The PMBA program includes Economics in One Lesson as a primer on basic economics. Its not your standard econ textbook. Hazlitt teaches through concrete examples and dismantling common economic fallacies.
Here’s the main point, according to the author:
The central lesson is that we should try to see all the main consequences of any economic policy or development – the immediate effects of special groups, and the long-run effects on all groups (p 55).
Hazlitt argues against artificial price controls, minimum wages, subsidies, government-issued credit, high taxes, price-fixing and inflation because these policies benefit special interests to the detriment of society as a whole.
As I read this book and found myself trying to apply Hazlitt’s reasoning to everyday buying decisions. Here’s an example.
My wife and I like Noble Fir Christmas trees. These trees can be expensive. A large tree can cost $90 at a private tree lot. This year we found a great tree at our local Target store for only $40. In an efficient market, everyone would buy their tree at Target and the private sellers would go out of business. Is society better off because we can buy trees for $40 instead of $90? Hazlitt would argue yes.
I have an extra $50 to spend on a jacket if I buy a $40 tree. The private tree sellers might lose their jobs, but new jobs would be created when I spend my $50 savings (or even if I save it, but that’s another matter). There is no net job loss, but I have acquired a tree and a jacket. My standard of living is higher and I am wealthier. If I had purchased a $90 tree, I would not have a jacket. I would have a lower standard of living and would be poorer. The lower prices and higher per-person productivity created by efficient free markets leads to wealthier societies with higher standards of living.
Hazlitt’s arguments make sense on a large scale. But are they overly simplistic? What if markets aren’t completely free? What if jobs don’t transfer easily from a dying industry to a new one? Can anyone recommend further reading in this area?