Saturday, November 14, 2009
the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. 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.This is from Economics in One Lesson by Henry Hazlitt. It was written 63 years ago & is not a matter of magical new insights but just the basics. Though those who use calling themselves Keynes' followers an excuse to print money or rig the game have come, gone & returned none of them have seriously addressed what he says here. Indeed they are simple enough to be self evident once somebody else has said them. Hat tip to Al Fin & in particular from his list of links which contains a whole range of classic & valuable references.
The above quote comes from the end of section 1 which starts with this:
"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 pleading of selfish interests. While every group has certain economic interests identical with those of all 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 would 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 finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible."
This gives you the chapter by chapter index. Virtually every modern snake oil nostrum presented to us today is dealt with. Economics is sometimes called "The Dismal Science" but it is no moreso than any other - merely that it is more overrun by charlatans. Medicine is not a dismal science merely because it has proven that Lilly the Pink's elixir, bleeding, & praying to Apollo don't work - modern medicine does achieve things far greater than any of these. In the same way economics may show that printing more money, protectionism & subsidising the politically connected don't work but it does show that classic free marketism, in the current era of scientific & technological progress can achieve double digit annual growth. That is far from dismal.