You have probably heard of Henry Hazlitt’s book, Economics in One Lesson. This week is the third and final week for this book in my economics course in the Ron Paul Curriculum.
Before I outlined this course, I went to several professors of economics. All of them are Austrian school economists. I asked them for a list of books that they would like their incoming freshmen students to have read. Every one of them listed Hazlitt’s book.
Over 40 years ago, when I was director of seminars for the Foundation for Economic Education, we had a policy of sending out three free books before each week-long seminar: Clichés of Socialism, Henry Grady Weaver’s The Mainspring of Human Progress, and Economics in One Lesson.
I don’t think it would be an exaggeration to say that this book, more than any other, has served as the single most important book in the revival of free-market economic thinking after World War II. Among economists, F. A. Hayek’s The Road to Serfdom (1944) has been more important, but with respect to the average man, who has probably never read Hayek’s book, Economics in One Lesson has been the touchstone.
He analyzed the various government interventions in the market by means of the analogy known as “the broken window fallacy,” which is also known as “the things seen and the things not seen.” The things not seen are the economic costs of the things seen: the most valuable uses for the money foregone. This analogy had been devised in 1850 by the French journalist Frederic Bastiat. This was that one lesson in economics. This was the heart of Hazlitt’s book, and it worked in terms of economic analysis.
The Mises Institute bought the rights to make it available free of charge to anyone who wants to read it. You can download it here: http://mises.org/library/economics-one-lesson.
When you think about when he wrote it, it is remarkable that he was able to write it. It is even more remarkable that it has sold as well as it has. He was given a six-week leave of absence by The New York Times in February 1946. At the time, he was the chief financial columnist for the newspaper.
World War II had ended the previous August. President Truman had not yet removed wartime price and wage controls. He did that only under the pressure of what was basically a revolt by cattlemen the following October. In October, he abolished the price controls on meat. In November, he abolished price controls on wages and most commodities. The only controls remaining after November were on sugar, rice, and rents.
When Hazlitt wrote the book, residents of the United States had been living under price controls for five years. Shortages were a way of life. Rationing had been enforced the entire period. The black market had flourished. So, Hazlitt included a chapter on price controls.
Market by market, intervention by intervention, “broken window by broken window,” Hazlitt wrote the book. It is 25 chapters long. He did this in six weeks. It was a major accomplishment. Given the enormous impact of the book, it was a startling accomplishment.
But there is a major problem with the book, and this problem keeps getting worse. It is dated. It was written in 1946. He wrote it for a particular audience, and that audience was still living under the economic controls of World War II. The issues that were prominent in the minds of his intended audience were not the same issues that are in the minds of voters today in the United States. Time marches on.
The second problem with the book is this: Ludwig von Mises had not yet written Human Action. That book was published in 1949. Hazlitt was a friend of Mises. He helped raise money for Mises, because New York University refused to pay Mises a dime from 1945 until 1969, when Mises retired.
(For the rest of my article, click the link.)