I recently finished reading the book Economics in One Lesson – The shortest and surest way to understand basic economics – by Henry Hazlitt.
The subtitle of the book says it all. This is definitely “the shortest and surest way to understand basic economics”. The author takes a unique approach by introducing all the main concepts through “exposition”. As he says “…its effort is to show that many of the ideas which now pass for brilliant innovations and advances are in fact mere revivals of ancient errors, and a further proof of the dictum that those who are ignorant of the past are condemned to repeat it.” The main premise of the book is that: “Economics, as we have now seen again and again, is a science of recognizing secondary consequences. It is also a science of seeing general consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run.”.
In addition to the unique approach taken by the author he is committed to making the material accessible to all: “I have tried to write this book as simply and with as much freedom from technicalities as is consistent with reasonable accuracy, so that it can be fully understood by a reader with no previous acquaintance with economics.” A definite read for all!
Below are excerpts from the book that I found particularly insightful:
1- “A certain amount of taxes is of course indispensable to carry on essential government functions. Reasonable taxes for this purpose need not hurt production much. The king of government services then supplied in return, which among other things safeguard production itself, more than compensate for this. But the larger the percentage of the national income taken by taxes the greater the deterrent to private production and employment. When the total tax burden grows beyond a bearable size, the problem of devising taxes that will not discourage and disrupt production becomes insoluble.”
2- “There is no limit to the amount of work to be done as long as any human need or wish that work could fill remains unsatisfied. In a modern exchange economy, the most work will be done when prices, costs, and wages are in the best relations with each other.”
3- “…our real objective is to maximize production. In doing this, full employment – that is, the absence of involuntary idleness – becomes a necessary by-product. But production is the end, employment merely the means. We cannot continuously have the fullest production without full employment. But we can very easily have full employment without full production.”
4- “Paradoxical as it may seem to some, it is just as necessary to the health of a dynamic economy that dying industries be allowed to die as that growing industries be allowed to grow. The first process is essential to the second.”
5- “So government policy should be directed, not to imposing more burdensome requirements on employers, but to following policies that encourage profits, that encourage employers to expand, to invest in newer and better machines to increase the productivity of workers – in brief, to encourage capital accumulation, instead of discouraging it – and to increase both employment and wage rates.”
6- “Profits, in short, resulting from the relationships of costs to prices, not only tell us which goods it is most economical to make, but which are the most economical ways to make them. These questions must be answered by a socialist system no less than by a capitalist one; they must be answered by any conceivable economic system; and for the overwhelming bulk of the commodities and services that are produced, the answers supplied by profit and loss under competitive free enterprise are incomparably superior to those that could be obtained by any other method.”
7-“Inflation is the autosuggestion, the hypnotism, the anesthetic, that has dulled the pain of the operation for him. Inflation is the opium of the people.”
8- “Saving, in short, in the modern world, is only another form of spending. The usual difference is that the money is turned over to someone else to spend on means to increase production.”