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Posts Tagged ‘Henry Hazlitt’

Don’t Fall for Biden’s Latest Talking Point | Mises Wire

Posted by M. C. on November 3, 2023

The problem with this thinking, Bastiat and Hazlitt explain, is that it cites only the economic activity that can be seen to result from the broken window. What goes unseen is the cost—all the economic activity the shopkeeper would have instead spurred had he not been forced to buy a new window.

And because the shopkeeper would have preferred to spend the $50 elsewhere, the breaking of the window can only be considered a net loss. The glazier benefits from the shopkeeper’s loss, but the shopkeeper and therefore the overall economy are made poorer.

https://mises.org/wire/dont-fall-bidens-latest-talking-point

Connor O’Keeffe

As the long-hyped Ukrainian counteroffensive against Russia stalls and a new war in Gaza draws the world’s attention, American support for funding Kyiv’s war has waned. In an effort to reverse this, the Biden administration is changing its messaging. A Politico report from last week details how White House aides are now telling members of Congress to sell Americans the lie that continuing to send money and weapons to Ukraine is good for the economy.

President Joe Biden made this point himself when he introduced a $105 billion proposal to send military aid to Ukraine, Israel, and Taiwan:

We send Ukraine equipment sitting in our stockpiles. And when we use the money allocated by Congress, we use it to replenish our own stores, our own stockpiles, with new equipment. Equipment that defends America and is made in America. Patriot missiles for air defense batteries, made in Arizona. Artillery shells manufactured in 12 states across the country, in Pennsylvania, Ohio, Texas. And so much more.

With this new talking point, the Biden administration is echoing Senator Mitch McConnell, who has for months been saying that the war in Ukraine is an excellent deal because American companies get paid, the Russian regime is weakened, and only Ukrainians have to die.

Setting aside the morality or practicality of Biden and McConnell’s foreign policy ambitions, the argument that all this military spending is good for the American economy relies on one of the oldest, most pervasive economic fallacies in our political discourse—the broken window fallacy.

First outlined by French economist Frédéric Bastiat in his essay “That Which Is Seen and That Which Is Not Seen” and later expounded upon by economic journalist Henry Hazlitt in his book Economics in One Lesson, the broken window fallacy is the false belief that spending money on restoring things that have been destroyed can make an economy richer.

To make this point, Bastiat used the example of a broken shop window. After his careless son breaks a pane of glass, a shopkeeper is forced to hire a glazier to repair the damage. A group of bystanders reflect on the situation and question their impulse to condemn the boy. After all, they ask, “what would become of the glaziers if panes of glass were never broken?”

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Meds: The Seen—and Unseen—of Intellectual Property Laws

Posted by M. C. on May 3, 2022

To slow down the development, use, and spread of technical innovation and prevent others from replicating and improving on innovations is to limit human production; it is to act against prosperity itself.

https://mises.org/wire/meds-seen-and-unseen-intellectual-property-laws

Bernardo Decoster

Perhaps the greatest lesson to be learned in economics is that public policies have seen and unseen effects. The mastery of such a lesson is what separates the good from the bad economist. “The bad economist,” writes Henry Hazlitt, “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 same economic reasoning should be applied to intellectual property laws. By joining together not only the seen, but also the unseen consequences of intellectual property laws, we can achieve a solidly ironclad understanding of its impacts on humanity.

Visible Effects of Intellectual Property laws

In August 2015, Turing Pharmaceuticals acquired the marketing rights to Daraprim, a life-saving drug used to combat parasitic infections, and became its sole supplier. The next month, it hiked the price of the drug 5,000 percent, from $13.50 a tablet to $750, sparking nationwide protests. 

More noticeably than in any other sector, the patent system’s visible effects on the pharmaceutical industry are severely damaging to consumers and free enterprise. According to the Association for Accessible Medicine, “Innovation is critical to the success of the entire pharmaceutical industry. Without innovation there could be no generic pharmaceutical or biosimilar medicines for patients.” Big pharmaceutical corporations, with well-organized lobbying funding, are able to sustain the very monopolistic system that enables their abuse of consumers through high prices. Shielded by the power of the government, for example, Roche/Genentech has had a virtual monopoly on the cancer drug Herceptin since 1985, and AbbVie, which markets the world’s best-selling drug, Humira ($18 billion in global sales in 2017), has filed over 240 patent applications. These data points come from a 2018 report by the Initiative for Medicines, Access and Knowledge (I-MAK), which found that, on average across the top twelve grossing drugs in America

  • There are 125 patent applications filed and seventy-one granted patents per drug, the majority of which are granted.
  • Prices have increased by 68 percent since 2012, and only one of the top twelve drugs has actually decreased in price.
  • There are thirty-eight years of attempted patent protection that are blocking generic competition sought by drug makers for each of these top-grossing drugs—or nearly double the twenty-year monopoly intended under US patent law.
  • These top-grossing drugs have already been on the US market for fifteen years.
  • Over half of the top twelve drugs in America have more than a hundred attempted patents apiece.

These outrageous statistics point ever more strongly toward the notion that intellectual property laws, unnecessary to reward innovation, are merely tools used by crony corporations close to government power to block competition and increase the price of their products. 

Sadly, IP is not limited to the pharmaceutical sector, and its monopolistic effects are also heavily felt in the entertainment industry. The artificial monopoly granted and protected by the government leads to a standard “massified culture” and a creative stagnation within the entertainment industry, a phenomenon noted many decades ago by Max Horkheimer and Theodor Adorno, two Frankfurt scholars who missed the critical role played by IP laws in the phenomenon and then wrongly blamed entrepreneurs. It is precisely the blocking of competition, the blocking of free enterprise and entrepreneurial creation, that leads to a “mass cultural industry” dominated by big corporations.

Besides its horrid healthcare consequences and sociological disasters, IP laws also weigh heavily and directly on the taxpayer via the bureaucracy of patent litigation. An incredibly detailed infographic from The Anatomy of a Patent Case draws from varied sources to show the bureaucratic burden of IP laws. It concluded that litigation functions as a tax of about $31 billion dollars per year (maybe as much as $42 billion) and a drag on free enterprise.

Artificial monopolies, the bureaucratic burden, the rage-inducing high prices, and the destruction of creativity are only some visible effects of IP laws. Much worse, however, are its unseen effects.

Unseen Effects of Intellectual Property laws

The worldwide call to break the patent on covid-19 vaccines, fueled by the desire to accelerate their distribution, revealed a basic economic truth hidden in plain sight: to limit knowledge is to limit human prosperity. Even key players faced vaccine shortages due to third-party patents, yet virtually no one applied the same logical reasoning to other sectors. If patents on vaccine production limited the production (and subsequently, the distribution) of vaccines, why wouldn’t this apply to any other technological innovation?

Let’s take a step back and look at the logic behind this truth. 

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Doug Casey on How Economic Witch Doctors Convince Everyone They’re Neurosurgeons

Posted by M. C. on December 11, 2021

Where to start? In my opinion, the best-done single book that you can read about economics is Henry Hazlitt’s Economics in One Lesson. It’s only about 150 pages, and it’s a gem. Everybody should read it.

https://internationalman.com/articles/doug-casey-on-how-economic-witch-doctors-convince-everyone-theyre-neurosurgeons/

by Doug Casey

International Man: The average person doesn’t care about economics. But to the extent that he does, he only reads mainstream publications like The Economist and editorials in The New York Times.

In these publications, the average person will find so-called economists advocating upside-down and destructive concepts like negative interest rates, banning cash, debt-fueled consumption, government spending, and rampant money printing as the cures to economic ailments.

And if those methods don’t work—or inflict damage—the establishment economists’ response is to simply call for more money printing, more debt, and even lower interest rates.

What’s your take on conventional economic thinking and methods?

Doug Casey: Frankly, most “economists” today are only political apologists masquerading as economists.

An economist is somebody that describes the way the world works—how people go about producing, consuming, buying, selling, and living their lives. That’s not, however, what most of today’s PhD economists do. Instead, they prescribe the way they would like the world to work and tailor theories to help politicians demonstrate the virtue and necessity of their quest for more power.

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It’s Time to Abolish the Capital Gains Tax | Mises Wire

Posted by M. C. on August 12, 2021

The great explains in Economics in One Lesson (order your free copy) that when investors realize

they lose the whole dollar when they lose, but can keep only a fraction of it when they win, they decide 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.

https://mises.org/wire/its-time-abolish-capital-gains-tax

McCoy Dorr

President Biden’s ridiculously high spending proposals require equally ridiculous tax proposals. Among the craziest proposals is a massive increase in the capital gains tax rate. According to the Tax Foundation, Biden’s proposal would raise the top federal rate on capital gains tax to 43.4 percent. When accounting for state and local rates, the average top rate would be 48 percent, up from the current 29 percent. This is about nineteen steps in the wrong direction. Progressives, the largest proponents of the tax on capital gains, believe that this tax is a necessary and just tool used to rein in the greed of the rich and ensure that the selfless government can implement righteous social programs to help the needy. This belief could not be further detached from reality. The existence of taxes on capital gains significantly distorts the natural flow of investment in markets, which harms the social welfare of all Americans, and it is past time to abolish the capital gains tax.

The capital gains tax is imposed on the profits gained from the sale of an asset. This increases the costs involved in realizing the profits of an investment, therefore altering individuals and businesses’ cost-benefit analysis and decision process when evaluating investment opportunities. This has a substantial impact on the reallocation of capital and the availability of capital, because investors have to take the capital gains tax into account when weighing if a new investment is worthy. Investors are forced to decide if the new investment has a profit potential that outweighs the impact of the capital gains tax and the future profit potential of whatever asset they may currently be invested in. Many investors decide it is not. This creates the “lock-in effect.” The capital gains tax creates the incentive for investors to retain their current subpar-performing investments even when more profitable investment opportunities are present. This keeps capital locked into inefficient and underperforming assets as opposed to more efficient and profitable assets. Therefore, these inefficient assets have an inflated value and worth compared to what a free market, undistorted by the capital gains tax, would have allocated to them. As capital is a scarce and limited resource, these distortions inhibit the growth of other industries and assets that are more worthy of investment and consequently harm the social welfare of all Americans, as these industries with a deflated worth are unable to provide the goods, services, and jobs the market would have otherwise provided. This is why an unaltered flow of capital and investment is integral to the health of a free economy. The great Henry Hazlitt explains in Economics in One Lesson (order your free copy) that when investors realize

they lose the whole dollar when they lose, but can keep only a fraction of it when they win, they decide 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.

These new enterprises that are blocked from coming into existence would have otherwise created better and cheaper goods. In the end, not only is the investor harmed but so are the consumers and producers that are deprived of an improved standard of living. It is nearly impossible to dissect and weigh all of the societal harms that have occurred due to the implementation of the capital gains tax, because we have been robbed of a reality we could use as a control. The industries and companies that have been deprived of growth due to the capital gains tax are invisible.

However, we can examine the effects previous changes in the capital gains tax rate have had on investments. The clearest metric we can use to examine the flow of capital into new enterprises is seed-capital funding. Seed-capital funding is funding provided by investors to the creators of a new start-up venture in exchange for equity. This seed-capital funding is linked to the capital gains tax, because investors likely have to divest their capital from another firm or asset, a taxable event, to then invest in a new company in exchange for equity, which would then be taxed again if ever sold. In an examination of past changes in the tax rate of capital gains and the volume of new seed-capital funding, an article published by National Review  found that when the capital gains tax rate was cut in 1977 from 49 percent to 20 percent, there was an increase in seed-capital funding from $68 million to $5.1 billion, a 700 percent increase. A later increase of the rate to 28 percent in 1986 resulted in a 60 percent decrease in seed-capital funding. This shows that funding for new ventures is intrinsically linked to the free flow of capital, which is instead obstructed by the capital gains tax. Investors are deprived of healthy returns on investment, producers are denied economic opportunity, and consumers are impoverished.

Examining just a few studies on the effects of the capital gains tax demonstrates the effects an abolition would have in boosting the quality of life for the lower and middle classes. First, economists from the Tax Foundation examined IRS data and found “that more than 80 percent of taxpayers who claim dividend income earn less than $100,000 and 76.4 percent of those who claim capital gains earn less than $100,000.” This shows that the burden of the capital gains tax falls on the middle class. This burden can be alleviated by removing the capital gains tax. Furthermore, the Cato Institute discovered that a capital gains tax reduction is a way to attract investment funds to capital-starved areas and minority groups. In the ’80s, when the capital gains tax was slashed, the number of black-owned businesses increased by one-third. And later when it was cut again, that number increased by an additional 38 percent. While the precise results that the elimination of the capital gains tax would have are incalculable due to the stubborn fact that we lack omniscience, an elimination would unequivocally lead to the creation of a large number of jobs and economic growth, which would bring an improvement to the quality of life of poverty-stricken communities by encouraging a culture of private ownership and entrepreneurship.

Eliminating the capital gains tax would free up an unprecedented amount of capital, create countless new jobs, and result in the formation of new enterprises dedicated to providing cheaper and improved goods and services. The abolition of the capital gains tax would create an economically productive and stable society, yet the fallacy persists that the capital gains tax is beneficial. The failure of progressives to see beyond the increased government revenues is the reason we are shackled with the capital gains tax today. Progressives are failing Hazlitt’s one lesson (not that anyone has ever accused progressives of being economically literate). As Hazlitt states at the end of his magnum opus, economics “is a science of recognizing secondary consequences. It’s 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.” Progressives look at the immediate effects, increase in government revenue and funding for their social programs, and are blind to the havoc they have wrought in the market. This failure to comprehend the impacts of distorting the flow of capital results in the average American consumer being deprived of an indecipherable higher standard of living. Author:

McCoy Dorr

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Economics In One Lesson Is Still the Best Layman’s Intro to Economics | Mises Wire

Posted by M. C. on March 6, 2021

Hazlitt believed two predispositions impeded people from recognizing the broader impacts of decisions: (1) self-interested pleadings for special treatment and (2) the persistent tendency to see immediate effects and overlook secondary consequences.

https://mises.org/wire/economics-one-lesson-still-best-laymans-intro-economics

Fergus Hodgson

A line in a recent National Post news story left me aghast: “Economists are nearly unanimous in their support for the $381-billion deficit Ottawa plans to run in 2021.” One of Canada’s more reasonable newspapers, founded by Conrad Black, published the outlandish notion that unprecedented Keynesian deficit spending is plain-vanilla economics.

This assertion, no doubt the honest belief of the reporter, reflects an opaque field lacking bearings. As Alexander Salter of Texas Tech University recently wrote in a Wall Street Journal commentary, the field has “lost itself in data.” Celebrating the life of UCLA economist William Allen, who passed away in January, Salter wrote: “Allen truly believed in economics—something that is hard to say about most economists these days…. Economics is increasingly less scientific and more susceptible to political influence.”

One way to grasp the gradual splintering, confusion, and manipulation within the field is to consider two disparate books for the layman: Economics in One Lesson (1946) and Naked Economics (2002). The former, by Henry Hazlitt, has for many years been familiar to me as a canon of both economics and liberalism. The latter was recommended reading for my MBA program at Rice University.

Charles Wheelan, author of Naked Economics and a Dartmouth College lecturer, is a well-read, thoughtful gentleman. His more recent book, Naked Statistics (2013), does an honorable job of making statistics accessible, clear, and meaningful.

However, his earlier work “for people who never studied economics” fails to distill the most fundamental elements of the discipline. Rather, it is a broad survey that delivers a muddy message, reflecting what has come of academic economics. By taking on too many topics and engaging in political rhetoric—belittling critics of US federal overreach, for example—he sets himself up for failure. Many readers have no doubt come away from Naked Economics more confused than when they went in.

Wheelan goes astray right from the first chapter: “Economics starts with one very important assumption: individuals act to make themselves as well off as possible.” Although there is a grain of truth there, the foundational principle of economics is scarcity, which necessitates tradeoffs and resource allocation. Gregory Mankiw of Harvard University notes in Principles of Economics—in its ninth edition and the most popular economics textbook in the United States—that “economics is the study of how society manages its scarce resources.”

In contrast to Wheelan, Hazlitt takes on a humble objective: to deliver an “unblushingly ‘classical,’ ‘traditional,’ and ‘orthodox’” synthesis of economics. This is the most fitting way to approach the layman, who will only retain a few lessons from an introductory book. Hazlitt offers just one lesson.

Hazlitt believed two predispositions impeded people from recognizing the broader impacts of decisions: (1) self-interested pleadings for special treatment and (2) the persistent tendency to see immediate effects and overlook secondary consequences.

In his canon, his singular goal is to ferret out fallacies by overcoming those two predispositions. After seventy-five years, the simplicity and clarity of his book mean it has stood the test of time—without any need for a revision or update. Economics in One Lesson is still the book I recommend to anyone seeking an economics primer.

Naked Economics will not stand the test of time, despite the title, which implies just the bare bones of economics. Wheelan perhaps never intended it to become a canon. He gets into the weeds of topical content, focusing heavily on current and recent events in the United States. Further, despite being the founder and cochairman of the United America NGO, he does little to conceal his moderate-Democrat inclinations. After all, he ran for Congress in a Democratic Party primary, and in the book he mocks anarcho-capitalist economists such as Walter Block and David Friedman.

Further, he appears blind to his own biases, falsely championing himself as a “radical centrist.” For example, he notes public spending as a percentage of GDP as his gauge of government size, assuming spending should grow in proportion to the rest of the economy. As economist Robert Higgs has said, “that doesn’t make a lot of sense.” We don’t assume the cost of other items should follow such a pattern.

Wheelan’s ideological blindness reminds me of when two prominent economists in Canadian universities—David Green and Joseph Marchand—offered a purportedly value-free assessment of the minimum wage. One published his research, which showed job losses, with the C.D. Howe Institute. Yet he and his coauthor proceeded to advocate a $15 minimum wage on “equity” and “turnover” grounds.

The challenges of economics as an academic field are vast and will continue to be a pertinent topic in my financial writing. In particular, the trend toward less theoretical and more empirical economics is becoming obvious, as are the consequences. As documented by Econ Journal Watch, progressive ideology and central banking biases have long been undermining classical economics, polluting the field, and orienting it toward policy interventionism.

Naked Economics has plenty of laudable material, notably regarding Gary Becker on family economics and Ronald Coase on property rights and externalities. However, the book is a product of its time, and much of the good in it will likely go over the layman’s head. Wheelan’s book on statistics remains his more useful work, and Economics in One Lesson, despite being fifty-six years its senior, retains its spot as the go-to economics primer.

Author:

Contact Fergus Hodgson

Fergus Hodgson is editor in chief of the PanAm Post, a bilingual publication that spans the American continent. Originally from New Zealand, he came to the United States to study economics at Boston University and now lives in Miami, Florida.

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Why Economists Are So Often Accused of Being Indifferent to Social Problems | Mises Wire

Posted by M. C. on June 16, 2020

For example, one can argue both economically and medically that if people are permitted to mingle again and return to their jobs, although in the short run we may see a spike in COVID-19 infections and even a spike in death rates, over the longer term, it would result in fewer deaths. To a certain extent, this is an empirical assessment that we cannot confirm until we actually engage in the activity and permit certain policies. The economists’ logic goes as follows: we know that in the short term there may be more infections and premature deaths, but over time such a policy would result in fewer infections and deaths in the longer future.

The critics, however, tend to look only at the short term.

https://mises.org/wire/why-economists-are-so-often-accused-being-indifferent-social-problems?utm_source=Mises+Institute+Subscriptions&utm_campaign=14274f5d69-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-14274f5d69-228343965

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.

~Henry Hazlitt, Economics in One Lesson

As someone who has written articles and papers on police and prosecutorial matters (yes, economists analyze those things, too) for two decades, I am not surprised to see the kinds of police killings that provoke people to anger, frustration, and helplessness.

When economists look at what only can be called bad things that happen time and again, we ask why that is so. More specifically, we want to know about the structures of incentives that encourage things to occur time and again, even when there is general agreement that things need to change. Our analyses and our recommendations (when we make them) often are seen either as insensitive or outright offensive to people who don’t know or understand the language of economics and economists.

For example, many economists have been much more critical of the lockdown response to COVID-19, so we are accused by others of wanting people to die. People accuse of us being “unscientific” or insensitive to the needs of others during a pandemic. It seems that it is impossible to cross the divide between economists and their critics.

So, what do economists believe regarding something like dealing with COVID-19? Is our criticism of the lockdowns due to right-wing ideology (as some of my colleagues would claim), lack of compassion for the sick, or something else?

First, and most important, economists hold that we live in a world of scarcity and that our options always are going to be limited. We also will operate in logical fashion, working off sets of assumptions. So, let me demonstrate how the analysis might work.

Economists Must Consider Scarcity

Let us first assume that the national lockdown strategy (one size fits all) was the most effective in preventing more COVID-19 deaths. Now, there was no basis in fact for the original prediction of 2.2 million American deaths, and we know in hindsight that the model that came from Imperial College of London was terribly flawed and vastly overestimated the “if we do nothing” results. We cannot know if our assumption is correct given that we didn’t try anything else, so we would have to deal with a counterfactual, which speaks for itself.

The question, then, would be how long we could be locked down before becoming overwhelmed with the unemployment and the lack of production of essential goods. In other words, How long before the negative results of the lockdown become so dire that we cannot continue on this path? To put it bluntly, if we stay locked down too long, people will die from the consequences; lots of people. Think of all of the people with medical conditions that could not see doctors and receive treatment because most of the medical resources were being directed toward dealing with treatment and prevention of COVID-19. (See? There we go again with the law of scarcity.)

Do we know where the crossover point might be? Well, no. The worlds of medicine and public policy will depend upon models that are imperfect, that are likely to be ideologically biased (especially the more apocalyptic ones), and that do not “predict” the past very accurately, let alone the future. (When I was doing graduate work, one of my professors once told me regarding the use of econometric models: “Econometrics: Predicting the past with ever increasing reliability.”)

However, we can make general observations, and we also can look at the occupational (and racial) makeup of those who are directing the lockdown policies and those who are most negatively affected by them. Phil Magness notes that when we consider policy decisions these occupational differences are not trivial:

Many in elite academia and journalism have the luxury of a paycheck for the time being, as well as the ability to do their work from home with only modest disruption. Vast numbers of newly unemployed Americans do not.

At the same time, most academic efforts to cast the lockdown debate along racial lines miss or omit another dimension that belies their critical theory-infused attacks on any attempt to reopen the economy. The very same lockdowns, social distancing mandates, and shelter-in-place orders that these writers defend are also backed by heavy-handed enforcement by the state. And in many cases, that enforcement falls disproportionately on racial minorities, the poor, and people with fewer means to defend themselves.

Magness was writing in response to those who claimed that people who protested the lockdown did so either out of selfishness or racism or both. (That the lockdowns have disproportionately harmed racial minorities seems to have escaped the notice of many academic and media elites. One doubts that this omission is accidental.)

Looking at the Long-Term

 

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The Great Criticism of Keynes That Every Economist Should Read

Posted by M. C. on December 21, 2019

Almost no one has ever read the book. There is good reason for this. Keynes’ book is unreadable. Its arguments are incoherent. This is why we rarely see direct quotes from the book.

https://www.economicpolicyjournal.com/

By Gary North

In 1959, Henry Hazlitt’s book, The Failure of the “New Economics,“ was published by D. Van Nostrand Company, a reputable but midsized publishing company. The book was subtitled An Analysis of the Keynesian Fallacies.
This was Hazlitt’s magnum opus. That is to say, it was his great work. Yet it was narrowly focused. It was a monograph. In clear prose, he took apart John Maynard Keynes’s magnum opus, The General Theory of Employment, Interest, and Money (1936), the book that indirectly reshaped economic theory in the second half of the twentieth century.

The Book Almost Nobody Has Read

Almost no one has ever read the book. There is good reason for this. Keynes’ book is unreadable. Its arguments are incoherent. This is why we rarely see direct quotes from the book. Keynesianism did not become a major factor in the thinking of most economists until 1945. The Keynesian movement accelerated in 1948 because of the first edition of Paul Samuelson’s textbook Economics. I own a reprint of that original edition. Keynes is not quoted in the book. Samuelson mentioned him on pages 253 and 303. The book and its later editions have sold something in the range of four million copies. It was the most successful economics textbook of the twentieth century. It shaped the thinking, or rather the non-thinking, of millions of students for seventy years. Yet almost none of these students has ever read The General Theory cover to cover.
Samuelson in 1946 wrote a laudatory assessment of the impact of The General Theory. It was published in Econometrica, an academic journal not noted for its clarity.
In any case, it bears repeating that the General Theory is an obscure book, so that would be anti-Keynesians must assume their position largely on credit unless they are willing to put in a great deal of work and run the risk of seduction in the process. The General Theory seems the random notes over a period of years of a gifted man who in his youth gained the whip hand over his publishers by virtue of the acclaim and fortune resulting from the success of his Economic Consequences of the Peace.
A reprint of his article is here.
The General Theory was not well received at the time of this publication. Richard Ebeling, a Misesian economist, wrote in 2004,
Except for some of Keynes’s young protégés at Cambridge University, most of the reviewers of the book were highly critical of many of its theoretical “innovations,” as well as its inflationary prescriptions for unemployment. Even some economists who later became proponents of Keynes’s “new economics” were initially highly critical of his work. For example, Alvin Hansen, who was one of the leading advocates of Keynesian economics in the United States in the 1950’s and 1960’s, wrote in late 1936 that The General Theory “is not a landmark in the sense that it lays the foundation for a ‘new economics.’ … The book is more a symptom of economic trends than a foundation stone upon which a science can be built.”
Yet within a few years, and most certainly by the end of World War II, Keynes’s ideas had virtually pushed aside every other explanation of the causes and cures of economic depressions. Keynes’s book became the foundation stone for the new “macroeconomics.”
In contrast to Keynes’s book, Hazlitt’s book is readable, although not so readable as all of his other books. That is because he had to spend his time trying to make sense out of Keynes’s convoluted prose and shifting definitions. But the book is coherent, and his explanations are lucid, as long as he was not directly citing Keynes.
I read the book in the summer of 1963. I know this because I used to write the date on which I had bought a book on the front inside cover page. I did not read Economics in One Lesson until 1971, when I became a senior staff member at the Foundation for Economic Education (FEE). The first book spoiled me. It really is a tour de force. I realize that the second book was his bestseller and is a fine introductory book for people who know nothing about economic theory, but his book on Keynes outshines it. Unfortunately, almost nobody has read it. It remains an unread book that demolishes an equally unread book.
In 1960, Van Nostrand published a follow-up volume edited by Hazlitt, The Critics of Keynesian Economics. It is a compilation of scholarly articles written by critics of Keynes.
The Mises Institute has done yeoman service in making certain that both of these books remain in print, and both of them remain available in PDF format free of charge.

The Memory Hole

Hazlitt’s book was not the first full-length book to criticize Keynes or the longest. That honor belongs to Arthur Marget, who was the first economist to devote a book to critiquing a narrow aspect of Keynes’s General Theory. It is a two-volume behemoth of over fourteen hundred pages, The Theory of Prices. It also covered Keynes’s earlier book, Treatise on Money (1930). The first volume was published in 1938; the second volume was published in 1942. It was unknown when it was published, and it remained unknown after it was republished in 1966. It is not as incoherent as Keynes’s book, but it is turgid, prolic, and unread. Almost no economist has ever heard of Marget. That was true in his day, too. There is no Wikipedia entry on him. His book did not go down the memory hole. It was published at the bottom of the memory hole, and it remained there. John Egger wrote a detailed review of it in 1995, which gives you some indication of just how obscure it is. It took over half a century to get a detailed review. Egger concluded, “Labels aside, Marget’s work offers scholarship in the history of monetary doctrine that is unmatched, and an analysis of processes that is in some respects unmatched, in explicitly Austrian works. ‘Prolixity’ or not, it deserves to be recognized as an exciting and significant contribution to the tradition of the methodologically individualistic analysis of monetary processes.” The use of the adjective “exciting” to describe this book I regard as exaggerated. The Mises Institute has made a PDF available of each volume.
Hazlitt in 1959 was a well-known economist. He had a regular column in Newsweek from 1946 to 1966. The Mises Institute has reprinted those articles in a massive 800-page book, Business Tides. Yet despite his name identification, the economic guild successfully blacked out references to Hazlitt’s book on Keynes. I never recall seeing a footnote to the book in any academic economic article other than those published in Austrian school journals.
The economists’ academic guild never took Hazlitt seriously. After all, Hazlitt did not go to college. Keynes did go to college, but he did not major in economics. He majored in mathematics. That certainly did not in any way hamper his capture of the academic guild after 1945.

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Socialist motivation defined by Henry Hazlitt via Marx.

Posted by M. C. on October 26, 2019

Henry Hazlitt Quotes. QuotesGram

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