Henry Hazlitt wrote “Economy in one Lesson” in the aftermath of WWII. It never cease to be read but it deserves more, it deserves to be read by everybody. It has been recommended by many experts and, although I dislike to even think about arguing on authority, the following opinions is descriptive; “if there were a Nobel Prize for clear economic thinking, Mr. Hazlitt book would be a worthy recipient…”.
Economics is a field of the social sciences interested on the problem of production, distribution, and consumption of good and services and other related issues. Although it is a rather complex subject of study, many difficulties are artificial. It is not the case that the best theories are difficult to understand (given enough time and attention), the problem is that those explanations are hidden within a forest of fallacy trees.
The metaphor “fallacy tree” immediately reminded me an old story by Chesterton, one of the adventures of the Father Brown. I had forgotten the details, unfortunately, but the important thing is that there was a General of His Majesty that murdered a rival over a woman. The problem to this General was to hide the body so he could not be incriminated. The next day, he decided to break a long truce and start a bloody battle and in that battle the General’s rival died, as the chronicles said, an heroic death. Chesterton makes us know that that battle could have been avoided and the blood kept inside the bodies. We also came to know, at the end of the story, that there is no better place to hide a corpse than in a mountain of dead bodies. Similarly, there is no better place to hide the good ideas than to bury them in a pile of fallacies. One different is however important; in Chesterton’s story there is a criminal mind conspiring behind the scene, while in the field of economics there are just ideas, worse and better explanation of reality.
Hazlitt metaphors, “a tree of fallacies” is brilliantly used along his short book. The main stem of the tree is the ignorance of the secondary effects of any given action, the effects that are invisible in the immediate. “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consist in tracing the consequences of that policy not merely for one group but for all groups”.
“The whole argument of this book may be summed up in the statement that in studying the effects of any given economic proposal we must trace not merely the immediate results but the results in the long run, not merely the primary consequences but the secondary consequences, and not merely the effects on some special group but the effects on everyone.”
Henry Hazlitt
This particular species of tree, always branch into two branches; one is the ignorance of the effects of the act in time, the other is the ignorance of the effect in scope.
There is a striking parallel between Hazlitt and Popper. Hazlitt theory can be summarised as follow: the evils of economic policies are derived either for the ignorance of the long, or the broad consequences of any action. Popper wrote that the main task of all social sciences, including economics, was to study the unintended consequences of any social action. These unintended consequences are those that should be brought to the center of any economic analysis.
Beyond the metaphor, “Economics in one Lesson” is full of real life examples and the many uses of those fallacies in building public policies. There is also a brilliant attack to technophobia and other intellectual maladies.
Hazlitt book was important to me. Both of my parents went to college and suceded, I think that they will forgive me if I disclose here that they also were illiterate on basics economics. That is why I had regretted not having certain basic but solid knowledge about how economy works during my early years.
Francis Bacon was right in saying that “Money is a great servant, and a terrible master”, it is also true that money has a heavy impact in your life, it is either the servant or the master; if you are well of or if you have to struggle for survival every day. Money does not buy happiness, of course, it buys freedom!