ECONOMICS IN ONE LESSON Other books by the same author THINKING AS A SCIENCE THE ANATOMY OF CRITICISM A NEW CONSTITUTION NOW A PRACTICAL PROGRAM FOR AMERICA (Editor) ECONOMICS IN ONE LESSON By Henry Hazlitt HARPER & BROTHERS PUBLISHERS New York and London ECONOMICS IN ONE LESSON Copyright, 1946, by Harper & Brothers Printed in the United States of America All rights in this book are reserved. No part of the book may be reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For information address Harper 6¯ Brothers r c 3 II 13 i9 27 30 4i 56 63 . 68 7i 85 9i ioo 107 u6 125 137 143 159 163 173 190 211 CONTENTS PART ONE: THE LESSON I. The Lesson PART TWO: THE LESSON APPLIED II. The Broken Window m. The Blessings of Destruction iv. Public Works Mean Taxes v. Taxes Discourage Production vi. Credit Diverts Production vn. The Curse of Machinery vni. Spread-the-Work Schemes ix. Disbanding Troops and Bureaucrats x. The Fetish of Full Employment xi. Who's Protected by Tariffs? xn. The Drive for Exports xni. "Parity" Prices xrv. Saving the X Industry xv. How the Price System Works xvi. "Stabilizing" Commodities xvn. Government Price-Fixing XVHI. Minimum Wage Laws xix. Do Unions Really Raise Wages? xx. "Enough to Buy Back the Product" xxi. The Function of Profits xxn. The Mirage of Inflation XXIII. The Assault on Saving PART THREE: THE LESSON RESTATED xxrv. The Lesson Restated V [...]... the printing press As this is being written, in fact, printing money is the world's biggest industry—if the product is measured in monetary terms But the more money is turned out in this way, the more the value of any given unit of money falls 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... economics consists in fooking not merely at the immediate hut at the longer effects of any act or policy; it consists in tracing the consequences of that 'policy not merely for one group hut for all groups Nine-tenths of the economic fallacies that are working such dreadful harm in the world today are the result of 6 ECONOMICS IN ONE LESSON ignoring this lesson Those fallacies all stem from one of two central... over for everything else When they buy houses they will have just that much less purchasing power for everything else Wherever business is increased in one direction, it must (except insofar as productive energies may be generally stimulated by a sense of want and urgency) be correspondingly reduced in another The war, in short, will change the post-war direction of i6 , ECONOMICS IN ONE LESSON effort;... the war It would be obvious that buying power had been wiped out to the same extent that productive power had been wiped out A runaway monetary inflation, lifting prices a thousandfold, might none the less make the "na~ i8 ECONOMICS IN ONE LESSON tional income" figures in monetary terms higher than before the war But those who would be deceived by that into imagining themselves richer than before the... who in turn are full of schemes for getting something for nothing They tell us that the government can spend and spend without taxing at all; that it can continue to pile up debt without ever paying it off, because HERE 19 2O ECONOMICS IN ONE LESSON "we owe it to ourselves/' W e shall return to such extraordinary doctrines at a later point Here I am afraid that we shall have to be dogmatic, and point... correcting the halftruth with the other half But to consider 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 follow and soon becomes bored and inattentive The bad economists rationalize this intellectual debility and laziness by 8 ECONOMICS IN ONE LESSON assuring the... but corresponding purchasing power The needs of China today are incomparably greater than the needs of America But its purchasing power, and therefore the "new business" 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 They think of "purchasing power" merely in terms of money Now money can be... years instead of being concentrated in one It also means that what is taken from the taxpayers is spread over many years instead of being concentrated into one Such technicalities are irrelevant to the main point The great psychological advantage of the public housing advocates is that men are seen at work on the houses when they are going up, and the houses are seen when they are finished People live in. .. merely a window Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer The glazier's gain of business, in short, is merely the tailor's loss of business No... half-truth in the "backed-up" demand fallacy, just as there was in the broken-window fallacy The broken window did make more business for the glazier The destruction of war will make more business for the producers of certain things The destruction of houses and cities will make more business for the building and construction industries The inability to produce automobiles, radios, and refrigerators during . FOR AMERICA (Editor) ECONOMICS IN ONE LESSON By Henry Hazlitt HARPER & BROTHERS PUBLISHERS New York and London ECONOMICS IN ONE LESSON Copyright, 1946,. working such dreadful harm in the world today are the result of 6 ECONOMICS IN ONE LESSON ignoring this lesson. Those fallacies all stem from one of two central