Have you ever been confused when politicians speak of tariffs and subsidies? Does talk of inflation make your head spin? Henry Hazlitt helps clear away the fog of economics in his book, “Economics In One Lesson".
The one lesson is very simple: It’s all about looking at the unseen, as well as the seen. It’s about considering the opportunity costs. When considering any economic policy, we must not only look at the short-run effects on some groups, but we must also look at the long-run effects on all groups. One prominent example of this is the broken window fallacy.
Even though the book was written quite a while ago, I found it to be a highly illuminating read. All of the examples still make sense even today, and perhaps even more so, given the recent financial crisis and the failure of western economics to find their way forward.
Some sections of the book are quite telling, like this excerpt from chapter six: “Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to “buy” houses that they cannot really afford.” This is wisdom that we had available to us, and that we unfortunately chose to ignore.
Hazlitt’s book “Economics In One Lesson” is just as highly relevant today as it was when it was written; I would recommend it to anyone looking to decode the unseen consequences of the proposed actions of politicians and economists. From the Mises Store: “Written for the non-academic, it has served as the major antidote to fallacies in the popular press, and has appeared in dozens of languages and printings. It’s still the quickest way to learn how to think like an economist. And this is why it has been used in the best classrooms more than sixty years.”