Tài liệu Economics in One LessonHenry HazlittJune 1978 pdf

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Bastiat’spamphlet. My second debt is to Philip Wicksteed: in particular the chap-
ters on wages and the final summary chapter owe much to his Common-sense of
Political Economy.Mythird debt is to Ludwig von Mises. Passing overeverything
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.
When analyzing fallacies, I have thought it still less advisable to mention particu-
lar names than in giving credit. Todosowould have required special justice to
each writer criticized, with exact quotations, account taken of the particular
emphasis he places on this point or that, the qualifications he makes, his personal
ambiguities, inconsistencies, and so on. I hope, therefore, that no one will be too
disappointed at the absence of such names as Karl Marx, Thorstein Veblen, Major
Douglas, Lord Keynes, Professor Alvin Hansen and others in these pages. The
object of this book is not to expose the special errors of particular writers, but eco-
nomic errors in their most frequent, widespread or influential form. Fallacies,
when theyhav e reached the popular stage, become anonymous anyway.The sub-
tleties or obscurities to be found in the authors most responsible for propagating
them are washed off. A doctrine becomes simplified; the sophism that may have
been buried in a network of qualifications, ambiguities or mathematical equations
stands clear.Ihope I shall not be accused of injustice on the ground, therefore, that
afashionable doctrine in the form in which I have presented it is not precisely the
doctrine as it has been formulated by Lord Keynes or some other special author.It
is the beliefs which politically influential groups hold and which governments act
upon that we are interested in here, not the historical origins of those beliefs.
Ihope, finally,that I shall be forgivenfor making such rare reference to statistics
in the following pages. Tohav e tried to present statistical confirmation, in referring
to the effects of tariffs, price-fixing, inflation, and the controls oversuch commodi-
ties as coal, rubber and cotton, would have swollen this book much beyond the
dimensions contemplated. As a working newspaper man, moreover, I amacutely
aw are of howquickly statistics become out of date and are superseded by later fig-
ures. Those who are interested in specific economic problems are advised to read
current ‘‘realistic’’discussions of them, with statistical documentation: theywill
not find it difficult to interpret the statistics correctly in the light of the basic prin-
ciples theyhav e learned.
Ihav e tried to write this book as simply and with as much freedom from technical-
ities as is consistent with reasonable accuracy, sothat it can be fully understood by
areader with no previous acquaintance with economics.
While this book was composed as a unit, three chapters have already appeared as
separate articles, and I wish to thank the NewYork Times, the American Scholar
and the NewLeader for permission to reprint material originally published in their
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pages. I am grateful to Professor von Mises for reading the manuscript and for
helpful suggestions. Responsibility for the opinions expressed is, of course,
entirely my own.
Henry Hazlitt
NewYork
March 25, 1946
June 1978
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1. The Lesson
Economics is haunted by more fallacies than anyother study known to man.
This is no accident. The inherent difficulties of the subject would be great enough
in anycase, but theyare multiplied a thousandfold by a factor that is insignificant
in, say,physics, mathematics or medicine-the special pleading of selfish interests.
While every group has certain economic interests identical with those of all
groups, every group has also, as we shall see, interests antagonistic to those of all
other groups. While certain public policies would in the long run benefit every-
body,other policies would benefit one group only at the expense of all other
groups. The group that would benefit by such policies, having such a direct interest
in them, will argue for them plausibly and persistently.Itwill hire the best buyable
minds to devote their whole time to presenting its case. And it will finally either
convince the general public that its case is sound, or so befuddle it that clear think-
ing on the subject becomes next to impossible.
In addition to these endless pleadings of self-interest, there is a second main factor
that spawns neweconomic fallacies every day.This is the persistent tendencyof
men to see only the immediate effects of a givenpolicy, orits effects only on a
special group, and to neglect to inquire what the long-run effects of that policywill
be not only on that special group but on all groups. It is the fallacyofoverlooking
secondary consequences.
In this lies the whole difference between good economics and bad. The bad
economist sees only what immediately strikes the eye; the good economist also
looks beyond. The bad economist sees only the direct consequences of a proposed
course; the good economist looks also at the longer and indirect consequences.
The bad economist sees only what the effect of a givenpolicyhas been or will be
on one particular group; the good economist inquires also what the effect of the
policywill be on all groups.
The distinction may seem obvious. The precaution of looking for all the conse-
quences of a givenpolicytoeveryone may seem elementary.Doesn’teverybody
know, inhis personal life, that there are all sorts of indulgences delightful at the
moment but disastrous in the end? Doesn’tevery little boyknowthat if he eats
enough candy he will get sick? Doesn’tthe fellowwho gets drunk knowthat he
will wakeupnextmorning with a ghastly stomach and a horrible head? Doesn’t
the dipsomaniac knowthat he is ruining his liverand shortening his life? Doesn’t
the Don Juan knowthat he is letting himself in for every sort of risk, from black-
mail to disease? Finally,tobring it to the economic though still personal realm, do
not the idler and the spendthrift know, eveninthe midst of their glorious fling, that
theyare heading for a future of debt and poverty?
Yetwhen we enter the field of public economics, these elementary truths are
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ignored. There are men regarded today as brilliant economists, who deprecate sav-
ing and recommend squandering on a national scale as the way of economic salva-
tion; and when anyone points to what the consequences of these policies will be in
the long run, theyreply flippantly,asmight the prodigal son of a warning father:
‘‘In the long run we are all dead.’’ And such shallowwisecracks pass as devastat-
ing epigrams and the ripest wisdom.
But the tragedy is that, on the contrary,weare already suffering the long-run con-
sequences of the policies of the remote or recent past. Today is already the tomor-
rowwhich the bad economist yesterday urged us to ignore. The long-run conse-
quences of some economic policies may become evident in a fewmonths. Others
may not become evident for several years. Still others may not become evident for
decades. But in every case those long-run consequences are contained in the policy
as surely as the hen was in the egg, the flower in the seed.
From this aspect, therefore, the whole of economics can be reduced to a single les-
son, and that lesson can be reduced to a single sentence. 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.
Section 2
Nine-tenths of the economic fallacies that are working such dreadful harm in
the world today are the result of ignoring this lesson. Those fallacies all stem from
one of twocentral fallacies, or both: that of looking only at the immediate conse-
quences of an act or proposal, and that of looking at the consequences only for a
particular group to the neglect of other groups.
It is true, of course, that the opposite error is possible. In considering a policywe
ought not to concentrate only on its long-run results to the community as a whole.
This is the error often made by the classical economists. It resulted in a certain cal-
lousness toward the fate of groups that were immediately hurt by policies or devel-
opments which provedtobebeneficial on net balance and in the long run.
But comparatively fewpeople today makethis error; and those fewconsist mainly
of professional economists. The most frequent fallacybyfar today,the fallacythat
emerges again and again in nearly every conversation that touches on economic
affairs, the error of a thousand political speeches, the central sophism of the new
economics, is to concentrate on the short-run effects of policies on special groups
and to ignore or belittle the long-run effects on the community as a whole. The
‘‘new’’economists flatter themselves that this is a great, almost a revolutionary
advance overthe methods of the ‘‘classical’’or‘‘orthodox,’’ economists, because
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the former takeinto consideration short-run effects which the latter often ignored.
But in themselves ignoring or slighting the long-run effects, theyare making the
farmore serious error.Theyoverlook the woods in their precise and minute exami-
nation of particular trees. Their methods and conclusions are often profoundly
reactionary.Theyare sometimes surprised to find themselves in accord with seven-
teenth-century mercantilism. Theyfall, in fact, into all the ancient errors (or
would, if theywere not so inconsistent) that the classical economists, we had
hoped, had once and for all got rid of.
Section 3
It is often sadly remarked that the bad economists present their errors to the
public better than the good economists present their truths. It is often complained
that demagogues can be more plausible in putting forward economic nonsense
from the platform than the honest men who try to showwhat is wrong with it. But
the basic reason for this ought not to be mysterious. The reason is that the dema-
gogues and bad economists are presenting half-truths. Theyare speaking only of
the immediate effect of a proposed policyorits effect upon a single group. As far
as theygotheymay often be right. In these cases the answer consists in showing
that the proposed policywould also have longer and less desirable effects, or that it
could benefit one group only at the expense of all other groups. The answer con-
sists in supplementing and correcting the half-truth with the other half. But to con-
sider all the chief effects of a proposed course on everybody often requires a long,
complicated, and dull chain of reasoning. Most of the audience finds this chain of
reasoning difficult to followand soon becomes bored and inattentive.The bad
economists rationalize this intellectual debility and laziness by assuring the audi-
ence that it need not evenattempt to followthe reasoning or judge it on its merits
because it is only ‘‘classicism’’or‘‘laissez faire’’or‘‘capitalist apologetics’’or
whateverother term of abuse may happen to strikethem as effective.
We hav e stated the nature of the lesson, and of the fallacies that stand in its way,in
abstract terms. But the lesson will not be drivenhome, and the fallacies will con-
tinue to go unrecognized, unless both are illustrated by examples. Through these
examples we can move from the most elementary problems in economics to the
most complexand difficult. Through them we can learn to detect and avoid first
the crudest and most palpable fallacies and finally some of the most sophisticated
and elusive.Tothat task we shall nowproceed.
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2. The Broken Window
Let us begin with the simplest illustration possible: let us, emulating Bastiat,
choose a broken pane of glass.
Ayoung hoodlum, say,heavesabrick through the windowofabaker’sshop. The
shopkeeper runs out furious, but the boyisgone. A crowd gathers, and begins to
stare with quiet satisfaction at the gaping hole in the windowand the shattered
glass overthe bread and pies. After a while the crowd feels the need for philo-
sophic reflection. And several of its members are almost certain to remind each
other or the baker that, after all, the misfortune has its bright side. It will make
business for some glazier.Astheybegin to think of this theyelaborate upon it.
Howmuch does a newplate glass windowcost? Two hundred and fifty dollars?
That will be quite a sum. After all, if windows were neverbroken, what would
happen to the glass business? Then, of course, the thing is endless. The glazier will
have $250 more to spend with other merchants, and these in turn will have $250
more to spend with still other merchants, and so ad infinitum. The smashed win-
dowwill go on providing moneyand employment in ever-widening circles. The
logical conclusion from all this would be, if the crowd drewit, that the little hood-
lum who threwthe brick, far from being a public menace, was a public benefactor.
Nowlet us takeanother look. The crowd is at least right in its first conclusion.
This little act of vandalism will in the first instance mean more business for some
glazier.The glazier will be no more unhappytolearn of the incident than an
undertaker to learn of a death. But the shopkeeper will be out $250 that he was
planning to spend for a newsuit. Because he has had to replace a window, hewill
have togowithout the suit (or some equivalent need or luxury). Instead of having
awindowand $250 he nowhas merely a window. Or, ashewas planning to buy
the suit that very afternoon, instead of having both a windowand a suit he must be
content with the windowand no suit. If we think of him as a part of the commu-
nity,the community has lost a newsuit that might otherwise have come into being,
and is just that much poorer.
The glazier’sgain of business, in short, is merely the tailor’sloss of business. No
new‘‘employment’’has been added. The people in the crowd were thinking only
of twoparties to the transaction, the baker and the glazier.Theyhad forgotten the
potential third party involved, the tailor.Theyforgot him precisely because he will
not nowenter the scene. Theywill see the newwindowinthe next day or two.
Theywill neversee the extra suit, precisely because it will neverbemade. They
see only what is immediately visible to the eye.
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3. The Blessings of Destruction
So we have finished with the broken window. Anelementary fallacy. Any-
body,one would think, would be able to avoid it after a fewmoments’ thought. Yet
the broken-windowfallacy, under a hundred disguises, is the most persistent in the
history of economics. It is more rampant nowthan at anytime in the past. It is
solemnly reaffirmed every day by great captains of industry,bychambers of com-
merce, by labor union leaders, by editorial writers and newspaper columnists and
radio and television commentators, by learned statisticians using the most refined
techniques, by professors of economics in our best universities. In their various
ways theyall dilate upon the advantages of destruction.
Though some of them would disdain to say that there are net benefits in small acts
of destruction, theysee almost endless benefits in enormous acts of destruction.
Theytell us howmuch better offeconomically we all are in war than in peace.
Theysee ‘‘miracles of production’’which it requires a war to achieve.And they
see a world made prosperous by an enormous ‘‘accumulated’’or‘‘backed-up’’
demand. In Europe, after World War II, theyjoyously counted the houses, the
whole cities that had been leveled to the ground and that ‘‘had to be replaced.’’ In
America theycounted the houses that could not be built during the war,the nylon
stockings that could not be supplied, the worn-out automobiles and tires, the obso-
lescent radios and refrigerators. Theybrought together formidable totals.
It was merely our old friend, the broken-windowfallacy, innew clothing, and
grown fat beyond recognition. This time it was supported by a whole bundle of
related fallacies. It confused need with demand. The more war destroys, the more
it impoverishes, the greater is the postwar need. Indubitably.But need is not
demand. Effective economic demand requires not merely need but corresponding
purchasing power.The needs of India today are incomparably greater than the
needs of America. But its purchasing power,and therefore the ‘‘newbusiness’’
that it can stimulate, are incomparably smaller.
But if we get past this point, there is a chance for another fallacy, and the broken-
windowites usually grab it. Theythink of ‘‘purchasing power’’merely in terms of
money. Now moneycan be run offbythe printing press. As this is being written,
in fact, printing moneyisthe world’sbiggest industry(emif the product is mea-
sured in monetary terms. But the more moneyisturned out in this way,the more
the value of anygiv enunit of moneyfalls. This falling value can be measured in
rising prices of commodities. But as most people are so firmly in the habit of
thinking of their wealth and income in terms of money, theyconsider themselves
better offasthese monetary totals rise, in spite of the fact that in terms of things
theymay have less and buy less. Most of the ‘‘good’’economic results which peo-
ple at the time attributed to World War II were really owing to wartime inflation.
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Theycould have been, and were, produced just as well by an equivalent peacetime
inflation. Weshall come back to this moneyillusion later.
Nowthere is a half-truth in the ‘‘backed-up’’demand fallacy, just as there was in
the broken-windowfallacy. The broken windowdid makemore business for the
glazier.The destruction of war did makemore business for the producers of certain
things. The destruction of houses and cities did makemore business for the build-
ing and construction industries. The inability to produce automobiles, radios, and
refrigerators during the war did bring about a cumulative postwar demand for
those particular products.
To most people this seemed likeanincrease in total demand, as it partly was in
terms of dollars of lower purchasing power.But what mainly took place was a
diversion of demand to these particular products from others. The people of
Europe built more newhouses than otherwise because theyhad to. But when they
built more houses theyhad just that much less manpower and productive capacity
left overfor everything else. When theybought houses theyhad just that much less
purchasing power for something else. Whereverbusiness was increased in one
direction, it was (except insofar as productive energies were stimulated by a sense
of want and urgency) correspondingly reduced in another.
The war,inshort, changed the postwar direction of effort; it changed the balance
of industries; it changed the structure of industry.
Since World War II ended in Europe, there has been rapid and evenspectacular
‘‘economic growth’’both in countries that were ravaged by war and those that
were not. Some of the countries in which there was greatest destruction, such as
Germany, hav e advanced more rapidly than others, such as France, in which there
wasmuch less. In part this was because West Germanyfollowed sounder eco-
nomic policies. In part it was because the desperate need to get back to normal
housing and other living conditions stimulated increased efforts. But this does not
mean that property destruction is an advantage to the person whose property has
been destroyed. No man burns down his own house on the theory that the need to
rebuild it will stimulate his energies.
After a war there is normally a stimulation of energies for a time. At the beginning
of the famous third chapter of his History of England, Macaulay pointed out that:
No ordinary misfortune, no ordinary misgovernment, will do so
much to makeanation wretched as the constant progress of physical
knowledge and the constant effort of every man to better himself will
do to makeanation prosperous. It has often been found that profuse
expenditure, heavy taxation, absurd commercial restriction, corrupt
June 1978
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tribunals, disastrous wars, seditions, persecutions, conflagrations,
inundations, have not been able to destroycapital so fast as the exer-
tions of private citizens have been able to create it.
No man would want to have his own property destroyed either in war or in
peace. What is harmful or disastrous to an individual must be equally harmful or
disastrous to the collection of individuals that makeupanation.
Manyofthe most frequent fallacies in economic reasoning come from the propen-
sity,especially marked today,tothink in terms of an abstraction(emthe collectivity,
the ‘‘nation’’(emand to forget or ignore the individuals who makeitupand give it
meaning. No one could think that the destruction of war was an economic advan-
tage who beganbythinking first of all of the people whose property was
destroyed.
Those who think that the destruction of war increases total ‘‘demand’’forget that
demand and supply are merely twosides of the same coin. Theyare the same thing
looked at from different directions. Supply creates demand because at bottom it is
demand. The supply of the thing theymakeisall that people have,infact, to offer
in exchange for the things theywant. In this sense the farmers’ supply of wheat
constitutes their demand for automobiles and other goods. All this is inherent in
the modern division of labor and in an exchange economy.
This fundamental fact, it is true, is obscured for most people (including some
reputedly brilliant economists) through such complications as wage payments and
the indirect form in which virtually all modern exchanges are made through the
medium of money. John Stuart Mill and other classical writers, though theysome-
times failed to takesufficient account of the complexconsequences resulting from
the use of money, atleast sawthrough ‘‘the monetary veil’’tothe underlying reali-
ties. Tothat extent theywere in advance of manyoftheir present-day critics, who
are befuddled by moneyrather than instructed by it. Mere inflation(emthat is, the
mere issuance of more money, with the consequence of higher wages and prices
may look likethe creation of more demand. But in terms of the actual production
and exchange of real things it is not.
It should be obvious that real buying power is wiped out to the same extent as pro-
ductive power is wiped out. Weshould not let ourselves be deceivedorconfused
on this point by the effects of monetary inflation in raising prices or ‘‘national
income’’inmonetary terms.
It is sometimes said that the Germans or the Japanese had a postwar advantage
overthe Americans because their old plants, having been destroyed completely by
bombs during the war,theycould replace them with the most modern plants and
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equipment and thus produce more efficiently and at lower costs than the Ameri-
cans with their older and half-obsolete plants and equipment. But if this were
really a clear net advantage, Americans could easily offset it by immediately
wrecking their old plants, junking all the old equipment. In fact, all manufacturers
in all countries could scrap all their old plants and equipment every year and erect
newplants and install newequipment.
The simple truth is that there is an optimum rate of replacement, a best time for
replacement. It would be an advantage for a manufacturer to have his factory and
equipment destroyed by bombs only if the time had arrivedwhen, through deterio-
ration and obsolescence, his plant and equipment had already acquired a null or a
negative value and the bombs fell just when he should have called in a wrecking
creworordered newequipment anyway.
It is true that previous depreciation and obsolescence, if not adequately reflected in
his books, may makethe destruction of his property less of a disaster,onnet bal-
ance, than it seems. It is also true that the existence of newplants and equipment
speeds up the obsolescence of older plants and equipment. If the owners of the
older plant and equipment try to keep using it longer than the period for which it
would maximize their profit, then the manufacturers whose plants and equipment
were destroyed (if we assume that theyhad both the will and capital to replace
them with newplants and equipment) will reap a comparative advantage or,to
speak more accurately,will reduce their comparative loss.
We are brought, in brief, to the conclusion that it is neveranadvantage to have
one’splants destroyed by shells or bombs unless those plants have already become
valueless or acquired a negative value by depreciation and obsolescence.
In all this discussion, moreover, wehav e so far omitted a central consideration.
Plants and equipment cannot be replaced by an individual (or a socialist govern-
ment) unless he or it has acquired or can acquire the savings, the capital accumula-
tion, to makethe replacement. But war destroys accumulated capital.
There may be, it is true, offsetting factors. Technological discoveries and advances
during a war may,for example, increase individual or national productivity at this
point or that, and there may eventually be a net increase in overall productivity.
Postwar demand will neverreproduce the precise pattern of prewardemand. But
such complications should not divert us from recognizing the basic truth that the
wanton destruction of anything of real value is always a net loss, a misfortune, or a
disaster,and whateverthe offsetting considerations in a particular instance, can
neverbe, on net balance, a boon or a blessing.
June 1978