In 1945, Henry Hazlitt authored Economics in One Lesson, wherein he offers market-oriented insight into a number of post-war developments in the United States and dispels several myths associated with economic theory that continue to dominate public policy discourse over sixty years later.
The first chapter, titled, “The Lesson,” discusses how many economic theories rely on fallacious assumptions and fail to anticipate the long-run consequences of public policy: “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, Hazlitt is reviving Bastiat’s concept of opportunity costs and law of unintended consequences, introduced nearly a century earlier in his essay, “What is Seen, What is Not Seen.” Bastiat presents a scenario in which a shopkeeper’s son breaks a window and spectators console the man that,
“It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?” In response to this hypothetical situation, Bastiat posits to the reader “what is not seen”:
“But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen. It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.”
The ideas of opportunity cost and unintended consequences profoundly affected public policy, challenging economists and politicians to scrutinize more heavily initiatives to intervene in the economic or manipulate economic outcomes. Hazlitt’s lessons, of which there are two dozen, apply to the 21st century economy, as well. He discusses how taxes discourage production, what effect minimum wage laws have on employers, where “Saving the X Industry” fails, and whom tariffs protect. I plan to enumerate these lessons in the coming weeks, applying them to various municipal, provincial, and federal policy initiatives and offering market-oriented solutions to each. This will familiarize the reader with Canadian politics and introduce ideas from some of history’s greatest thinkers.
Hazlitt’s book is available for download at Mises.org!