Economics in One Lesson

Your main required reading in this course will be Economics in One Lesson by Henry Hazlitt. No, sorry, that doesn't mean you only have to do one lesson and you'll be finished with the course. But you'll be able to see how Hazlitt's main lesson, which you'll learn about today, can be applied to most economic issues.

Henry Hazlitt

Henry Hazlitt

An economist, philosopher, and journalist, Henry Hazlitt wrote numerous books and essays, including articles in publications like The New York Times and The Wall Street Journal. He published his most famous work, Economics in One Lesson, in 1946. It was meant to be a critique of poor government economic policies in the wake of World War II, demonstrating the fallacies and poor reasoning that the government used to support those policies.

Ironically, Economics in One Lesson has remained popular for the last seventy-five years because many government policymakers have continued the same destructive practices that the book argues against. For one reason or another, public officials continue to advocate for variations of the same bad economic policies, which means that Hazlitt's book is still relevant today.

Throughout the course, you'll read sections of Hazlitt's book that will cover the same topics we're discussing. Your assignment for today is to read Part I, Chapter 1: "The Lesson." When you've finished the reading, continue on with the rest of the lesson.

The Lesson

From this chapter, we learn that economics is plagued by so many fallacies partially because humans are selfish, and they want to implement economic policies that benefit themselves (even if it's at the expense of others). Therefore, people spend a lot of time and effort defending policies that aren't logically sound, solely because they stand to benefit from those policies.

Another factor that creates economic fallacies is short-term thinking. Like David buying his new car in the last lesson, people have the tendency to only look at what the immediate results of a particular choice will be. They don't think about any long-term effects. The problem with continuous short-term thinking is that it always shoves our problems into the future. Eventually, those problems will catch up with us. It's like procrastinating when it comes to studying for a test, except the consequences will be much worse than an F—entire national economies could collapse. Indeed, the United States currently faces problems that have been building up for a long time, such as the enormous national debt and the potential collapse of Social Security. For decades, many economists have told us that these aren't pressing issues, and that for now they can be safely ignored. But as Hazlitt writes, "Today is already the tomorrow which the bad economist yesterday urged us to ignore."

People also suffer from narrow thinking. They might have genuinely altruistic motives to help a certain group, such as farmers. So, they implement policies that will help that group. However, they ignore how those policies will affect everyone else who's not part of that group. A government official might craft a policy that will be enormously beneficial to farmers but hurts everybody else. All the official cares about, however, is that it will help farmers, because that's what the policy is focused on. Everyone else's needs get lost in his or her zeal to help the farmers.

The bad economist sees only what immediately strikes the eye; the good economist also looks beyond.

Henry Hazlitt, Economics in One Lesson

The bad economist sees only what immediately strikes the eye; the good economist also looks beyond.

Henry Hazlitt, Economics in One Lesson

Hazlitt concludes that all of economics can be reduced to a single lesson: "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."

Of course, determining the long-term effects and figuring out how all groups will be affected is not always easy. However, it's the goal that good economists must strive for, and it will help us avoid most of the poor reasoning that plagues economic thought.

As we continue through the rest of the course, make sure to approach topics with a long-term and wide-ranging view. Certain ideas or policies may seem good because they offer quick rewards and help specific groups of people. But upon deeper examination, you might discover that those rewards will be short-lived, and that the policies will hurt far more people than they help.