This is an ongoing series based on Henry Hazlitt’s Economics in One Lesson, which could have been written in 2017. You can access the Table of Content here.
Hazlitt lamented that economics is haunted by more fallacies than any other course of study. He found this inevitable, given the “special pleading of selfish interests.” All groups have some economic interests in common, but every group possesses interests that run counter to those of other groups. There are occasional public policies that are of widespread utility, but most policies only benefit one group at the expense of all other groups. Naturally, the group that will benefit argues that these policies are needed and sometimes are able to convince the general public … or at least confuse them into bafflement.
There is also a persistent tendency to see only the immediate effect of a given policy, or its effects only on a specific group and to neglect to explore the long-term consequences on all groups.
Special pleading and neglect of secondary consequences are the hallmark of bad economists. It may seem sensible to look at all the consequences of a given policy on everyone, but we see that people can be very short-sighted in more personal affairs and some economists suffer the same failing when they look at public policy. Just as the man who overindulges at the bar should know he’ll pay for it with a hangover the next day, Keynesian economists should know that they are creating a future of debt and poverty, but they only see the good times now and not the future.
In 1946, economists were being deemed brilliant who “deprecate savings and recommend squandering on a national scale as a way of economic salvation ….” When the long-term consequences of these policies were pointed out, they sloughed them aside, saying the current situation is more important than the future.
Hazlitt believed they were already suffering the long-term consequences in 1946. “Today is already the tomorrow which the bad economist yesterday urged us to ignore.” Consequences can take years to develop, but sometimes the pain is felt immediately.
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.
Hazlitt acknowledged that the opposite error was possible. Economic policies cannot look solely at long-term results to the community as a whole because that would callously disregard the negative effects policies may have on certain groups for the short-term. Classical economists had sometimes made that error, but by 1946 (and in 2017), that’s a rare occurrence indeed. Usually, the problem is so-called mainstream economists failing to look at the long-term effects of economic policies on the whole of society.
They over look the woods in their precise and minute examination of the particular trees. Their methods and conclusions are often profoundly reactionary. They are sometimes surprised to find themselves in accordance with seventeenth-century mercantilism.
Sadly, the bad economists are much better communicators than the good economists, mainly because they can deal in half-truths and slogans. When the good economists attempt to refute the demagoguery by showing the other half, they must launch into a long dully chain of reasoning that quickly loses the general public’s attention, and the Keynesians can refute them by saying their “capitalist apologists.”
Having stated his lesson and the fallacies in the abstract, Hazlitt then turned his attention to specific real life examples.
This is part of a series. Click here to go to the table of contents.