imagine

thedo — Fri, 03 Apr 2009 01:47:00 GMT

I often think how unimaginative statists are. When confronted with an argument against government services, or government itself, statists will at some point respond with a fallacy of a false choice.

"Well if the government won't provide X, what then? Do you just want X to not exist?"

Of course, X is anything from national defense to police protection to roads to health care to welfare. (An aside, a point does go to statists for imagining an innumerable amount of Xes for the government to act upon.)

It seems impossible for these people that they could imagine a legitimate alternative to a lack of government in X. I here defer to the wisdom of Henry Hazlitt and Faustino Ballve.

In his "Economics in One Lesson," Hazlitt goes into great depth of not the immediate effects of economic policy but the long-term effects. He further explains the effects of economic policy for not only one group but for all groups. Hazlitt here displays a wide and far-reaching imagination. This is because he has, as he says, developed the practice of using his "third eye."

I came across tonight of a wonderful passage in Faustino Ballve's "Essentials of Economics":

"Economics is not about anything that could be expressed in mathematical terms; its domain is rather that of imagination and invention, of adventure into the unknown, of a hazardous enterprise that is not for the cowardly."

Anyone familiar with Austrian writers, certainly Mises and Rothbard, are well familiar with using imagination to conceive of the greatest theoretical bulldozers to statist economics and intervention between free individuals. Is it any wonder that statists' economic ideas and political ideas are so dull, unimaginative, and harmful? Because they lack a keen "third eye" they are incapable of stating any sound economic position. & further, because they are myopic, they cannot envision a world where the government man does not take from the free man.

The prescience of Hazlitt

thedo — Sat, 07 Feb 2009 23:31:00 GMT

Shortly after the erection of Fannie Mae, and nearly 30 years before that of Freddie Mac and the legislation of the Community Reinvestment Act, Henry Hazlitt was there. The voice of the Austrian school could see it with his refined eye, as only he could. 'It,' of course, is the unseen consequences of government action.

From the Fiftieth Anniversary edition of Economics in One Lesson, p. 33-4:

"The case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget that what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to "buy" houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase overall national production but encourage malinvestment."

Economics in a job interview

thedo — Wed, 10 Sep 2008 20:58:00 GMT

My month-plus-long search for job stability turned onto the final 100m today. For over the past month I have been seeking a full-time position. Finding nothing, I turned to temporary work at a local staffing agency and easily found temp. work. The work wasn't hard and I made enough to pay for the necessary bills. I learned just how capable the market is in employing people and putting food on peoples' tables—so long as they are willing to "swallow their pride" and do work that isn't ideal. Humorously enough, I've been part of the poorest demographic, students, and accumulated thousands of dollars of debt chasing after that noble ideal of higher education, yet I never considered myself poor until I graduated and had to "manage by." As a result, and at the same time I read a financially awakening book by Dave Ramsey called "The Total Money Makeover," I learned the value of a budget and not spending beyond my means. It is just like if you want to get fit: You don't eat more calories (spend more money) than you expend (make).

But as I said, I'm running down the final 100m now after interviewing with Almon, Inc., the technical documentation contractor of John Deere, and receiving a full-time job offer. My interview today was the most interesting and pleasing interviews I've ever had. The reason was due to simply talking with the people I'd be working under and with and listening to their job anecdotes and how they showed economic truths.

Anecdote 1: John Deere is having to shut down an operation in Canada and relocate to Mexico. The reason? The oft-maligned "cheaper wages." But the full story I was told, that Canadian labor laws forced Deere to pay its employees the same as the automotive industry, upheld the basic fact that labor unions exclude possible employment, raise wages, and that minimum wage laws, in general, increase unemployment. Deere would've like to have kept its plant and employed many Canadians, and many Canadians would've surely enjoyed employment at Deere. However, because Deere could not afford to pay its employees such a high price at that location they had to relocate, increasing the number of unemployed Canadians who must now begin the arduous task of job searching again as I did.

Anecdote 2: Almon, Inc. has not grown considerably in size over the past decade but is achieving much higher productivity than simply 10 years ago. This story illustrates the true economic path to progress: capital reinvestment. Almon, Inc. did not become more productive because it highered more people and raised wages. It did so by reinvesting its capital, which later allowed the company to higher more people and raise wages because it could afford to do so. This is an economic point few understand, especially those who would say that companies becoming so rich should first raise wages, higher more people, or be taxed more. This is fundamentally unsound. A business cannot redirect its capital investment to wage raises or increased employment without first reinvesting capital to cover its costs. The same goes for taxes: the more a business is taxed, the less it has to reinvest for capital, which means, in turn, it'll have even less for raising wages and hiring new employees.

After reading authors of the "Austrian" school of economics such as Henry Hazlitt and Ludwig von Mises, it has been refreshing to see their economic theories proven by real-life examples. It was refreshing to know, no, the government doesn't need to "create jobs" for people to be employed, nor does the government need minimum wage laws to provide people with a "just wage," nor does it need to tax and implore businesses to "share the wealth."

So I know, even more, that I cannot believe a word Barack Obama or John McCain say about leading the American economy back on course because they both believe in job creation, which only removes more business from the private sector and increases taxes (because more people on the government payroll means more people will have to pay their wages). They both believe in minimum wage laws and labor unions. And they both believe in taxes, for sure, but also taxing businesses and the rich. These men, and their parties, are not different.

The real world demonstrates that the three aforementioned areas do not need government intervention. The real world demonstrates the two aforementioned presidential candidates are not needed.