Archive from June, 2014
1 Jun
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Our First Ever Book Review

The Young Republican’s blog is proud to announce new posts on book reviews. Lord willing and the Creek don’t rise, the posts shall be fairly regular, insightful, and proof positive to our liberal friends that we can in fact read.

There are lots of things to learn for which one lesson constitutes a positive hazard.  For instance, I took only one driving lesson before driving the family suburban through the local In-N-Out drive-thru, and put quite a big dent in the back of a 1967 Mustang. This experience taught me two more lessons, (1) putting a suburban in neutral does not prevent the suburban from moving forward on its own volition, and (2) women do not find it endearing to be hit on by the person who left their suburban in neutral and had it ram into the back of their father’s antique automobile.

This then is why Henry Hazlitt’s Economics in One Lesson is so valuable, because it is confined solely to one particularly easy two-part lesson. As Hazlitt eloquently puts it, “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 for all groups.”

Brilliantly easy right? Hazlitt suggests looking at both long term and short term consequences, and examining an economic policy’s effect on everyone. I took my nearly a full semester of economics during college at a certain party school (for anonymities sake, I’ll refer to it by its initials, A.S.U.[1]), and if I can get this, you can get this.

But just in case you can’t (or went to the University of Alabama), Hazlitt gives us example after example, starting with what’s called the Broken Window Parable.[2] Hazlitt puts before us a shopkeeper and a boy playing baseball. The boy accidently breaks the shopkeeper’s window, and the shopkeeper pays $250 to the handyman to get it fixed. The handyman is $250 richer, the shopkeeper $250 poorer.

But what about the tailor? The tailor is the invisible third party, the forgotten man, that Hazlitt asks us to consider, for had the glass not been broken, the shopkeeper would have bought a $250 sweater from the tailor. Not only is the shopkeeper poorer by one sweater, so is the economy as a whole, because in the long term that sweater never gets made.

With Hazlitt’s basic premise in mind, let’s try the scenario with a few other examples. Let’s start with “shovel ready projects.[3]” For our shovel ready project, we’ll choose a new bridge, which we’ll grandly christen the “Bridge to Narnia.” Now, our liberal friends get very excited, because building the Bridge to Narnia provides employment. “We’ve created 500 jobs,” they say, glee on their happy liberal faces. Folderol.

Being smart conservatives who have taken Hazlitt’s lesson to heart, we know that all government expenditures, including our bridge, must eventually be paid for through taxation. And to pay the salaries of our 500 new Narnia workers and other costs of construction, the government must raise $10,000,000 in taxes from the people. These taxes are money that people could have spent on other things, that would have flown into the economy. Thus, no new jobs have been created, jobs have merely been diverted from one economic activity to another, the bridge represents, in Hazlitt’s words ‘unbuilt homes, unmade cars and washing machines, the unmade dresses and coast, perhaps the ungrown and unsold foodstuffs.” Thus, for every public project job, a private job is never created, for every public work, a private work is never created. Of course, some bridges are necessary – Hazlitt is only concerned with bridges for the sake of providing employment.

And so to with the litany of other economic fallacies, ranging from rent control to unions to minimum wage laws. Some of Hazlitt’s work is a little outdated – we don’t talk much about tariffs – but much of it still retains its power more than five decades after it was written. Take this chestnut:

[g]overnment-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 (ed. the forgotten man), to subsidize the bad risks and defray the losses. They encourage people to ‘buy’ houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (more forgotten men)..and may mislead the building industry into an eventually costly overexpansion…

The above is merely the barest introduction to Hazlitt, and there are few other books that can be read in so short a time with so much profit. Think of Hazlitt as training that will enable you to always have a ready answer at hand to any liberal economic fallacy.

[1] In the interest of full disclosure, I did not go to Appalachian State University, but to the other A.S.U. I’m sure that unlike my alma mater, Appalachian State is a fine academic institution that was not featured on Girls Gone Wild.

[2] Truth be told, Hazlitt didn’t come up with this, but a French economist named Frédéric Bastiat first wrote about it in his 1850 essay Ce qu’on voit et ce qu’on ne voit pas.

[3] Understanding of course that shovel ready projects are projects that may or may not actually be shovel ready.