Economics in One Lesson

Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics (1946) is a book on Classical Economics written by American journalist Henry Hazlitt. Its main purpose is to challenge some of the most widespread economic beliefs embraced by the US government, editorialists, politicians, and fellow economists in Hazlitt’s time. Although published post-WWII, Hazlitt’s views are still influential and debated today, and are especially popular with conservative and libertarian strands of economic thought. Hazlitt explores such themes as The Need to Establish Free-Market Efficiency, The Problem of Emotionalism in Government Policies, and The Nature of Monetary Policies to Address Inflation.

This guide uses the 2008 reprint by the Ludwig von Mises Institute. It differs from earlier prints by having an editor’s introduction penned by American Austrian School economist Walter Block and not including the original Chapters 18 and 26, which were added in 1961 and have since lost some relevance.

Summary

Economics in One Lesson is divided into three sections. Its foundational premise is one that follows the tenets of Classical Economics: In a free market economy, the “natural” forces of supply and demand are what dictate the quantity and quality of production, wages, and the price and quantity of goods sold. Net economic gains are only possible when these forces are balanced out and an advancement in technology improves production efficiency. Any disruption of these allegedly natural forces, such as from governmental intervention, is more likely to do harm than good.

Hazlitt’s central argument is that the most widespread economic policies of his time—which he argues are often the result of biased political forces or emotionalism—fail to consider the following key factors in their analysis: They only see particular interests of a specific group without observing the effects on everyone else; they only look at the short-term effects without thinking about the long-term consequences; and they focus only on the visible, primary results of their economic policy without measuring opportunity costs or other implied effects. In doing so, Hazlitt asserts that their attractive slogans designed to draw in specific crowds are detrimental to the overall economic growth of the country.

Section 1 of Economics in One Lesson includes only Chapter 1. This is where Hazlitt describes the main argument of his book, summarized above.

Section 2 comprises of Chapters 2 to 23, in which the author applies his theory onto the various economic beliefs of his time. These chapters help guide readers into better understanding the theories explained in the previous section.

Chapter 2 discusses the belief of the “broken window.” Hazlitt argues that some economists mistakenly believe that purposefully destroying a product can ultimately benefit the economy as a whole.

Chapter 3 expands on why the above theory is flawed, in Hazlitt’s view, by looking at a common claim: that destruction brought by warfare is actually good for the economy.

Chapter 4 explores reasons why needless public work, paid by the people in the form of taxes, is not beneficial to the greater economy despite temporarily creating jobs.

Chapter 5 expands on the above point by arguing that taxes discourage production, which in turn negatively affects the economy as a whole.

Chapter 6 discusses how government loans and subsidies given to particular groups often decrease overall production and cause more harm than good.

Chapter 7 seeks to dismantle the idea that technological improvement and the adoption of machines are detrimental to the worker.

Chapter 8 further argues how forcing a subdivision of labor where none is necessary increases production costs and, though meant to protect the worker, hurts them in the long run.

Chapter 9 reviews how, in peacetime, reincorporating soldiers into the private work sphere can be a beneficial process when factoring the opportunity costs of letting them idle away in the army.

Chapter 10 argues why full employment is not always desirable, such as when artificial jobs are forcibly created just to reach that ceiling.

Chapter 11 argues that tariffs, by virtue of protecting only a particular group, actually hurt everyone else in the long run.

Chapter 12 expands upon the previous point by tackling exports and reviewing the problem from the other side of the coin. It comes to the same conclusion that tariffs hurt everyone in the long run, including export rates.

Chapter 13 argues that artificially raising prices to an arbitrary “parity” value is detrimental to the economy.

Chapter 14 expands upon the broken window theory of Chapter 2 by arguing that government subsidies to save dying industries are actually harmful to the economy in most cases.

Chapter 15 explores how demand and supply in a free market operate. It argues that they are the ultimate forces that determine the price system. This analysis is meant to support the conclusion made in the previous two chapters, which argue that government tampering with prices of goods and wages of workers away from their “natural” market rate is ultimately detrimental to the economy.

Chapters 16 and 17 both explore why government policies designed to raise the price of goods and meant to boost production actually have the opposite effect.

Chapter 18 arrives at the same conclusion as the previous two, this time focusing not on raising the price of goods but of workers’ wages.

Chapter 19 questions the true contribution of unions to the recent increase in wages. Hazlitt argues that though unions have greatly improved workers’ rights and benefits, they are not the fundamental factor in the general raising of wages in his time; he argues that market forces and greater productivity are the primary cause.

Chapter 20 argues that the “buy back the product” theory purported by Marxists and other new economic schools is unfounded in the present state of the economy, characterized by a division of labor.

Chapter 21 further argues why profit and market forces are the primary driving factor for net economic gains.

Chapter 22 discusses why Hazlitt believes that people are mistaken in thinking inflation and money-printing help kickstart an economy during a period of depression.

Chapter 23 argues against current trends that depict saving as a vice; Hazlitt instead argues that modern methods of saving are beneficial even during economic depressions.

Finally, Section 3 of the book, which includes only Chapter 24, is a summary of everything explored above. It reviews the central arguments of the book and briefly reiterates why Hazlitt believes they discredit the most common economic theories of his time.