Surname 1ECONOMICS IN ONE LESSON: HAZLITT, HENRY. Tyebally, Amaar People Soft id 0863173 MacroEconomics 2305 Section 16820 MWF 11AM (18, October, 2010)
Surname 2 Economics in One Lesson This book gives an analysis of economic fallacies that have proved to be prevalent thathave nearly become new orthodox. There have been self-contradictions which havedifferentiated the group that accept same premises into several schools of thought. The majordifference between one school and the other is that one group wakes up earlier than the othergroup to the absurdities to which false premises are driving it towards, and becomes at that timeinconsistent by either unwittingly leaving its premise that is false. This book explains that there is no major government in the whole world that haspolicies that are not at all affected if not wholly determined by taking in some of the fallacies.Perhaps shortest and most reliable way to understand economics is through dissection of suchlike errors. The book explains the difference between good and bad economists as that, the goodeconomists, look at secondary and general effects on everybody, while the bad economists onlylooks at the primary effects. The book emphasizes more on high taxes, evils which take place inpublic program works, fixing of prices and tariffs by the government, the minimum wage,saving certain industries, control of rent, unions and minimum wage. The issues that I canperceive not important but discussed in the text include parity pricing, disbanding large numberof troops, commodity stabilization, and swatting down the alleged advantages of inflation.Some of letter list is unfamiliar to modern readers, since no one anymore, for instance,advocates price inflations something good. This can be placed on the fact that, time that mayadvocate. It is widely “Known that that if we drink too much alcohol, the secondary consequenceof a hangover will be unpleasant. Theres a secondary, "hangover" effect from many economic
Surname 3policies as well. Yet the politics of the matter often mean that theyre ignored”, (Hazlitt, para3).The newspaper in the current moments according to Hazlitt, carry news that acts as economicstimulus program that can be termed as infrastructure projects. It is not that Hazlitt is against infrastructure projects. Hazlitt explains that by all meansand built it, and it is done by the use of public money. However, this projects have to bejustified basing on their merits, but not as a plan of injecting money into the economy. Forevery shilling spent on public infrastructure, a shilling is taken from the private sector, whichwould have been used some where else. Individuals might able to hide all these by the use ofdeficit spending, but as usual, in the end, piper has to be paid. The book explains on how suchpublic works projects are affected. It is furthermore highly visible and news worthy. Thesecondary effect has been explained in the book on how some of the money which would havebeen spent somewhere else is taken out of the economy. This is due to the fact that, though thismoney is not and nothing is bought, it has not been directly seen and hence far less likely to bereported on. Considering what is in the news nowadays, federal lending institutions like Freddie Macand Fannie Mae. The Community Reinforcement Act provides loans to individuals ho do not atall qualify. The administration of Bush in the previous times went a head to ensure that bankslead more money. “Hazlitt explains how by definition government will never do as good a job in makingloans as will the private sector for the simple reason that people are more careful with theirown money.” (Hazlitt, para8) This kind of truth is in most cases hidden; this is because when abank failure occurs due to bad loans, it is announced allover in the news, and where by badloans made by governments are hidden within most federal spending. Political considerations
Surname 4further more wrap the lending by government, something that can really happen in the privatesector, if and only if, there is extreme or politically motivated legislation. The broad agreements in the current times indicate that tariffs are harming the economywhich had been the rational behind North American Free Trade Agreement (NAFTA) amongother free trade agreements. We know that consumers are hurt by tariffs, Although Hazlittemphasized that the producers are also hurt. Tariffs makes consumers to pay higher for aproduct than ordinary, and every cent they spend, is a cent less they could spend in anotherplace. As an effect producers of other products and services end up losing that cent. Matters concerning protectionism or about saving industries are not addressed byHazlitt, due to national security. The book concentrates on the economic impact of governmentactions. Individuals are supposed to be worried about their trade imbalances, as theirimportation is higher than their exportation. It has been understood worldwide that too muchimbalances is very dangerous. Hazlitt explains that "The real gain of foreign trade to anycountry lies not in its exports but in its imports."(Hazlitt, para11) This is because individualsimport things since doing so has proved to be cheaper for the consumers. This is something thatis good. Small fallacies like the idea that the cost of production determines the price has alsobeen addressed in the book. The book further explains that, deeper considerations show thatsupply and demands determine the prices. Last year individuals believed that high prices of oilwere as a result of evil speculators. Hazlitt explains that far from being the enemies, speculatorsare very essential to the stability and prosperity of the economy. They in real sense protectpeople from price fluctuation. Neither of the reason holds water for their activities not to be
Surname 5regulated to enhance transactions that are honesty, simply that in and itself, is advantageous topeople’s well being. One finds it very hard to imagine how Hazlitt approves current government bail outs.Apart from the pains of deficit spending, it is something good when inefficient businesses closedue to being bankruptcy. This acts like a signal that the capital that they have invested inbusiness would better be spent somewhere else. Hazlitt stresses that he knows that there aredisadvantages for individual workers, and that people have to address their short-term needs.However in the similar script, the general consequences of inefficient businesses closing downare good. In the context of government fixing price, Hazlitt discusses the issues of regulation,price fixing and the matter of mine is different. This has been shown recently in action withgasoline prices. Everybody is not ready to pay more for the essentials, and it is a naturaltendency of assuming the worst motivations tendency behind businesses that supply such likeproducts. “Preachers would have less to complain about; reformers would lose their causes: thedemand for their services and contributions for their support would decline.” (Hazlitt, pp. 220) The primary effects of rent control are that, poor individuals have better places to live.Whilst, the secondary consequence is that, landlords have little money that they can use to fixup their buildings. Generally, contractors tend not to build more houses since landlords have nomoney to build. This then results to housing shortages. At the end, similar people whom thepolicies of price control were meant to help are the same ones suffering. The only way ofincreasing wages but avoid putting other individuals out of work is through having a goal thatfocuses on profits. When unions agitate for safe working condition, they do more good thanwhen pushing for minimum wage. Much of these will be familiar to libertarian, and indeed
Surname 6most arguments raised by Hazlitt are not new to most of us though they are clearly explainedthan I have ever seen. The unique thing that I experienced in his explanation was his elaboration on saving. Heexplained that saving is only another kind of spending; though spend on somewhat differentkind of products. The difference is that saving involves giving someone else money to spendand is spend in different products. Therefore, money which is saved its more less like it hasbeen spent although it would be accessed when ever it is needed. The interest rates earned onmoney which is saved is relatively lower than who is investing it is paying therefore. If theperson who had saved the money had an investment plan and invest the money in moreprofitable manner it would earn him more. However, such investments might beinconveniencing to the owner if at all they want the money invested urgently as it might not beavailable or it might as well disrupt the investment already done. When directly consumers spend money, it is for sure on consumer goods and services,while when they put them in saving accounts; it does not just sit there at all. Banks lend them tobusiness people while mutual funds or corporate bond managers give them to business peopleby encouraging them to purchase bonds or stocks. Hence, corporations usually take this moneyand spend them on capital goods like buildings. The main point remains, the money is spent,though it might take longer and is on different items. For any one who is of libertarian or conservative bent, I advice him/her to go throughthis book, so that we can all lean to speak economics language, and enables us to unite andfight off big government liberals. We should have clear, easy to understand and concisearguments. Going through this book, also will enable one understand and appreciate the trueconsequences of the actions government would like to take. The main theme emphasized
Surname 7reiterated in this book is that actions have to be thought through and through so that individualscan watch the long term effects, that will not just be highly visible short term ones.
Surname 8 Work CitedHazlitt, Henry. Economics in One Lesson. New York: Harper & Brothers Publishers, 1946.Hazlitt, Henry. The Redhunter. “Economics in One Lesson.” Rev. of Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics. January 26, 2009. http://theredhunter.com/2009/01/book_review_economics_in_one_lesson.php November 16 2010