This is the first in a series of summaries and analyses on the landmark book Economics in One Lesson
by Henry Hazlitt. The book introduces a layperson to clear economic
thought. No economics background is necessary to understand this
timeless lesson (and the subsequent applications of the lesson) put
forth in this book.
Part One: The Lesson
Hazlitt
begins his monumental book by describing the problems with economic
science, showing that its fallacies are greatly exacerbated compared to
other scientific fields because of special interests in government. The
special interest groups consistently advocate policies that they
benefit from at the expense of everyone else. Many people, however,
believe these fallacies because of man’s nature to see only the
“immediate effects of a given policy, or its effects only on a special
group.” Those people neglect the long-term effects and the implications
on other groups by an economic policy. Hazlitt goes on to explain that
those fallacies do not typically occur in everyday life, but they are
dominating in the field of economics. Long-run effects are sometimes
not seen for many years, so they can easily be hidden and separated
from the policy that created them. Hazlitt reduces his lesson to a
single sentence, “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.”
Most of the fallacies in economics
come from ignoring this essential lesson, but the opposite are can
occur. Classical economists only focused on long-term consequences and
not the immediate damage incurred by certain groups. This error,
however, is not often made. Many people take short run consequences
into account to the extent that they neglect any long term consequences
of policy.
Hazlitt goes on to explain that bad economists can
get their points across because they express half-truths. The bad
economists show the beneficial immediate effects or the effects on a
certain group. This portrayal appeals to audiences while good
economists who try to explain the secondary consequences use long
chains of reasoning that bore audiences. Hazlitt concludes the first
chapter by stating a need to provide examples to both point out
specific fallacies and drive the lesson home.
Hazlitt sets the
theme for the rest of the book in the first chapter. He lays a
foundation for looking at secondary consequences and scrutinizing
policy. If someone were smart enough, he could use this lesson and
reach the same conclusions reached in the examples that follow the
first chapter. Applying the lesson allows for someone to scrutinize
most public policy and see its secondary consequences while at the same
time not requiring any sort of knowledge of praxeological methods. The
beauty of Economics in One Lesson is its ability to establish clear
economic thinking without the need to know the theory and methodology
behind it.
Hazlitt gets the reader thinking like an economist in
the first chapter. The book does not become a lecture telling you what
to think like a typical introductory economics textbook. The chapter
sets off a spark in the mind of the astute reader and leads him to the same
conclusions at the same time that Hazlitt states them. The subsequent
chapters do not lecture about public works, price-fixing, and inflation
for the sake of preaching. The later chapters drive home the lesson
that was put forth in this chapter for the sake of exercising the mind
of the reader and giving him clear examples of how to see the secondary
consequences of economic policy.