This book is an excellent, concise introduction to one particular kind of economic thinking: the idea that an economy works best if left to free market forces alone, and that any kind of government intervention is bad and disturbs the economy, rather than improving it.

This is what I like about the book: I have never seen such a clear exposition of this line of thinking. And this is my greatest disappointment: That these ideas are presented as the only possible way to understand economics, the only conclusion that any rational mind would naturally arrive at. Those who don't are, in the words of the author: stupid, apostles of a different faith, enemies.

In other words, this book is not a rational treatise of economics, but a political pamphlet. You realize this a few pages in, and you have to live with it for the rest of the book.

That being said, many of the ideas are thought-provoking, due to the crystal clear simplicity with which they are stated. I constantly wondered: Is this right? Who would claim the opposite? Why? Who has the better arguments?

So in all, it's not a bad book. But you have to start thinking where the author left off.

Filled with pure gold. Tough to argue with any of these points unless you think with feels.

Highlights:

The art of economics consists in looking not merely at the immediate hut 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.

There is no more persistent and influential faith in the world today than the faith in government spending.

Everything we get, outside of the free gifts of nature, must in some way be paid for. The world is full of so-called economists who in turn are full of schemes for getting something for nothing. They tell us that the government can spend and spend without taxing at all; that it can continue to pile up debt without ever paying it off, because “we owe it to ourselves.” We shall return to such extraordinary doctrines at a later point. Here I am afraid that we shall have to be dogmatic, and point out that such pleasant dreams in the past have always been shattered by national insolvency or a runaway inflation. Here we shall have to say simply that all government expenditures must eventually be paid out of the proceeds of taxation; that to put off the evil day merely increases the problem, and that inflation itself is merely a form, and a particularly vicious form, of taxation.

There is a similar effect when personal incomes are taxed 50, 60, 75, and 90 percent. People begin to ask themselves why they should work six, eight, or ten months of the entire year for the government, and only six, four, or two months for themselves and their families. If they lose the whole dollar when they lose, but can keep only a dime of it when they win, they decide that it is foolish to take risks with their capital. In addition, the capital available for risk taking itself shrinks enormously. It is being taxed away before it can be accumulated. In brief, capital to provide new private jobs is first prevented from coming into existence, and the part that does come into existence is then discouraged from starting new enterprises. The government spenders create the very problem of unemployment that they profess to solve.

Government “encouragement”to business is sometimes as much to be feared as government hostility. This supposed encouragement often takes the form of a direct grant of government credit or a guarantee of private loans.

Arkwright invented his cotton-spinning machinery in 1760. At that time it was estimated that there were in England 5,200 spinners using spinning wheels, and 2,700 weavers—in all, 7,900 persons engaged in the production of cotton textiles. The introduction of Arkwright’s invention was opposed on the ground that it threatened the livelihood of the workers, and the opposition had to be put down by force. Yet in 1787—twenty-seven years after the invention appeared—a parliamentary inquiry showed that the number of persons actually engaged in the spinning and weaving of cotton had risen from 7,900 to 320,000, an increase of 4,400 percent.

It is true that a few persons can profit at the expense of the rest of us from this minute arbitrary subdivision of labor—provided it happens in their case alone. But those who support it as a general practice fail to see that it always raises production costs; that it results on net balance in less work done and in fewer goods produced. The householder who is forced to employ two men to do the work of one has, it is true, given employment to one extra man. But he has just that much less money left over to spend on something that would employ somebody else. Because his bathroom leak has been repaired at double what it should have cost, he decides not to buy the new sweater he wanted. “Labor” is no better off, because a day’s employment of an unneeded tilesetter has meant a day’s employment of a sweater knitter or machine handler. The householder, however, is worse off. Instead of having a repaired shower and a sweater, he has the shower and no sweater. And if we count the sweater as part of the national wealth, the country is short one sweater. This symbolizes the net result of the effort to make extra work by arbitrary subdivision of labor.

But the provision in the Federal law, that an employer must pay a worker a 50 percent premium above his regular hourly rate of wages for all hours worked in any week above forty, was not based primarily on the belief that forty-five hours a week, say, was injurious either to health or efficiency. It was inserted partly in the hope of boosting the worker’s weekly income, and partly in the hope that, by discouraging the employer from taking on anyone regularly for more than forty hours a week, it would force him to employ additional workers instead. At the time of writing this, there are many schemes for “averting unemployment” by enacting a thirty-hour week.

When your money is taken by a thief, you get nothing in return. When your money is taken through taxes to support needless bureaucrats, precisely the same situation exists.

As a postscript to this chapter I should add that its argument is not directed against all tariffs, including duties collected mainly for revenue, or to keep alive industries needed for war; nor is it directed against all arguments for tariffs. It is merely directed against the fallacy that a tariff on net balance “provides employment,” “raises wages,” or “protects the American standard of living.” It does none of these things; and so far as wages and the standard of living are concerned,
it does the precise opposite.

Paradoxical as it may seem to some, it is just as necessary to the health of a dynamic economy that dying industries be allowed to die as that growing industries be allowed to grow.

The whole argument of this book may be summed up in the statement that in studying the effects of any given economic proposal we must trace not merely the immediate results but the results in the long run, not merely the primary consequences but the secondary consequences, and not merely the effects on some special group but the effects on everyone.

The natural consequence of a thoroughgoing overall price control which seeks to perpetuate a given historic price level, in brief, must ultimately be a completely regimented economy. Wages would have to be held down as rigidly as prices. Labor would have to be rationed as ruth-lessly as raw materials. The end result would be that the government would not only tell each consumer precisely how much of each commodity he could have; it would tell each manufacturer precisely what quantity of each raw material he could have and what quantity of labor. Competitive bidding for workers could no more be tolerated than competitive bidding for materials. The result would be a petrified totalitarian economy, with every business firm and every worker at the mercy of the government, and with a final abandonment of all the traditional liberties we have known. For as Alexander Hamilton pointed out in the Federalist Papers a century and a half ago, “A power over a man’s subsistence amounts to a power over his will.”

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. In brief, for a low wage you substitute unemployment. You do harm all around, with no compara-ble compensation.

The more the individual worker produces, the more he increases the wealth of the whole community. The more he produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid. Real wages come out of production, not out of government decrees.

we are driven to the conclusion that unions, though they may for a time be able to secure an increase in money wages for their members, partly at the expense of employers and more at the expense of nonunionized workers, do not, in the long run and for the whole body of workers, increase real wages at all.

The concept of functional wages has been taken over, in a per-verted form, by the Marxists and their unconscious disciples, the purchasing-power school. Both of these groups leave to cruder minds the question whether existing wages are “fair.” The real question, they insist, is whether or not they will work. And the only wages that will work, they tell us, the only wages that will prevent an imminent economic crash, are wages that will enable labor “to buy back the product it creates.” The Marxist and purchasing-power schools attribute every depression of the past to a preceding failure to pay such wages.

For Paul H. Douglas in America and A.C. Pigou in England, the first from analyzing a great mass of statistics, the second by almost purely deductive methods, arrived independently at the conclusion that the elasticity of the demand for labor is somewhere between –3 and –4. This means, in less technical language, that “a 1 percent reduction in the real rate of wage is likely to expand the aggregate demand for labor by not less than 3 percent.”1 Or, to put the matter the other way, “If wages are pushed up above the point of marginal productivity, the decrease in employment would normally be from three to four times as great as the increase in hourly rates”2 so that the total income of the workers would be reduced correspondingly.

Laissez Faire Capitalism Propaganda!!!

This book lives up to it's promise.

I can confidently claim that this book granted me the understanding of basic economic principles and equipped me with knowledge to recognize common fallacies.

The core lesson is straight forward. A coherent interpretive insight into a complicated economic decision can be made through keeping two principals in mind. The first being the consideration of how that decision affects the whole community at large, rather than a special group. Secondly, to always regard the effects of that decision in the long run, as opposed to short-term effects.

Five stars all the way!

For a book that was written so long ago, this book is amazingly relevant to today. It clearly explains how things like stimulus packages, government subsidies, nationalization, currency inflation etc., aren't, and can't be, magic solutions that fix the economy. It gives examples of times these types of things have been tried in the past and haven't worked and why they won't work today and will never work. If you are skeptical of the hundreds of billions of dollars being printed and shuffled around from tax payers to businesses, but can't quite explain exactly why it's wrong, this book is a great way to solidify your thoughts.

It is one of those rare books that challenged my whole perception of the world. Every chapter taught me something new and the book has sharpened my thinking abilities.

First I must point out, that I find the author simply admirable, he reminds me of those intellectual and sharp-tongued seniors, who not only don’t mind offending others, but may secretly enjoy it. His little bitter remarks made this seriously-written book so much better, for that alone it deserves a good rating.

Talking about the book itself, it is a great introduction to anyone who is interested in libertarian economics and free market theory. The author discusses many ideas in a simplified way while giving real-life examples. He also debunks some myths and gives you a material to view politician promises in a more critical manner. However, it wont teach you everything about economics and is pretty one-sided.

“The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”

"The whole of economics can be reduced to a single lesson, and that lesson can be reduced 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.

Nine-tenths of the economic fallacies that are working such dreadful harm in the world today are the result of ignoring this lesson."

Hazlitt covers a variety of topics including: tariffs, exports/imports, parity, subsidies, commodities, price fixing, minimum wage, unions, profits, inflation, and most importantly, government borrowing.

"The government cannot keep piling up debt indefinitely, for if it tries, it will someday become bankrupt."

"Deficit spending, once embarked upon, creates powerful vested interests which demand its continuance under all conditions."

"The country as a whole cannot get anything without paying for it."

Although a lot of time has passed since this book was first published, and certain examples might seem dated, the basic information shared still remains pertinent, especially when making decisions between candidates and their proposals in an election year. Look for all consequences of an economic proposal: who stands to gain, who stands to lose. For there WILL be consequences--some intended, some not.

The book is available free in the public domain. Recommended.

I think a better title for this book should "Amoral Economics in One Lesson - I hate government and here are some simplistic arguments as to why you should too". As far as I can tell the arguments of this book is the economics is a zero-sum game, government spending is uniformly bad, humans are rational economic actors and charity & kindness have no place in economic thought.

Economics is not a zero sum game, wealth is created and sometimes the government is the only agency to be able to do so. The easiest examples if this are huge research projects undertaken by government which is the only institution able to to take such huge risks. The atom bomb, the space program, cancer research are all examples and countless jumps in technology that built wealth originated from these.

The book is convinced without any real proof that all government spending is inefficient and all private spending is. And weirdly the only proof it gives of the latter is that inefficient spenders are weeded out. The problem of course is that a new spender always come into existence. The private spender is not this one person who keeps learning from one's mistakes and never repeats it. If that were true there would be no suckers in the share market.

Finally the almost unnerving amorality with which the book treats humans is disturbing. The main reason government needs to spend on big projects is that it can raise the standard of living of a section of people by spreading the loss across another section that can absorb it. That is the nature of being a part of a human and indeed humane society. In Mr. Hazlitt's society the weak and downtrodden deserve no-one's help and they ought to be destroyed by the cruel hand of the market. It is shocking to think that such amorality can be used influence economic discourse.

Finally an interesting argument the book makes is that because humans are unable to see the invisible effect of government spending and taxes i.e. all the money taken away from private hands but we do see the direct effect of public works we are fooled into believing that this spending is better. Here is the problem this is completely hypothetical argument borne out of an almost fetishistic belief in free market. The point is Mr. Hazlitt does not provide any numbers or studies that demonstrate that lowered taxes would have produced a better standard of living. In fact I strongly suspect that in this amoral economic universe there is no hope for the weak and downtrodden because they cannot prove their efficiency to a private lender and must keep growing poorer and die in utter penury.

At best this book is rehash of tired old economic argument built on the dogma of free market capitalism which makes simplistic assumptions about humans & efficiency and quickly brushes aside any counterargument by waving the around the invisible hand of the free market as the panacea.

Dated slog written in 1946 by someone who was obviously still angry about FDR and the New Deal. Why is it so popular now? My theory is that the same people who believe this dreck are the ones who think America needs a certain NY real estate developer.

Excellent overview of basic economics! The information was condensed well and generally not too difficult to understand. His insight into government and the economy applied shockingly well to today, and his first “basic lesson” is something that can be applied to just about everything in life. Highly recommend.

I could not finish this book. It is trite, misleading, and misstates history. Here are my notes:

Notes on Economics in One Lesson, by Henry Hazlitt (1946)

I'm with Hazlitt on the broken window fallacy: destruction of value needs to be added to the balance of new value created in replacing the destroyed.

But the next step is NOT a logical extension (p. 14): "But the more money is turned out in this way, the more the value of any given unit of money falls.“ Not true. Money has no value at all. It is merely a means of storing value. Macro is not micro.

This fallacy is clear from the example he uses (pp 14-15): "But what really takes place is a diversion of demand to these particular products from others." No, no, no. The Second World War sparked a huge increase in the entire world economy, not just a diversion of demand from one thing to another. Why? Because there was a huge public investment in technology, which vastly increased labor productivity. A single worker could produce vastly more steel by the end of the war than he could at the beginning. An increase in the money supply which matched the increase productivity of labor simply allowed that labor could trade goods more efficiently. It had nothing to do with diversion. They key was public investment in the economy, where demand was artificially depressed (as a result of the depression), and massive public spending, which provided people with the money to buy the goods they wanted.

"Mere inflation—that is, the mere issuance of more money, with the consequence of higher wages and prices—may look like the creation of more demand. But in terms of the actual produc- tion and exchange of real things it is not." This is absolutely true. But the key is "mere." However, inflation tied to increased productivity does in fact reflect greater demand. If I used to take three days to build a car, but now I can build a car in an hour, then cars have, in a very real sense, become cheaper. I can produce a lot more cars, and can afford to charge a lot less for them. If the same is happening in every area of production, then everyone can buy a lot more stuff, and be much better off. However, if the money supply is fixed, or contracting, as happened during the depression, then I can not in fact buy more, because there will not be enough cash around to store the value of all these new purchases. Printing more money makes sense, when there is a lot more stuff being produced.

He admits this point, bit then discards and ignores it. "There may be, it is true, offsetting factors. Technological discoveries and advances during the war, for example, may increase individual or national productivity at this point or that." But it wasn't just "at this point of that." It was worldwide.

The following chapter simply builds on this fallacy (p. 19): "Therefore for every public job created by the bridge project a private job has been destroyed somewhere else." This is true ONLY if the problem is a lack of supply, rather than a lack of demand. If the problem is lack of money and this lack of demand, then the government can borrow money, build a bridge, pay workers, and those workers will now have money to spend. This money would not have been spent by anyone, but for the bridge and associated borrowing. Corporations must make a profit. Thus, if they are sitting on piles of money, they will not spend it to create demand, because too much of that demand would benefit competitors. They will only spend the money if there is a demand for what they make. And that demand requires consumers with money to spend. Building a bridge solves that problem. The government can spend the money, without worrying about whether it will "profit" from a specific expenditure, because taxes are paid by everyone, government will "profit" regardless of how the money is spent.

Of course, a lot of government spending does actually increase wealth directly, by increasing the productivity of labor. But the key is, government spending (in times when there is pent up demand) does not HAVE to increase efficiently. How does one know if conditions are right? Easy. Look at corporate balance sheets: if they have large cash reserves, it means there is not enough demand. If they have unused production capacity (eg., only running one shift instead of three), then there is no unmet demand.

At this point I had to stop, as it became clear he was simply going to continue building on these same fallacies, over and over and over. I have better things to do with my life.

As of this writing, the 1946 first edition of this book, a good introduction to Libertarian thought, is available as a free, 200-page, slow-downloading .pdf file from the URL on the Goodreads page for this book. The link is just below the ISBN and original title (same link here). For a free, but faster-loading, .html version of this book from the same source, readable in any web browser, click here.

However, like an idiot, I paid $9.99 on Amazon. It's the second edition of the book, from 1978, with revisions and an additional chapter at the end. It's not worth the price. That's why I need a book on economics.

This book is admirable in many ways but I disagree with it. Economist Bradford DeLong accurately diagnoses the shortcomings of this book on his blog here. (To find the post, put Hazlitt into the search bar on the right.)

The admirable part is that the book is short, simple, and clear. It takes a person with courage of convictions to write so clearly. If you disagreed with certain points, as I did, it's easy to pinpoint them. There's no equivocating.

However, there is bullying, and also insults for people of good will who disagree. In this respect, Hazlitt is the spiritual grandfather of the Internet Zombie Army of Libertarian Trolls who ceaselessly populate this and other sites. I wish I could honestly write “If Hazlitt were alive today, he'd be appalled”, but, from the tone of this book, I have to conclude that he'd be right up there on the front lines of the tiresome “My Way Or The Highway” squad.

In summary: worth downloading for free. Not worth paying for.