I have started reading a book I picked up recently at B&N: Economics in One Lesson(by Henry Hazlitt), first published in 1946 and revised by the author in 1961. The book’s outside back cover has testimonials by economics Nobel Laureates Milton Friedman and F.A. Hayek, and has sold over a million copies. The relatively short book is immensely readable and has about 25 chapters on things like taxes, trade, rent control, government price fixing, and minimum-wage laws. (One can find free pdf and e-book versions of the book on Google).
I am so excited about the book that I quote extensively from just the first chapter … things that fit today’s America and policymakers to a T.
“Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine – the special pleadings of selfish interests. While every group has certain economic interests identical with those of all other 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 everybody, other policies would benefit one group only at the expense of all other groups. The group that will benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And, it will either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.”
A second fallacy: “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-term 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 the whole difference between good economics and bad economics. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond… at the longer and indirect consequences.”
“The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades.”
“But in themselves ignoring or slighting the long-run effects, … they overlook the woods in their precise and minute examination of particular trees. Their methods and conclusions are often profoundly reactionary. They are sometimes surprised to find themselves in accord with seventeenth-century mercantilism.”
Now, the “one lesson”: “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.”
By Vinod K. Jain