Henry Hazlitt did the seemingly impossible, something that was and is a magnificent service to all people everywhere. He wrote a line-by-line commentary and refutation of one of the most destructive, fallacious, and convoluted books of the century. The target here is John Maynard Keynes's
General Theory, the book that appeared in 1936 and swept all before it.
In economic science, Keynes changed everything. He supposedly demonstrated that prices don't work, that private investment is unstable, that sound money is intolerable, and that government was needed to shore up the system and save it. It was simply astonishing how economists the world over put up with this, but it happened. He converted a whole generation in the late period of the Great Depression. By the 1950s, almost everyone was Keynesian.
But Hazlitt, the nation's economics teacher, would have none of it. And he did the hard work of actually going through the book to evaluate its logic according to Austrian-style logical reasoning. The result: a 500-page masterpiece of exposition.
Murray Rothbard was blown away.
Keynes' General Theory is here riddled chapter by chapter, line by line, with due account taken of the latest theoretical developments. The complete refutation of a vast network of fallacy can only be accomplished by someone thoroughly grounded in a sound positive theory. Henry Hazlitt has that groundwork.
An "Austrian" follower of Ludwig von Mises, he is uniquely qualified for this task, and performs it surpassingly well. It is no exaggeration to say that this is by far the best book on economics published since Mises' great Human Action in 1949. Mises' work set forth the completed structure of the modern "Austrian" theory. Hazlitt's fine critique of Keynes, based on these principles, is a worthy complement to Human Action.
Henry Hazlitt, a renowned economic journalist, is a better economist than a whole host of sterile academicians, and, in contrast to many of them, he is distinguished by courage: the courage to remain am "Austrian" in the teeth of the Keynesian holocaust, alongside Mises and F. A. Hayek. On its merits, this book should conquer the economics profession as rapidly as did Keynes.
But whether the currently fashionable economists read and digest this book or not is, in the long run, immaterial; it will be read, and it will destroy the Keynesian System. At the very least, there is now a new generation under thirty-five, to bring this message to fruition.
Far from being a dull read, this book has all the brightness and clarity we've come to expect from Hazlitt. He is a dazzling writer, and one can't be thrill to see him in the ring with the giant Keynes. By the time he delivers the knock-out punch--taking on Keynes's suggestion that we nationalize investment--there is nothing left of his opponent.
By now, Keynesian theory is so woven into both theory and policy that hardly anyone notices it anymore. But this Hazlitt book helps us stand up and take notice of the extent to which we've allowed sheer fallacy to dominate our thinking.
This new edition by the Mises Institute is a pleasure to release, after so many years of being out of print. Hazlitt lives again to give Keynes the treatment he deserves and yet no one else dared give him.
Table Of Contents
Chapter Page
Acknowledgments V
I. Introduction 1
1. Canonization 1
2. Uses Of Refutation 4
3. A Path-Breaking Pioneer? 6
4. The " General" Theory 9
Ii. Postulates Of Keynesian Economics 13
1. What Is The Classsical Theory Of Employment? 13
2. Wage-Rates And Unemployment 17
3. No "General Level" Of Wage-Rates 25
4. "Non-Euclidean" Economics 29
Iii. Keynes Vs. Say's Law 32
1. Keynes's "Greatest Achievement" 32
2. Ricardo's Statement 36
3. The Answer Of Haberler 40
4. To Save Is To Spend 42
Iv. Overture 44
1. Effective Demand 44
2. The Propensity To Consume 49
3. Derision Of Thrift 54
V. "Labor Units" And "Wage Units" 60
Vi. The Role Of Expectations 66
Vii. "Statics" Vs. "Dynamics" 69
Appendix On "User Cost" 75
Viii. Income, Saving, And Investment 78
1. Confusing Definitions 78
2. Why "Saving" Equals "Investment" 81
3. Saving As The Villain 85
4. Keynesian Paradoxes 89
5. Can Savings Be Printed? 93
Ix. "The Propensity To Consume": I 98
1. Digression On Mathematical Economics 98
2. The "Fundamental Psychological Law" 106
3. Ambiguity Of The "Consumption Function" 115
4. The Meaning Of "Saving" 120
5. The Sinking-Fund Bogey 123
6. In A Nutshell 127
X. "The Propensity To Consume": Ii 128
1. Reasons For Not Spending 128
2. The Fear Of Thrift 131
Xl "The Multiplier" 135
1. The Magic Of It 135
2. Not Fixed Or Predictable 138
3. "Saving" And "Investment" Again 142
4. "Investment" Means Government Spending 148
5. Paradox And Pyramids 152
Xii. "The Marginal Efficiency Of Capital" 156
1. Slippery Terms 156
2. Interest Rates Embody Expectations 158
3. Effects Of Expected Inflation 162
4. Does Lending Double The Risk? 165
5. Confusions About "Statics" And "Dynamics" 168
Xiii. Expectations And Speculation 171
1. The State Of Confidence 171
2. Fictions About The Stock Market 172
3. Gambling, Speculation, Enterprise 179
Xiv. "Liquidity Preference" 186
1. No "Liquidity" Without Saving 186
2. Money Is A Productive Asset 189
3. Interest Is Not Purely Monetary 193
Xv. The Theory Of Interest 197
1. An "Unsettled Problem" 197
2. Productivity Theories 198
3. Time-Preference Theories 202
4. Combined Interest Theories 206
5. Real Plus Monetary Factors 212
Xvi. Confusions About Capital 217
1. On Going Without Dinner 217
2. Saving, Investment, And Money Supply 224
3. Roundabout Production 229
4. Abundance Unlimited 231
Xvii. "Own Rates Of Interest" 236
1. Speculative Anticipations Are Not "Interest" 236
2. Impossible Miracles 241
3. Ought Wages To Be Rigid? 243
4. We Owe Our Lives To Saving 244
5. Keynes Vs. Wicksell 248
6. "Equilibrium" Of An Ice Cube 250
Xviii. The General Theory Restated 253
1. Economic Interrelationships 253
2. "Stable" Unemployment 257
3. The Demand For Labor Is Elastic 259
4. Stabilize Wage-Rates—Or Employment? 261
Xix. Unemployment And Wage-Rates 263
1. Unemployment Is Caused By Excessive Wage-Rates 263
2. Wage-Rates Are Not Wage-Income 267
3. "Elasticity" Of Demand For Labor 269
4. Fallacies Of "Aggregative" Economics 273
5. The Attack On Flexible Wage-Rates 276
6. Inflation Vs. Piecemeal Adjustment 279
7. A Class Theory Of Unemployment 286
Xx. Employment, Money, And Prices 288
1. An Unproved "Functional" Relationship 288
2. General Value Theory Vs. Monetary Theory 291
Xxi. Prices And Money 296
1. "Costs" Are Prices 296
2. The Positive Theory Of Money 299
3. What Theory Of Prices? 301
4. Another Digression On "Mathematical" Economics 305
5. "Elasticity" Of Demand And Supply Cannot Be Measured 309
6. Sacrosanct Wage-Rates, Sinful Interest Rates 312
7. Monetary Inflation Preferred To Wage Adjustment 314
8. Those Arbitrary Moneylenders 316
Xxii. The "Trade Cycle" 319
1. A "Sudden Collapse" Of The
"Marginal Efficiency Of Capital"? 319
2. When Governments Control
Investment 322
3. The Life Of Durable Assets 326
4. A Policy Of Perpetual Inflation 329
5. More Carts Before Horses 332
6. Sun-Spots Before The Eyes 333
Xxiii. Return To Mercantilism? 337
1. "Let Goods Be Homespun" 337
2. Running Comment On Running Comments 340
3. Wise Mercantilists, Stupid Economists 342
4. The Religion Of Governmental Controls 347
5. Canonization Of The Cranks 352
6. Mandeville, Malthus, And The Misers 355
7. The Contribution Of Mill 361
8. J. A. Hobson And Major Douglas 371
Xxiv. Keynes Lets Himself Go 374
1. Inequalities Of Income 374
2. The Euthanasia Of The Rentier 376
3. Robbing The Productive 380
4. The Socialization Of Investment 385
5. The "Economic Causes Of War" 390
6. The Power Of Ideas 391
Xxv. Did Keynes Recant? 393
1. "The Classical Medicine" 393
2. The Underlying Contradictions 395
Xxvi. "Full Employment" As The Goal 399
1. Is It Definable? 399
2. Is It Attainable? 405
3. Is It Unconditionally Desirable? 406
Xxvii. "The National Income Approach" 409
1. Is National Income Determinate? 409
2. Its Dangers For Policy 415
Xxviii. The Keynesian Policies 421
1. Do Deficits Cure Unemployment? 421
2. Does Cheap Money Cure Unemployment? 422
3. Race With The Printing Press 425
Xxix. Summary 427
A Note On Books 437
Appendix A-The 1919 Prophecies 440
Appendix B 445
Appendix C 447
Appendix D 448
Index 451 paperback
ISBN 978-1-933550-11-4 paperback