In these times of massive government budget deficits ($1.6 TRILLION deficit on $3.8 TRILLION spending for fiscal 2011 alone), when even a few billion dollars of cuts in spending are called “extreme” or “draconian” by those policy makers in Washington whose power base is firmly entrenched in the special interest groups committed to keep those government spending dollars flowing, this book is more of a must read than ever before. A deep understanding of economics can be had by reading this book and it will not require an understanding of calculus, or an analysis of complicated mathematical proofs. As the author says, “When we study the effects of various proposals, not merely on special groups in the short run, but on all groups in the long run, the conclusions we arrive at usually correspond with those of unsophisticated common sense.”
Economics in One Lesson was written after the “new” theories of economics espoused after the Great Depression, largely by John Maynard Keynes in his book The General Theory of Employment, Interest, and Money in 1936. Keynes theorized that the cause of the Great Depression was a lack of adequate consumer spending, and that the corrective government policy is for the government to simply make up for that lack in consumer spending by increasing government spending. Economics in One Lesson clearly points out the fallacies of such thinking.
A summary of the “one lesson” is encapsulated in this quote from the book:
“Many things that seem to be true when we concentrate on a single economic group are seen to be illusions when the interests of everyone … are considered. To see the problem as a whole, and not in fragments: that is the goal of economic science.”

The author describes the two central errors that occur and damage our overall economy because policy makers tend to:
1) focus only on particular interest groups to the neglect of others, and
2) consider only the immediate consequences of an act or proposal.

Next the author applies the lesson to several policies (government spending as stimulus for the economy, minimum wage laws, overgenerous and extended unemployment relief payments, redistributive government policy, consequences of government deficits and debt, inflation, government loans or guarantees of loans) and shows the long-term, overall disastrous effects of these policies.
Consider the policy idea of government guarantee of mortgages. In 1946 the author, prophetically, wrote this:
“Government-guaranteed home mortgages, especially when a negligible down payment or no down payments 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 over-stimulate 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 mal-investment.”

Did the government policy makers who declared that home-ownership is a “right”, and forced banks to grant mortgages to every living person regardless of their credit worthiness and with virtually no down-payments, foresee the resultant housing market bubble that grew from the 1970’s through 2008 when the bubble finally burst? Did they consider the long-term results of their policies, or did they just see the Pollyanna good they thought they were doing for the people “buying” homes they couldn’t afford and would eventually not pay for. We now have a higher than ever before glut of housing on the market (many such homes stand vacant), more foreclosures in process and yet to begin the process, housing starts for new construction will likely not recover for years, many more mortgages are “underwater”, and a huge fall in the home values of virtually every American. What a prime example of do-gooder government policy in its full glory of unintended consequences.

Read this book. We all need to have an understanding of economic principles as our Country faces massive deficits and debt from 80 years of unpaid for government promises that we clearly cannot afford.
See by blog series: Budget Deficit Crisis at www.TheEconoMom.com

5 to 5 star rating. Highly recommended.

- Great book for all disciplines, Henry Hazlitt teaches you to think in the economic science “to see the problem as a whole, and not in the fragments”
- Will not teach alike textbook concepts in micro or macro economics, instead explaining most common economic happenings such as inflation, minimum wage, tariffs and profits
- Explain the common fallacy in those economic events in simple logical reasoning
- Small pages for every chapter but enough to make reader understand the concept
- Basic economic knowledge needed to fully grasp the concept


I believe all aspiring economists, despite their school of thoughts, or even non economics background should read this book to train their deductive reasoning which Hazlitt said “to see the problem as a whole and not in the fragments”. Many of us, even the prominent economist or bureaucrats, tend to make a stance on something in short sighted thinking. Only tend to think at the sake of certain groups without carefully determine the possible consequences to other groups or tend to think the short result that visible to the eye, without considering the hidden effect that will not arise due to the action. That is what Hazlitt continuously teaches us in every 24 chapters, to always carefully foresee the effects of one policy to all groups and within all timeframe.

That main concept of thinking is taught in the form of explaining the common fallacy in daily economic events. For example the policy makers who propose legislation of full employment as the goal of the nation. Perhaps we think there is nothing wrong with the proposition as people need job to survive. However, if we apply the economic science thinking thoroughly, this notion has its fallacy. It disrespects the output of production. It means that any approach is good as long as it is create jobs. It means that creating railroad is not good for economy as we could employ hundred thousands of labor to transport our goods from one place to other. It also means that continuous war is good for the country as it provides full employment for the country.

Economics in one lesson will not provide the detail concepts of micro nor macro, but the most typical economic activity that always become the debate in society. He could explains the fallacy of each topics in brief and simple logic, hence non economic background could easily absorb the idea. However, basic understandings in economic are needed to fully comprehend the idea as this book will go directly peel the fallacy in each topics.

To conclude, this book is highly recommended for everyone, who would like to shape their economic thinking, that is to see the problem as a whole, and not in the fragments. As Hazlitt said in the last chapter of the book “Economics is a science of recognising secondary consequences. It is also a science general consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on general interest in the long run”

Economics is one of those topics on which I've intended to get better educated for some time now. The events since the latter half of '08 have definitely bumped that intention up several notches in my list of priorities. The first problem I really had to tackle was figuring out where to start, which is to say, deciding exactly what and whom I should be reading. I knew just enough to determine that pretty much anything from a Keynesian perspective—which, with differences that are in the final analysis inconsequential, has represented the mainstream positions of both the political right and left for the last several generations—was out. Also out was any nonsense coming out of the far left, i.e. socialism or fascism, unfortunately including a number of Christian writers who have adopted these positions and labored to make them somehow compatible with their Faith.

Eventually I found out about the Austrian School Economists, generally liked what I was hearing from that perspective (with important qualifications noted below) and decided to dive in by first tackling Henry Hazlitt's (1894-1993) well lauded primer Economics in One Lesson. Turns out that it was a great choice. Who would have ever thought that a book on economics could be a page turner on par with an Agatha Christie novel? Far from seeming stale or out of date (the volume was first published in 1946 and last updated by the author in 1979), the material is immanently relevant given our current state of affairs, and delightfully readable to boot. I started off underlining what I thought were key sentences from the Prologue and Chapter One, and then gave up when I realized that the whole thing needed underlining! (Just read the first two-and-a-half pages from Chapter One on Amazon and you will see what I'm talking about.)

Hazlitt's thesis statement, for which the book as a whole is simply a cyclical reiteration is as follows:

…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.(p17)

In each chapter of the book, Hazlitt re-illustrates this fundamental principle by applying it to matters such as government subsidies, government attempts at manipulating supply and demand via price fixing, controls on imports and exports (including tariffs), rent controls, minimum wage laws, inflation, and a number of other all too familiar phenomena.

To sum up, I really enjoyed and profited from this book, and plan to read further on this topic from other writers of the Austrian School. That said, I don't want to hold forth a generally glowing review without acknowledging that these guys do have their own blind spots and that those are not insignificant. As a Christian, I am bound to affirm that the fear of the Lord is the beginning of all knowledge and wisdom (Proverbs 1:7; 9:10; 15:33). That includes wisdom and knowledge in the area of economics. Through the mechanism of common grace, I believe that the Austrian Economists are generally right-on in their astute observations of how the economic aspect of the world works and are generally far less deluded than other competing schools of thought on the matter. However, their essentially secular viewpoint does leave them open to certain deceptions and shortcomings, the chief of these being the fundamental assumption that man is basically good and that his greatest problem is not sin but ignorance. In addition, I must also bear witness that true and enduring freedom and liberty—in all their various forms, including economic—are blessings that are only found in Jesus Christ. Any attempts to idolize individual freedom and liberty by abstracting them and attempting to construct a comprehensive worldview around them (e.g. Ayn Rand, a noted favorite of both the Austrian Economists and their Libertarian political chums) is just as much doomed to frustration, failure and wretchedness as any other false ideology.

This was so boring and I’m not sure what possessed me to download it. I shall stick to Fae, demons and murderers moving forward.

Una breve lección, ya enseñada por Frederic Bastiat un siglo antes, con 24 aplicaciones prácticas. Todas tan vigentes actualmente como lo estaban en su primera edición de 1946. Falacias económicas soportadas por argumentos basados en el corto plazo y en un grupo concreto de afectados. Eso es lo que se ve. Lo que no se ve suele ser el impacto a largo plazo y en todos los afectados.

Some commentary is a little dated (last revision was the 1970's). But content overall is good. Doesn't take into account things like greed or selfish thinking, but i don't know how you would account for that anyways, so its fine.

4.5 -- "Economics is a science of recognizing secondary consequences. It is also a science of seeing general consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run."

This book served as my initial foray into comprehending the fundamental principles of economics, and I thoroughly relished delving into Mr. Hazlitt's enlightening lessons. The clarity and accessibility of the writing made the experience highly enjoyable. "Economics in One Lesson" is a worthwhile read for anyone looking to gain a foundational understanding of economics and its relevance to the world. Its accessibility, timelessness, and practical examples make it an excellent resource for those interested in economic literacy.

In essence, the entire book can be distilled into one concise sentence: the art of economics consists of looking not merely at the immediate but at the longer effects of any act or policy; it consists of tracing the consequences of that policy not merely for one group but for all groups.

At the beginning of the book, Mr. Hazlitt employs a simple story to illustrate his points. In the tale, a young boy throws a brick, shattering a shop's window. Onlookers initially rationalize the incident, suggesting that it might benefit the local glazier, who will earn money from the repair. This, they argue, will stimulate other businesses, creating a positive cycle. However, Mr. Hazlitt highlights the essential truth: the shopkeeper must spend $250 on the broken window, funds that could have otherwise been spent on a new suit. Consequently, the tailor, who would have sold the suit, loses $250 in potential income. And so on.

The book is filled with real-world examples and case studies that illustrate economic concepts in action. These practical examples make the material more engaging and relatable. For example, the author writes that some argue that war creates more demand (houses that are destroyed and need to be rebuilt and such), but they confuse need with demand. The more war destroys, the greater the postwar need. What mainly took place during the war was a diversion of demand to particular products from others. When they built more houses they had just that much less manpower and productive capacity left over for everything else.

In another chapter, Mr. Hazlitt uses a bridge built to provide employment as an example. What is immediately seen is that the building of the bridge will provide an additional 5,000 jobs, let’s say, but that bridge has to be paid for out of taxes. What’s not seen is the unbuilt homes, things that are actually needed. Had the taxpayers kept what was theirs, they have been permitted to spend it on what they actually needed.

He also delves into the topics of taxes, credit, government loans, the role of machines, tariffs, pricing, and so many more.

In the last chapter, the author warns us that a little economics can easily lead to paradoxical and preposterous conclusions (as dealt with in this volume), but depth in economics brings men back to common sense. For depth in economics consists in looking for all the consequences of a policy instead of merely resting one's gaze on those immediately visible. This, in fact, is what the whole book is about.

Great arguments against Keynesian economics. Should be a must read for anyone who wishes to get into politics.

A classic work on economics that should be read by anyone who wants to understand the subject. The basic lesson of Hazlitt's work is this: economics is the science of recognizing secondary consequences. It is also a science of seeing general consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run.

I do not study economics, but find it interesting to read outside of my area of expertise from time to time, and see what I can pick up. What I found in this book was a well-written and highly accessible version of, as best as I can tell, the libertarian and conservative economic playbook. It tries to lay out the reasoning why most government economic policies—most types of taxes, tariffs, subsidies, public works projects, social security, minimum wage, and so on—are detrimental or harmful. The basis of this argument—the "one lesson" from the book's title—is:

"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."

In other words, taxes, tariffs, subsidies, and everything else either only benefit one group at the cost of another or may have benefits in the short term, but always cause problems in the long run.

The general idea is a good one: we *should* consider long-term trends and not favor certain groups over others; and certain economic policies definitely do favor some groups over others or cause harm over the long term. The problem is that Hazlitt generalizes from this simple argument to the broader idea that virtually *all* governmental economic policies are harmful, and the evidence and reasoning he uses strikes me, at least as a novice to economics, as deeply flawed. The evidence, in particular, is almost entirely lacking: most of the book is based off armchair reasoning rather than actual case studies. And the armchair reasoning doesn't seem to hold water.

Here are some of the places where the reasoning seems to fall apart:

* The biggest issue is that Hazlitt doesn't take his "one lesson" into account! In particular, he does not consider _all_ the possible consequences of an economic policy. He typically shows the _direct_ consequences to the group effected (e.g., the farmer that is subsidized by the government); he shows the _indirect_ consequences to a few other groups that are effected (e.g., the tax payer who pays more taxes to subsidize the farmer, and other farmers who are now worse off because they didn't get the subsidy); but he does not show the countless other possible "side effects." By "side effects," I'm referring to the fact that humans are not machines. We aren't cash registers that behave solely based on cash in vs cash out. We have these inconvenient things called "emotions" and "morals." This is why, for example, we have regulations in many industries: we are not OK with companies producing dangerous goods that get people killed. Sure, the free market would eventually fix that sort of thing, as, given enough tie, people would probably buy goods from the companies that make safer products, but we're not willing to have thousands of people die while the market sorts that out.

* There's another aspect of the "one lesson" that Hazlitt ignores. He assumes that individuals and private corporations always know how to use their money better than the government. So, for example, the government giving loans to small business is always worse than a private bank or investor deciding who to give loans to. In some cases, that may be true. But in many cases, it's not. For example, for many years in the US—and sadly, it still happens today—banks would not loan money to minorities or women, not because they were "riskier," but simply due to racism or sexism. The result is that the economic output from more than half of society was suppressed! Of course, this is just one example. Hazlitt, for example, argues strongly against minimum wage policies and makes the laughable claim that most workers eventually earn what they are worth except in rare circumstances, such as monopolies. This assumes a perfect market with no information asymmetries, power imbalances, or discrimination; Hazlitt being a well-off white male may not realize this, but in the real world, minorities and women are often paid less, many companies collude to keep wages down (e.g., see the recent law suit with Google, Apple, etc), and many companies pay extremely low wages to most employees while executives pocket millions. Left to their own devices, our "free market" economy even used to include scrip wages, slavery, and child labor: it turns out that these are not only bad for the economy, but again, we see that whole "side effects" thing again—for some reason, we silly humans aren't OK with any amount of slavery and child abuse (whereas the free market may tolerate it for a long time).

* Hazlitt seems to assume a zero-sum game when convenient for his argument, but ignore it when it's not. For example, Hazlitt argues, to put it very roughly, that every dollar the government spends is a dollar taken from the tax payer that would have been better spent elsewhere. That's true if you assume the pie is a fixed size. But one possible outcome (of the many outcomes we should consider, per Hazlitt's "one lesson") is that the way the government spends that money may result in the whole pie getting bigger (the economy growing), whereas the way the individual would've spent it would not have had that effect. For example, the government using tax dollars to build bridges and roads reduces the cost of commerce, making business more efficient, and allowing the economy to prosper and grow. Whereas had the individuals kept those tax dollars, they probably would not have invested them in a bridge, and the economy would've stagnated. Hazlitt makes allowance for _some_ government programs such as this sort of infrastructure spending, but offers no guidance as to what separates the programs that are OK from the ones that he claims cause only damage.

* For example, would Hazlitt be against the government using tax dollars to fund research? It's not exactly an "infrastructure" project and it's clearly something private companies could do themselves. From reading this book, I get the impression Hazlitt would almost always argue in favor of private companies... And yet some of the biggest technological leaps of the last century—for example all the discoveries at Xerox Parc (the GUI, mouse, laser printer, object oriented programming) and the Department of Defense (e.g., the ARPANET, which led to the Internet)—were only possible due to government funding... This research grew the economy by trillions (not a typo) of dollars, which is far, far more than the tax dollars that went in. Another interesting example is NASA. Putting aside all the practical scientific discoveries that led to economic growth, how do we value (a) a better understanding of the universe, (b) the possibility to make humanity a multi-planetary species that can survive certain types of species-ending disasters, and (c) inspiring millions of kids to become scientists and engineers? Is it possible that there are "side effects" we should care about beyond just the pure dollars in and dollars out?

* The way Hazlitt makes his arguments is a bit infuriating. He'll take on some small, very specific point (e.g., one argument used by certain groups to support minimum wage laws), and make a convincing argument against that specific point, all the while pointing out explicitly that he is ONLY talking about that one specific point, and not the larger economic issue as a whole. However, a few pages or chapters later, he'll suddenly generalize his stance to being a condemnation of that entire economic issue, reminding you how soundly he tore it down before. He's relying on the fact that you remember his earlier argument was convincing, but that you'll forget that it was only convincing about one small portion of the larger debate, and not the whole thing. I'm not a fan of such sneaky tactics.

I want to emphasize again that I'm not arguing the book is completely wrong or not worth reading. There are plenty of government economic policies that are wasting money, but generalizing that concept too far is harmful. That said, I enjoyed reading the book, it made me think through a lot of important points, and I found plenty of interesting insights:

* Full employment is not the goal. You can achieve that easily: throw away all technology and suddenly you have 100% employment (as a very inefficient subsistence farmer).

* Machines and automation may cause job loss in the short term, but they vastly increase production, which throughout history has always greatly increased jobs. If technology really made jobs go away, then from thousands of years of technological progress, we'd expect everyone to be unemployed already.

* We all play three roles: producer, consumer, taxpayer. When a policy comes up, which side you're on typically depends on how it affects each of these roles. Every person wants the goods they produce to be scarce and expensive, while all the other goods (the goods they consume) to be plentiful and cheap.

* "Wages" are just another term for prices. They are the price that an employee charges to the company.

* Increasing wages without increasing productivity must imply that the costs of goods has increased.

* Money is not the same thing as wealth. The government can't make us all wealthy by printing out more money. Wealth consists of what's produced and consumed: houses, clothes, food, cars, etc.

* Saving in the modern world (i.e., putting your money into banks and stocks) is the same as spending. That's because our financial institutions spend your money on loans and other business ventures.

* In math the formulation of the problem contains the solution. This is inevitable. But inevitable conclusions are not always obvious conclusions, as some math problems are hard to solve!





As always, I've saved a few of my favorite quotes:

“Practically all government attempts to redistribute wealth and income tend to smother productive incentives and lead toward general impoverishment. It is the proper sphere of government to create and enforce a framework of law that prohibits force and fraud. But it must refrain from specific economic interventions. Government's main economic function is to encourage and preserve a free market. When Alexander the Great visited the philosopher Diogenes and asked whether he could do anything for him, Diogenes is said to have replied: "Yes, stand a little less between me and the sun." It is what every citizen is entitled to ask of his government.”

“There is a strange idea abroad, held by all monetary cranks, that credit is something a banker gives to a man. Credit, on the contrary, is something a man already has. He has it, perhaps, because he already has marketable assets of a greater cash value than the loan for which he is asking. Or he has it because his character and past record have earned it. He brings it into the bank with him. That is why the banker makes him the loan. The banker is not giving something for nothing.”

“When personal incomes are taxed 50, 60 or 70 percent. People begin to ask themselves why they should work six, eight or nine months of the entire year for the government, and only six, four or three months for themselves and their families. If they lose the whole dollar when they lose, but can keep only a fraction of it when they win, they decide that it is foolish to take risks with their capital.”

Lo más importante de todo, es que el libro ofrece un carácter ilustrativo y no pretende ser original en cuanto a las ideas principales que contiene. Más bien, busca mostrar cuántas personas hoy en día experimentan avances e innovaciones brillantes que en realidad no son más que la resurrección de viejos errores, y reafirma el adagio de que aquellos que ignoran el pasado están condenados a repetirlos.

Excellent book with a simple premise, essentially it spells out the Law of Unintended Consequences. Hazlitt repeats this theme through several examples. This is a book that is so full of facts, examples and sound reason that there is no way anyone in a position of any sort of power will heed any of these warnings. Fun times, everyone!