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Economics in One Lesson Econone Prf2 Q5 to Client.Qxd 3/3/2008 8:42 AM Page Ii EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page i Economics in One Lesson EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page ii The Ludwig von Mises Institute dedicates this volume to all of its generous donors and wishes to thank these Patrons, in particular: Mr. and Mrs. Brantley I. Newsom Carl A. Davis; David Keeler; Chris J. Rufer Robert G. Beard, Jr.; Mr. and Mrs. J. Robert Bost; Mary E. Braum; Mr. and Mrs. Jeremy S. Davis; Richard J. Kossmann, M.D.; Hunter Lewis; Arthur L. Loeb; Mr. and Mrs. Peter K. Martin; Mr. and Mrs. William W. Massey, Jr.; Wiley L. Mossy, Jr.; James M. Rodney; Ann V. Rogers; Sheldon Rose; top dog™; William P. Weidner; Mr. and Mrs. Walter Woodul III Ross K. Anderson; Dr. Vern S. Boddicker; John Hamilton Bolstad; John E. Burgess; in memory of A.T. (Norge) Cook; Mr. and Mrs. George Crispin; Kerry E. Cutter; Mr. and Mrs. Willard Fischer; James and Dannell Fogal; Larry R. Gies; Bettina Bien Greaves; Charles C. Groff; Keith M. Harnish; Dr. Frederic Herman; Doyle P. Jones; Warner Knight; David M. Kramer; Jim Kuden; John R. Lee; Ronald Mandle; Joseph Edward Paul Melville; Robert A. Moore; Francis M. Powers, Jr., M.D.; Robert M. Renner; Michael Robb; Mr. and Mrs. Joseph P. Schirrick; Conrad Schneiker; Ernesto Selman; Norman K. Singleton; Mr. and Mrs. Thomas W. Singleton; Henri Etel Skinner; Mr. and Mrs. Byron L. Stoeser; Charles A. Strong; Edward Van Drunen EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page iii Economics in One Lesson Henry Hazlitt Introduction by Walter Block Ludwig von Mises Institute Auburn, Alabama EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page iv Copyright © 1946 by Harper & Brothers Introduction copyright © 2008 by the Ludwig von Mises Institute The Ludwig von Mises Institute thanks Three Rivers Press for permission to repro- duce the first edition of Economics in One Lesson. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher. Originally published in the United States in hardcover by Harper & Brothers Pub- lishers, New York, in 1946. Subsequently a revised edition was published in softcover by Three Rivers Press, an imprint of the Crown Publishing Group, a division of Ran- dom House, Inc., New York, in 1988. This edition is published by arrangement with Three Rivers Press. Produced and published by the Ludwig von Mises Institute, 518 West Magnolia Avenue, Auburn, Alabama 36832 USA. Mises.org. ISBN: 978-1-933550-21-3 Printed in China EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page v Contents Introduction by Walter Block . .vii Preface to the First Edition by Henry Hazlitt . .xi Part One: The Lesson . .1 1 The Lesson . .3 Part Two: The Lesson Applied . .9 2 The Broken Window . .11 3 The Blessings of Destruction . .13 4 Public Works Mean Taxes . .17 5 Taxes Discourage Production . .23 6 Credit Diverts Production . .25 7 The Curse of Machinery . .33 8 Spread-the-Work Schemes . .45 9 Disbanding Troops and Bureaucrats . .51 10 The Fetish of Full Employment . .55 11 Who’s “Protected” by Tariffs? . .59 12 The Drive for Exports . .69 13 “Parity” Prices . .75 14 Saving the X Industry . .83 v EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page vi vi Economics in One Lesson 15 How the Price System Works . .89 16 “Stabilizing” Commodities . .97 17 Government Price-Fixing . .105 18 Minimum Wage Laws . .115 19 Do Unions Really Raise Wages? . .121 20 “Enough to Buy Back the Product” . .133 21 The Function of Profits . .141 22 The Mirage of Inflation . .145 23 The Assault on Saving . .159 Part Three: The Lesson Restated . .173 24 The Lesson Restated . .175 EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page vii Introduction to the 2007 Edition of Economics in One Lesson riting this introduction is a labor of love for me. You know how Wwomen sometimes say to each other “This dress is you! ” Well, this book is me! This was the first book on economics that just jumped out and grabbed me. I had read a few before, but they were boring. Very boring. Did I mention boring? In sharp contrast, Economics in One Lesson grabbed me by the neck and never ever let me go. I first read it in 1963. I don’t know how many times I have reread it since then. Maybe, a half-dozen times in its entirety, and scores of times, partially, since I always use it whenever I teach introductory economics courses. I am still amazed at its freshness. Although the first edition appeared in 1946, apart from a mere few words in it (for example, it holds up to ridicule the economic theories of Eleanor Roosevelt, about which more below) its chapter headings appear as if they were ripped from today’s headlines. Unless I greatly miss my guess, this will still be true in another 60 years from now, namely in 2068. Talk about a book for the ages. Other books on Austrian economics, too, are classics, and will be read as long as man is still interested in the subject. Mises’s Human Action and Rothbard’s Man, Economy, and State come to mind in this regard. But those are epic tomes, numbering in the hundreds of pages. This little book of Hazlitt’s is merely an introduction, written, specifically, for the beginner. I wonder of how many introductions to a vii EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page viii viii Economics in One Lesson subject it can be truly said that they are classics? I would wager very, very few, if any at all. There is nothing that pleases a teacher more than when that expression of understanding lights up a student’s face. The cartoons depict this phenomenon in the form of a light bulb appearing right above the depiction of the character. Well, let me tell you: I have got- ten more “ahas” out of introductory students who have read this book than from any other. I warrant that there have been more con- versions to the free market philosophy from this one economics book than, perhaps, from all others put together. It is just that stupendous. The only thing I regret in this regard is that never again will I read this book for the first time. That, gentle reader, is a privilege I greatly envy you for having. A word about style. The content, here, we can take for granted. But the number of economists who could really write can be counted upon one’s fingers, but Hazlitt is certainly one of them. His verbiage fairly leaps off the page, grabbing you by the neck. In fact, I now ven- ture a very minor “criticism”: the author of this book is so elegant a wordsmith that sometimes, rarely, I find myself so marveling at his presentation, that I take my eye off the “ball” of the underlying eco- nomics message. But enough of my personal slavering, drooling appreciation for Eco- nomics in One Lesson. Let us now get down to some specifics. The core of this book is, surely, the lesson: “the art of economics consists in looking not merely at the immediate but at the longer effects of any act or pol- icy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” Coupled with Hazlitt’s suspicion of the “special pleading of selfish interests,” and his magnificent rendition of Bastiat’s “broken-window” example, the plan of Economics in One Lesson is clear: drill these insights into the reader in the first few chapters, and then apply them, relentlessly, without fear or favor, to a whole host of specific examples. Every widespread economic fallacy embraced by pundits, politicians, editorialists, clergy, academics is given the back of the hand they so richly deserve by this author: that public works pro- mote economic welfare, that unions and union-inspired minimum EconOne_Prf2_Q5_to_client.qxd 3/3/2008 8:42 AM Page ix Introduction ix wage laws actually raise wages, that free trade creates unemployment, that rent control helps house the poor, that saving hurts the economy, that profits exploit the poverty stricken, the list goes on and on. Exhil- arating. No one who digests this book will ever be the same when it comes to public policy analysis. I cannot leave this Introduction without mentioning two favorite passages of mine. In chapter 3, “The Blessings of Destruction,” Hazlitt applies the lesson of the broken-window fallacy (who can ever forget the hoodlum who throws a brick through the bakery window?) to mass devastation, such as the bombing of cities. How is this for a gem?: “It was merely our old friend, the broken-window fallacy, in new clothing, and grown fat beyond recognition.” Did Germany and Japan really prosper after World War II because of the bombing inflicted upon them? They had new factories, built to replace those that were destroyed, while the victorious U.S. had only middle-aged and old factories. Well, if this were all it takes to achieve prosperity, says Hazlitt, we can always bomb our own industrial facilities. And here is my all-time favorite. Says Hazlitt in chapter 7, “The Curse of Machinery,” “Mrs. Eleanor Roosevelt . wrote: ‘We have reached a point today where labor-saving devices are good only when they do not throw the worker out of his job’.” Our author gets right to the essence of this fallacy: “Why should freight be carried from Chicago to New York by railroad when we could employ enormously more men, for example, to carry it all on their backs?” No, in this direc- tion lies rabid Ludditism, where all machinery is consigned to the dust bin of the economy, and mankind is relegated to a stone-age existence.
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