A smidgen of economic literacy in less than one lesson

From the preface of Henry Hazlitt’s 1946 Economics in One Lesson:

This book is an analysis of economic fallacies that are at last so prevalent that they have almost become a new orthodoxy. There is not a major government in the world at this moment [not now either, TeeJaw], however, whose economic policies are not influenced if they are not almost wholly determined by acceptance of some of these fallacies.

Because this is a work of exposition I have availed myself freely and without detailed acknowledgment …of the ideas of others. But my indebtedness to at least three writers is of so specific a nature that I cannot allow it to pass unmentioned. My greatest debt, with respect to the kind of expository framework on which the present argument is hung, is to Frédéric Bastiat’s [1801-1850] essay Ce qu’on voit et ce qu’on ne voit pas [“What we see and what we do not see,” This essay in its entirety is available here, TeeJaw], now nearly a century old. The present work may, in fact, be regarded as a modernization, extension and generalization of the approach found in Bastiat’s pamphlet. My second debt is to Philip Wicksteed [1844-1927]: in particular the chapters on wages and the final summary chapter owe much to his Common Sense of Political Economy [still in print!] My third debt is to Ludwig von Mises [1881-1973]. Passing over everything that this elementary treatise may owe to his writings in general, my most specific debt is to his exposition of the manner in which the process of monetary inflation is spread.

From Chapter One:

Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject …are multiplied a thousand fold by…the special pleading of selfish interests.

In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

In this lies almost the whole difference between good economics and bad.

Economics in One Lesson is available to read in PDF format at the Foundation of Economic Education. You can also listen to or download an MP3 file of the entire book and transfer it to an iPod, iPhone, tablet or other device for listening on the go.  Economic literacy will make you happier and better informed. It will enhance your BS detector when politicians and bureaucrats lie to you, which is most the time.

A modern example of bad economics is the government mandated minimum wage. Politicians and voters see only the immediate effects of some workers getting a pay raise and ignore the secondary consequences when many other workers lose their jobs.  Those who lose their jobs are the most vulnerable because they are the least skilled and therefore need the job they have so they can acquire the experience and skills to advance. The harm to this group is not seen, only the benefit to the group that will be kept and paid more. The harm to the low-skilled group is not offset by the benefit to the higher-skilled group. It’s in fact the exact opposite, the harm to those who become unemployed is likely to make them unemployable in the future.  That is terrible in the harm it causes. Such economic idiocy is a depredation on the poor, and government is responsible for it.

There is abundant research on the ill effects of minimum wage laws. A lot can be found here and a lot more here.

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