“Economics is haunted by more fallacies than any other study known to man.” is the opening sentence Henry Hazlitt’s classic primer on economics, Economics in One Lesson. In this classic first published in 1946 takes the reader through basic economic reasoning and applies it to a variety of policy issues. While some of the issues are dated many are not just the names and particulars have changed.The first chapter entitled simply “The Lesson” explains the pitfalls that lead to faulty economic reasoning. The first flaw is self interest which can prevent sound reasoning. The second is the inability to look beyond the initial effects which are often good to see all the secondary effects. In modern speak this is often called the “unintended consequences” Hazlitt explains this fallacy in the following passage which is also on the first page: 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-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences. ”
Later chapters use this line of reasoning to explain a variety of policy issues starting with the broken window fallacy. This fallacy states that repairing broken windows does not increase economic activity unless you are the glass man. It in fact, wastes resources that could have been used for other more important uses. Other chapters deal with economic stimulus, taxes, tariffs, price controls, monetary policy and other issues.
The book is less than two hundred pages and devoid of the usual things that scare people away from learning economics such as graphs and academic jargon. If you can read the Wall Street Journal and are willing devote sometime to study this would be a good starter on learning economics. Armed with better understanding of economics you can better understand politics and history. An electronic version is available at the website of the Foundation for Economic Education, founded by Hazlitt for those who want to devote some time understanding basic economic reasoning.
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