Henry Hazlitt (1894-1993) was one of the greatest economic journalists of the 20th century. He is the author of Economics in One Lesson, among twenty other books; was a chief editorial writer for the New York Times; and wrote weekly for Newsweek. He was a founding board member of the Foundation for Economic Education, where he served in an editorial capacity at The Freeman. We discussed the nine chapters included in the FEE’s free book, "The Essential Henry Hazlit," the last of five books in this Memorable Mentor series.
1. The Lesson (Economics in One Lesson, 1952)
“Economics is haunted by more fallacies than any other study known to man.” As Thomas Sowell says: It’s not the economics that’s complicated, it’s the fallacies. Why is economics bedeviled by these fallacies?
- Not in physics, mathematics, or medicine do you find self interested individuals
- Economists who only look at the immediate effects of a policy
2. The Early History of FEE (The Freeman, March 1984)
Leonard Read was the General Manager of the Los Angeles Chamber of Commerce. In 1947 he organized a conference in Vevey, Switzerland, with 43 libertarian writers, which was the beginning of Mont Perelin Society.
FEE opened March 16, 1946, Irvington, New York. In mid-1954 FEE took over The Freeman publication, one of Ron’s favorite (now available only online).
FEE published Roofs or Ceilings, by Milton Friedman and George Stigler, and Planned Chaos by Ludwig von Mises. Neither publication had a direct effect on legislation but even Adam Smith’s book, The Wealth of Nations, took time to influence policy.
3. Understanding “Austrian” Economics (commissioned by the Silver and Gold Report, 1981)
Three prominent Austrian economists are discussed: Carl Menger (1840-1921), Friedrich von Wieser (1851-1926), and Eugen von Bohm-Bawerk (1851-1914).
Menger (and Stanley Jevons and Leon Walras) came up with marginal utility (Wieser coined the term), between 1871-1874.
Goods have no inherent value; they only have value because they help to satisfy some human want or need.
There are goods of the first order (consumption), the goods of the second order (machinery, labor, etc.) used to produce first order goods.
What a good has cost cannot determine its value. What it will cost determines how much gets made. Whether you mined a diamond or found one on street is irrelevant to its value.
Money is not a measure of value—it’s a measure of transactions at an agreed upon price.
After these three economists passed on, economics went to the mathematics of general equilibrium, which Austrians don’t believe. Balance is for tires and ballerinas, after all. Equilibrium doesn’t exist in capitalism because it is in constant dynamic disequilibrium. Austrians speak of a market process, not market equilibrium.
4. The Problem of Poverty (The Freeman, June 1971)
The history of poverty is the history of mankind. The Encyclopedia Britannica identifies 31 major famines from ancient times to 1960.
Thomas Robert Malthus (1798), author of Essay on the Principles of Population as it affects the Future Improvement of Society, was a pessimist who influenced Ricardo and even Darwin.
Hazlitt writes that this essay led British journalist Thomas Carlyle to coin economics as “The Dismal Science.” But this is not true (Hazlitt is wrong).
Carlyle was a racist who believed in slavery. The economists of his day, all of them from Adam Smith to David Ricardo, were against slavery. Hence, Carlyle’s epithet for economics.
Malthus posited his theories just as the Industrial Revolution was about to falsify them.
The population of England and Wales in 1700 was 5.5 million; in 1750, 6.5 million; in 1801 9 million (1st census); and by 1831 it was 14 million [due mostly to a continuous fall in the death rate, not an increase in birth rates].
Not one Famine since end of 18th century fell in a single country in the industrialized Western world.
5. False Remedies for Poverty (The Freeman, Feb 1971)
Hazlitt identifies the chief evil from the left’s perspective is inequality, not poverty. There are several remedies proposed.
Land reform, guaranteed income, which destroys incentives at both ends of economic scale.
Unions and strikes, overtime rules that obliged employers to hire additional workers (more dues-paying members). Minimum wage laws, but we can’t mandate productivity. As Thomas Sowell points out: The real minimum wage is always zero. Price and Wage Controls. And outright socialism.
6. On Appeasing Envy (The Freeman, March 1972)
“Your levelers wish to level down as far as themselves; but they cannot bear leveling up to themselves.” Samuel Johnson
Justice Holmes: “I have no respect for the passion for equality, which seems to me merely idealizing envy.”
Helmut Schoeck wrote Envy, 1966.
Societies engage in redistribution to prevent a supposed actual revolution. But this is the opposite of the truth. Appeasing envy provokes more of it. We should never try to buy off a revolution.
7. Planning vs. The Free Market (The Freeman, December 1962, originally a lecture at the 1962 Mont Pelerin Society)
The question is not having a plan or no plan? The question is: whose plan?
Planning always involves compulsion.
8. Can We Keep Free Enterprise?
No defense of capitalism will ever be generally accepted. Hazlitt identified give main impulses inherent in human nature to explain why this is true:
- Genuine compassion
- Impatience for a cure
- Envy (graduated income tax)
- Propensity to think only of the intended or immediate results, overlook secondary and long-term results
- Propensity to compare any actual state of affairs, and its inevitable defects, with some hypothetical ideal
“Each of us is as free to practice what he preaches as to preach what we practices.”
Yet, as Charles Murray writes in his book, Coming Apart, the upper class is not preaching what it practices.
9. The Lesson Restated (Economics in One Lesson, 1952)
The Forgotten Man of William Graham Sumner, essay in 1883:
Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X…What I want to do is to look up C…I call him the Forgotten man…He is the man who never is thought of.
Amity Shales book The Forgotten Man is an excellent history on The Great Depression.
The forces of self interest exceed forces of altruism. This is because our sphere of altruism is smaller.
We interact with many more people when we purchase goods and services in the market than we do in personal and social institutions. We couldn’t rely on altruism alone for food, automobiles, and the many other items we purchase in the free market.
Changes in tastes and preferences cause harm too, just like technology. If we increase sobriety, we reduce bartenders. If we increase male chastity, we decrease the world’s oldest profession.
Other Resources Mentioned
- “12 Venn Diagrams that Show the Intellectual Inconsistency of the Left,” by Mark J. Perry.
- To manage your Kindle highlights, check out: www.clippings.io
- Rules for Living, by Henry Hazlitt, making the utilitarian case for ethics.