Worst book ever: "Economics in One Lesson"?

[niemivh]

I just finished reading "Economics in One Lesson".  Oh boy.  The fact that anyone can gobble that swill down without as much as a burp of mental indigestion is frankly stunning.  I read it due to someone's rave revues on this forum to which they basically revered this book as a bible of sorts.

There are only a few chapters with any worthwhile arguments to salvage, some of those chapters (and there weren't many) I truly liked the principle message of, but even those he had to pack as much polemical mouth-frothing vitriol in as he could, much of which felt manic, like he couldn't even finish a thought without bursting out in Strangelovian fashion. The chapters were also stacked with the most obvious straw man arguments you could possibly dream up.  It's as if his sole source for counter-arguments was someone who read a bad translation of Keynes into a non-native language, had a lobotomy, and were given opiates and hallucinogens prior to their interview with Mr. Hazlitt.

The naked class warfare of this book was so blatant it's amazing that people can read this thinking that it's some disinterested objective view by a scholarly hermit completely removed from the system he seeks to influence, which due to the reverence in which it was previously addressed lead me to believe that some believe this not far off from the truth.  No sooner than you might give him the new chance of being objective and fair in the next chapter he bursts into another polemic.  The lack of objectivity and disingenuous nature actually put this book the borderline of being a manifesto rather than any actual work of academia.  The words "liberty", "freedom" and other slogans are smattered about the pages to keep the average libertarian plodding along thinking that the system he promotes would somehow be in any of their best interests to which they are woefully mislead.

But to be fair, it is nowhere as bad as "Capitalism and Freedom" by Milton Friedman.

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[The Script]

Any specific passages, ideas or arguments you wish to critique?

[niemivh]

Any specific passages, ideas or arguments you wish to critique?

My brain had so many responses at once to this that I think I just had an aneurysm.

I'll post some 'gems' from this book tomorrow if I can make the time.

 

[amincd]

With all due respect, I think you are very misguided on economics if you can't see the quality of Hazlitt's book. He manages to demonstrate in simple form, the most common economic fallacies that people believe in.

The book demonstrates how the problem of theories promoting economic interventionism is always one of not seeing beyond what is seen to what is unseen.

The naked class warfare of this book was so blatant

There is absolutely no promotion of class warfare in the book. It's a refutation of the class warfare that Marxism preaches.

[AyeYo]

But to be fair, it is nowhere as bad as "Capitalism and Freedom" by Milton Friedman.

 


This information doesn't surprise me at all.  It just goes to show how willing people are to gobble up anything, no matter how far-fetched, illogical, ridiculous, or just flat out wrong, if it confirms their worldview.  Fox News has made a fortune operating on this principle.

[J180]

But to be fair, it is nowhere as bad as "Capitalism and Freedom" by Milton Friedman.

 


This information doesn't surprise me at all.  It just goes to show how willing people are to gobble up anything, no matter how far-fetched, illogical, ridiculous, or just flat out wrong, if it confirms their worldview.  Fox News has made a fortune operating on this principle.

I'm very interested in hearing criticism of Milton's book, if either of you wish to post a link, or simply point out any bad arguments or evidence. He strikes me as so logical that an illogical leap pointed out would change my opinion of him quite dramatically (assuming he refused to correct it).

[Mittlyle]

The book can be found as free pdf at http://www.hacer.org/pdf/Hazlitt00.pdf

I'm looking forward to reading it as it is often used as reference for arguments I find unfounded. So either I'm going learn new stuff on economics or new straw mans on economics, in both cases it should be worthwhile reading.

[NghtRppr]

he had to pack as much polemical mouth-frothing vitriol

Funny, I get that from reading your post.

The book is brilliant and even though it was written over half a century ago, you wouldn't know it because people are still using the same fallacies today.

[Leon]

I read it, it was "okay", but not worth the wasted time at all.

[myrkul]

The book can be found as free pdf at http://www.hacer.org/pdf/Hazlitt00.pdf

I'm looking forward to reading it as it is often used as reference for arguments I find unfounded. So either I'm going learn new stuff on economics or new straw mans on economics, in both cases it should be worthwhile reading.

I don't think this is the same book OP read. It can't be. Granted, I'm only about a third of the way through (finally decided to read it, so I could participate in this thread), But so far I haven't seen any "naked class warfare" or "polemical mouth-frothing vitriol". Maybe he accidentally picked up a copy of "Property is Theft"?

[netrin]

But to be fair, it is nowhere as bad as "Capitalism and Freedom" by Milton Friedman.

This information doesn't surprise me... (and other self-acknowledged ignorant drivel)

I'm very interested in hearing criticism of Milton's book, if either of you wish to post a link, or simply point out any bad arguments or evidence. He strikes me as so logical that an illogical leap pointed out would change my opinion of him quite dramatically (assuming he refused to correct it).

I've read a bit of Keynes, Greenspan, Freedman and Hazlitt, and while each would like to portray themselves as bearers of seemly-obvious previously obscured enlightenment, clearing our eyes of mud and showing us their truth, they all conveniently or from understandable ignorance neglected certain facts and come to dubious conclusion (of which I've only learned from equally brilliant minds or their own retraction). None the less, I've learned a great deal from them all and judge each by the others.

But I too would like to hear from the greater geniuses of this forum, specific critiques of Freedman and Hazlitt.

(Rand's writing style, proving 'fact' through fiction, was more than I could tolerate)

[The Script]

Again, for those who wish to criticize Hazlitt's book, I want to read specific critiques of specific points, not baseless accusations and general whining.  Thanks. 

[myrkul]

If anything, I'm getting sick of his furious backpedaling at the end of every chapter. "Now, don't get me wrong, I'm not trying to say we don't need ANY tax/tarrifs/etc"

 

[AyeYo]

Again, for those who wish to criticize Hazlitt's book, I want to read specific critiques of specific points, not baseless accusations and general whining.  Thanks. 

I think the most significant and telling criticsm of the book is its followers.  I didn't even waste the time to read the book yet, but based on those around here who campion it as a masterful lesson in economics (and obviously know nothing about economics), clearly it's anything but.

[netrin]

Again, for those who wish to criticize Hazlitt's book, I want to read specific critiques of specific points, not baseless accusations and general whining.  Thanks.  

I think the most significant and telling criticsm of the book is its followers.  I didn't even waste the time to read the book yet, but based on those around here who campion it as a masterful lesson in economics (and obviously know nothing about economics), clearly it's anything but.

AyeYo, we're still on the first page of this discussion and already twice you've presented strong negative opinions about a book and its readership which you admit not having read yourself. Please tell us what books you have read so we can all consider not reading them based on their ignorant prejudice illogical readership.

[myrkul]

Again, for those who wish to criticize Hazlitt's book, I want to read specific critiques of specific points, not baseless accusations and general whining.  Thanks.  

I think the most significant and telling criticsm of the book is its followers.  I didn't even waste the time to read the book yet, but based on those around here who campion it as a masterful lesson in economics (and obviously know nothing about economics), clearly it's anything but.

AyeYo, we're still on the first page of this discussion and already twice you've presented strong negative opinions about a book and its readership which you admit not having read yourself. Please tell us what books you have read so we can all consider not reading them based on their ignorant prejudice illogical readership.

Cat in the Hat and Green Eggs and Ham, I'd wager.

[JoelKatz]

If anything, I'm getting sick of his furious backpedaling at the end of every chapter. "Now, don't get me wrong, I'm not trying to say we don't need ANY tax/tarrifs/etc"

 

I think that's a good rhetorical style.

Someone presents an invalid argument why X is greater than Y. You show how that same argument also shows X is less than Y. Now, obviously, you don't believe either argument is valid because X cannot be both greater than and less than Y. So after you make your argument, you have to backpedal because your argument was a response to a premise with which you do not agree.

Someone presents an argument that X is the greatest thing in the world. You begin listing all the bad consequences of X. But, of course, sometimes there are cases where X is needed, despite its bad consequences, to avoid even worse consequences. So after you make our argument, you have to backpedal because your argument was a response to an argument with which you do not agree.

It's not furious backpedaling. It's switching from rebutting an opposing argument to advancing one's own position.

[bjorn]

I just finished reading "Economics in One Lesson".  Oh boy.  The fact that anyone can gobble that swill down without as much as a burp of mental indigestion is frankly stunning.  I read it due to someone's rave revues on this forum to which they basically revered this book as a bible of sorts.

There are only a few chapters with any worthwhile arguments to salvage, some of those chapters (and there weren't many) I truly liked the principle message of, but even those he had to pack as much polemical mouth-frothing vitriol in as he could, much of which felt manic, like he couldn't even finish a thought without bursting out in Strangelovian fashion. The chapters were also stacked with the most obvious straw man arguments you could possibly dream up.  It's as if his sole source for counter-arguments was someone who read a bad translation of Keynes into a non-native language, had a lobotomy, and were given opiates and hallucinogens prior to their interview with Mr. Hazlitt.

The naked class warfare of this book was so blatant it's amazing that people can read this thinking that it's some disinterested objective view by a scholarly hermit completely removed from the system he seeks to influence, which due to the reverence in which it was previously addressed lead me to believe that some believe this not far off from the truth.  No sooner than you might give him the new chance of being objective and fair in the next chapter he bursts into another polemic.  The lack of objectivity and disingenuous nature actually put this book the borderline of being a manifesto rather than any actual work of academia.  The words "liberty", "freedom" and other slogans are smattered about the pages to keep the average libertarian plodding along thinking that the system he promotes would somehow be in any of their best interests to which they are woefully mislead.

But to be fair, it is nowhere as bad as "Capitalism and Freedom" by Milton Friedman.

This could probably be edited in such a way to be self-descriptive.

[myrkul]

It's not furious backpedaling. It's switching from rebutting an opposing argument to advancing one's own position.

If it's not backpedaling, it's an amazing level of double-think. Or maybe it's just failing to think it all the way through.

[J180]

If you show a single quote where they misrepresent someone, or ignore obvious evidence, or commit a logical fallacy, then that's enough for me not to trust the rest of the Author's conclusions, a reason I dismissed both Rothbard and Rand for example. So you can make a very strong argument against the book by just focusing on a particular part which annoyed you.

[JoelKatz]

If you show a single quote where they misrepresent someone, or ignore obvious evidence, or commit a logical fallacy, then that's enough for me not to trust the rest of the Author's conclusions, a reason I dismissed both Rothbard and Rand for example. So you can make a very strong argument against the book by just focusing on a particular part which annoyed you.

You shouldn't trust anyone's conclusions. The reason all the stuff before the conclusion is there is so that you can make a decision about what to do with the conclusion.

Any author that has written a significant amount of work has almost certainly written something that misrepresents someone, ignores obvious evidence, or commits a logical fallacy. It is crazy to dismiss all of that author's work just for that. Rand, for example, wrote a lot of really idiotic things about gender roles and art. That's no reason to dismiss much less idiotic things she said about epistemology.

[J180]

You shouldn't trust anyone's conclusions. The reason all the stuff before the conclusion is there is so that you can make a decision about what to do with the conclusion.

Ideally (and often) but not always. Two example situations are:
1. Where analyzing the primary evidence is beyond the grasp of an average reader, or at least not worth his own time to learn. If a scientist tells us 'the temperature of the earth is increasing at this rate' and shows us a graph, I can see if experts agree with that graph without going over piles of difficult research papers and analyzing their method. For an example in economics, someone could write "purchasing power of the average worker increased/decreased during this period" or "net exports went up by this percent each year". I could decide if that's true by trusting the economist and seeing if other experts agreed with his conclusion. In both those cases, learning the correct application of statistics and going through hoards of primary data, to decide if I trust a single sentence, is not worth my time.
2. Sometimes the 'stuff before the conclusion' can be purposefully misrepresented or twisted, even if it's within the grasp of the average reader. They might quote passages from a book or historic figure out of context. If you cannot trust the author, it means the only way you can make up your own mind is by personally tracking down the books they quote and checking it hasn't been quoted out of context (or even made up completely). Once again, an unreasonable use of my time, especially if there's an alternative author with a long track record of not misrepresenting evidence.

Any author that has written a significant amount of work has almost certainly written something that misrepresents someone, ignores obvious evidence, or commits a logical fallacy. It is crazy to dismiss all of that author's work just for that.

Accepted. To clarify my statement I'm referring to purposeful deception rather then mistakes. This is the area where it can be difficult to tell. But a common indicator is whether they correct themselves and change their mind when told about the mistake. Here's an example from David Friedman referring to an exchange with Rothbard:

My standard example was an exchange long ago, after a talk of his in which he claimed that Reagan did not really cut government and offered as evidence the increase in the nominal federal budget. I pointed out that, while his conclusion might for all I knew be true, his evidence combined whatever growth had occurred in the real size of the federal government with the effect of inflation over the period.

His response was that that was all right; because Reagan was responsible for the inflation, it was appropriate to use it to make his performance look worse. Think that through and he was saying that it was all right to misrepresent the evidence to his fellow libertarians as long as the result was to make them think badly of someone they should think badly of, to lead them to the correct conclusion for the wrong reason. I don't regard that as a desirable approach to political (or other discussion). Or, for that matter, a libertarian one—we are generally opposed to fraud as well as force

[The Script]

Again, for those who wish to criticize Hazlitt's book, I want to read specific critiques of specific points, not baseless accusations and general whining.  Thanks.  

I think the most significant and telling criticsm of the book is its followers.  I didn't even waste the time to read the book yet, but based on those around here who campion it as a masterful lesson in economics (and obviously know nothing about economics), clearly it's anything but.

AyeYo, we're still on the first page of this discussion and already twice you've presented strong negative opinions about a book and its readership which you admit not having read yourself. Please tell us what books you have read so we can all consider not reading them based on their ignorant prejudice illogical readership.

Ha ha, I agree. I still haven't seen anyone attack specific arguments from this book. That doesn't mean the book is 100% correct, but the "this book is stupid but I can't make specific logical arguments against it" whining is pointless and irritating.

[Mittlyle]

If you show a single quote where they misrepresent someone, or ignore obvious evidence, or commit a logical fallacy, then that's enough for me not to trust the rest of the Author's conclusions, a reason I dismissed both Rothbard and Rand for example. So you can make a very strong argument against the book by just focusing on a particular part which annoyed you.

I have one argument that I believe seriously hampers the main arguments in the book:

The author seems oblivious of consumption function (and improved models with similar content), which was first introduced by Keynes in his The General Theory at 1936. Simplified model of consumption function is shown here:
http://tutor2u.net/economics/content/diagrams/consumption_theory_2.gif
The x-axis is the persons income and f(x), the black line, is his consumption. The vertical difference x - f(x) is what person's accumulates. The point where the black and red line intersect is the so called brake-even point. Above that person accumulates money and below either spends his savings or has to take debt. The consuption function is in reality not linear but the slope is reduced when the income increases.

Important concept here is MPC, or marginal propensity to consume. If we give a person extra money, the ratio of it that will increase consumption is the so called MPC. The MPC is simply the slope of the consumption function. In the simplified model all income-classes would have same MPC. In reality, however, average poor people have higher MPC than average rich, as the slope is reduced with x. This leads us to very important conclusion: aggregate demand is not indifferent to transfer of wealth.

Many of the Hazlitts arguments are of form: When you take x from person A (by taxation, accident or other means) and give it for entity B to consume, the loss of consumption of A cancels the positive effects of consumption of B, and as consumption of B is inherently less effective as not being decided by the markets, the net effect is negative. This completely ignores MPC. Consider for example employing somebody with taxation. Somebody loses money in the process. If he has lower MPC than the one employed then aggregate demand will increase thus improving the employment rate in aggregate. In addition, if the job filled is improving circumstances for business (law-enforcement, infrastructure...) it is in effect investment improving prospects for economy. Also, the taxed money is used to increase domestic employment rather than foreign.

This argument does not clearly refute any of the arguments, but clearly shows the book is using straw-mans. There were few other smaller ones, but I'll post them maybe later to keep things bite-size.

[J180]

This argument does not clearly refute any of the arguments, but clearly shows the book is using straw-mans.

I think that evidence is convincing at calling the book outdated since it doesn't present that argument. But I can't assume it's a strawman, since the consumption function was published in 1936 which is not long before Economics in One Lesson. Especially as I remember reading that Keynes's ideas were criticized initially but ended up taking off as the war ended, just when the book would of been published. Hazlitt apparently made a book attempting to refute General Theory of Employment, Interest, and Money, in 1959 once the idea caught ground. So he might of mentioned it in Economics in One Lesson if it was published a decade or two later.

[Mittlyle]

This argument does not clearly refute any of the arguments, but clearly shows the book is using straw-mans.

I think that evidence is convincing at calling the book outdated since it doesn't present that argument. But I can't assume it's a strawman, since the consumption function was published in 1936 which is not long before Economics in One Lesson. Especially as I remember reading that Keynes's ideas were criticized initially but ended up taking off as the war ended, just when the book would of been published. Hazlitt apparently made a book attempting to refute General Theory of Employment, Interest, and Money, in 1959 once the idea caught ground. So he might of mentioned it in Economics in One Lesson if it was published a decade or two later.

You are probably right that calling the arguments as straw mans is bit too strong when looking at the historical context. As he mentioned Keynes in the beginning he should've been aware of the consumption function. In the Keynes's book the consumption function was probably modeled as linear and as there probably weren't many empirical studies done at the time of Hazlitt's book, the MPC would have been assumed constant thus validating Hazlitts point of view.

I found that the general tone in the Hazlitt's book was that here you have bunch of recurring economic fallacies, and then let the reader to read between the lines that all theories emphasizing government spending, including Keynes's arguments are reducible to those and thus there is no need to touch upon them. The fact he needed another book for Keynes indeed shows that Economics in One Lessons wasn't alone sufficient criticism.

[netrin]

Thanks Mittlyle for some meaty critique. I'll take a stab...

The author seems oblivious of consumption function (and improved models with similar content), which was first introduced by Keynes in his The General Theory at 1936.

And Keynes was likewise oblivious to economists he preceded. Such as the life cycle hypothesis or Friedman's permanent income hypothesis stating that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term income expectations. Transitory, short-term changes in income have little effect on consumer spending behavior. Consumption trends follow income, whether up or down.

Keynes rightly argues that the rich consume less personally than the poor. But the rich invest. Hazlitts argues that the investor is better equipped to evaluate efficient use of his own savings, both risk and gains, whereas the government through taxation takes from properly risk/gain calibrated investment to necessarily less efficient projects.

You can argue that some projects (law-enforcement, infrastructure...) have a benefit to all of society for which no single investor would see gains that compensate his risk. I don't recall Hazlitt denying this (I believe an earlier post referred to it as 'back peddling') but argued against subverting private investment to fund private debtors who could not otherwise receive favorable loans - ie subsidizing bad investment at the loss of good investment.

[niemivh]

Sorry to be away for so long.  But it looks like the title got people's juices flowing.
Ok, so I'll just pitch out one chapter I think is horrible, not the worst chapter but a bad one nevertheless.  I'm sure that this will rile people more so than other chapters, but that's part of the reason I am choosing it.

 

Chapter XX
"Do Unions Really Raise Wages?"

Second sentence:  "This delusion is mainly the result of failure to recognize that wages are basically determined by labor productivity." 

This above sentence is more or less the theme of the chapter; yet there are so many factors that go into what someone earns at a wage that he ignores or heavily downplays in this chapter.  For example, the fact that workers doing a similar (or nearly identical) job in two different countries (let's use a barber for example) make radically different wages; if it was purely or even primarily a function of their productivity then why would a US citizen get paid ten times or more what someone does in the 3rd world?  Is that 'mainly' a function of their labor productivity? 

He bravely concedes shortly thereafter that in a bargaining relationship between worker and employer that the worker potentially has much more to lose, admitting that the old total liquidity of labor is patently false.  Good on him for that.

He next sees unemployment as the worst possible outcome, not under-employment or working at slave wages.  This is a reoccurring theme in the book.

He then refers to those that have a different interest or different wants as "emotional economics" citing the oft-used "free market" mythos (my apologies to those who still believe that such a thing exists, if you think it exists then please succinctly define what you mean by the term "Free Market" in a reply, citation of historical examples of such a thing earn extra bonus points).  Then he begins the setup for some divide and conquer strategy in saying that if other's have unions then you'll be paying higher prices for their services.  This is clearly true, the prices would be partially (not totally) 'absorbed' by non-unionized workers, but what non-unionized workers should be doing about it is pushing for their own unionization for their own rational self interest.  Reason: the closer to 100% of the labor force that is unionized the more rapidly wages rise in relation to non-wage money flows; which is exactly what the monied interests don't want. The workers income rising against the rich's assets they consider "inflation" (totally ignoring the actual underpinning economic growth, but more on that later), this is the "inflation" that central bankers speak about (it's truly code for rising wages) and why they hate Full Employment so much, the skyrocketing cost of living increases that you see while your wages remain flat or are declining are totally ignored by Bernanke and crew.  They have a blind spot toward speculative commodities prices, and why shouldn't they?  The price that a super rich person pay in relation to their total assets in higher commodity prices is incredibly negligible compared to the infinitely more visible 'loss' (which is really isn't, but more on that later) of having to pay higher wages for worker bees.

Next he weaves a little example.  "In order to see more clearly how this occurs, let us imagine a community in which the facts are enormously simplified arithmetically."  This is an understatement in the example he creates.  He creates a world where all money exists as wage payments and the end-user purchasing power scantly mentioning the issuance of more bank credit at the end of the example.  Like before, he ignores savings, money held in bonds, the existence of debt, financial securities of all types, capital gains, etc.  I hope you see the immediate problem with this.  He later in the example brings up the idea of unionizing everyone but poo-poo's it in a brief wave of the hand in a typical Zero Sum Game fashion.  He says that the balance of power amongst the various unions will not be balanced therefore you shouldn't unionize, and then harps back to his absurd thesis that all money in the system must exist as wages because if all wages rose in tandem it would be a net zero gain as everyone would have to pay higher prices.  This WOULD BE TRUE if all money did exist as wages and expenditures in a system, but that's not the system we live in, it's not a system that is feasible or ever has been or ever will be. 

In his next example (since it is a next sub-chapter) he allows for the fact that rising wages could impact total overall profits but hastily concludes that that will be just passed on to the customers of that business and not 'shared' among the bondholders, the shareholders, the board, etc.  We he finally gets around to admitting that it is "conceivable" that the money earned from higher wages could impact the earnings in relation to stocks and bonds we sink into a even deeper form of a Zero Sum Game than he was in before, I assume because they effect the interests in which he is most attached to, the myopic rich.  Wealth is created.  It is a fact, this would be impossible if we fell into the ZSG world-view where Hazlitt can only fathom a context of winners and losers and that for the workers to be winning in means that like some universal consent someone must be losing somewhere.   He then says in more words that the rich won't accept that kind of abuse of not reaping the entirety of the rewards of economic growth and take their money else where where they can get the highest returns.  If the rich of the country don't want to help create economic growth and go on an effective 'capital strike' we truly don't need them being our nations 'elite'.  There are many solutions to this if we wish not to be held captive to the caprice and avarice of a clique of unelected and unelectable dynastic families.  Of which one of them is issuing 0% credit from a nationalized central bank and build the capital intensive projects and infrastructure that we need.  I'll leave it at this as this opens up another avenue of conversation that would take pages to explain, so someone make the obvious rebuttal to it so I can return in kind.

Next he reinforces more ZSG crap: "Thus we are driven to the conclusion that unions, though they may for a time be able to secure an increase in money wages for their members, partly at the expense of employers and more at the expense of nonunionized workers, cannot, in the long-run and for the whole body of workers, increase real wages at all."

Well there you go, one big giant ZSG lump of a thesis.  What a bleak outlook.  This is actually a regurgitated neo-classical trash from raving reactionaries from the days of yore.  Totally disproven from history, both modern and contemporary.  Collective bargaining allows the workers to have a portion of the economic growth they helped create, without which, as we have seen in this country the stagnation of wages even in the face of massive productivity gains from the flourishing of the information technology industry.  He sees full unionization as a futile impossibility.

Then he makes a few concessions in the reason why unions have worked in the past just to tee the ball for the next attempted 'grand-slam' to bash them in typical Socratic dialectical fashion (you always want to concede a few good things before you 'go for the kill').  He is apparently against the reduction of the work week any further but paradoxically supports the reduction of the work week from the high 70 hours a week but against lowering it below 40 as if there is something profoundly wonderful or numerologically superior to the 40 hour work week in comparison to other amounts of time.  If the average worker's productivity goes up by 70% from the introduction of new technology (in this case Information Technology) would it be outlandish for that worker to want to leverage that massive boost in productivity to have a 38 hour work week and a 15% raise?  That is still less than the overall growth or productivity gained from that worker with much of it going elsewhere in the system.  But of course monetarist, oligarchical reactionary sympathizers don't see this, they think that they should get all that extra wealth from that gain of productivity.

Of course he ends the chapters with some examples of what we would all consider union abuse, that is unions that are feather-bedding in ways that only the CEO's of our country should be allowed to do.  I'm against golden parachutes and I'm against ridiculous feather-bedding, ESPECIALLY the blocking of technological advancement.  That is a sin in my book, he who blocks technological advancement deserves to be tarred and feathered.  But the degree of this going from the top is much more profound and damaging to society than anything a union can do, but this is topic for another conversation.  Although it's convenient for him to make the average person look like a Luddite rather than the oligarchical interests.

Then he makes an abortive attempt at spurting out some form of condensed history lesson to fallaciously prove that unions = bad.  Basically pointing to unions for all our woes in an era where the following happened: Bretton Woods collapsed, Vietnam War, Cold War, oil crises, Prime rate spikes and many other events that would do much to explain these numbers, but no! it was the unions!

I eagerly await your comments and will try to not be away for many days this time.

[myrkul]

He next sees unemployment as the worst possible outcome, not under-employment or working at slave wages.  This is a reoccurring theme in the book.

You would argue, then, that $0.00/hour is better than $1.00/hour?

The rest of the arguments have merit, since his arguments against unions are seriously oversimplified and flawed.

That said, you've gotten to chapter 20 before running into anything to complain about... sounds pretty good to me.

[Mittlyle]

He next sees unemployment as the worst possible outcome, not under-employment or working at slave wages.  This is a reoccurring theme in the book.

You would argue, then, that $0.00/hour is better than $1.00/hour?

The rest of the arguments have merit, since his arguments against unions are seriously oversimplified and flawed.

That said, you've gotten to chapter 20 before running into anything to complain about... sounds pretty good to me.

Oversimplified and flawed is what I would describe the book as a whole. Actually I found the book bit arrogant as first Hazlitt started with explaining what is proper reasoning in economics, and then fails to follow it himself. Difference of MPC within people is just one short-term effect he failed to recognise and happens to have huge impact on most of his arguments.

In chapter dealing with reducing work-time by law he used two clear straw-man examples in which wages were fixed and then showed that this leads to problems. The strongest case with reduced work-hours and wages set by markets were ignored.

The inflation chapter is just bs dealing only with government spending with printing money.

Hazlitt also got the workings of banking wrong, which is common fallacy. Banks do not lend peoples savings, they just make two IOU's one of which is the debt-takers bank account and other is the agreement to pay back the principle plus interest. Peoples savings is just one of the defining factors of the limit how much this 'debt money' banks can create (Basel I, II, III).

Hazlitt also seem to reduce the purpose of economics to mere growing of the GDP over well-being of individuals, which in my opinion is confusing the end with means. Economics is for creating well-being which is subjective value, so resorting to absolute objectives is inherently flawed.

As book dealing mainly with economic fallacies, I find the omittance of law of comparative advantage a huge flaw as it is so unintuitive and thus leads to many fallacious reasonings regarding free trade.

The chapter dealing with price control after war was also flawed. Obviously the purpose during crise is to guarantee the adequacy of supplies by restricting hoarding. This is done by rationing. Price control will follow only if necessary, not the other way around as in the book.

That being said, I agree with many of the conclusions in the book. Nevertheless, I think Hazlitt's reasoning hardly qualifies him for the reputation he seems to have.

[netrin]

Oversimplified and flawed is what I would describe the book as a whole. Actually I found the book bit arrogant as first Hazlitt started with explaining what is proper reasoning in economics, and then fails to follow it himself.
...
As book dealing mainly with economic fallacies, I find the omittance of law of comparative advantage a huge flaw as it is so unintuitive and thus leads to many fallacious reasonings regarding free trade.
...
That being said, I agree with many of the conclusions in the book. Nevertheless, I think Hazlitt's reasoning hardly qualifies him for the reputation he seems to have.

Mittlyle, I appreciate reading your critiques; I was otherwise worried this thread would be stillborn. I realize someone posted the book as "the final word" or "must read before comment on econ". Indeed, that is why I read it. I agree with you that Hazlitt presents gross simplifications which might have been better expressed in a book 10% the size.

I think the running thesis, the one lesson, is to recognize not only the apparent results of economic policy but also the hidden or subsequent distributed losses.

While I think you correctly argue that Hazlitt tends to argue a zero-sum-game, his accusation is none the less true, that democracies past and present create policy with visible results irrespective of hidden losses, whether for political gain or ignorance.

Reason: the closer to 100% of the labor force that is unionized the more rapidly wages rise in relation to non-wage money flows; which is exactly what the monied interests don't want. The workers income rising against the rich's assets they consider "inflation" (totally ignoring the actual underpinning economic growth, but more on that later), this is the "inflation" that central bankers speak about (it's truly code for rising wages) and why they hate Full Employment so much, the skyrocketing cost of living increases that you see while your wages remain flat or are declining are totally ignored by Bernanke and crew.  They have a blind spot toward speculative commodities prices, and why shouldn't they?  The price that a super rich person pay in relation to their total assets in higher commodity prices is incredibly negligible compared to the infinitely more visible 'loss' (which is really isn't, but more on that later) of having to pay higher wages for worker bees.

This is interesting. While the economy is contracting the Fed and central banks are inflating money supplies (devaluing currencies) to prop up housing and stock markets. Food and energy prices are increasing disproportionate to wages. How could anyone claim that inflation remains low and that deflation (monetary or price) is our greatest concern? But "inflation...truly code for rising wages" is the most succinct wording I've yet read.

[niemivh]

He next sees unemployment as the worst possible outcome, not under-employment or working at slave wages.  This is a reoccurring theme in the book.

You would argue, then, that $0.00/hour is better than $1.00/hour?

The rest of the arguments have merit, since his arguments against unions are seriously oversimplified and flawed.

That said, you've gotten to chapter 20 before running into anything to complain about... sounds pretty good to me.

Why would I argue that working for $0 is better than $1?  What did I say that leads you to believe that?

Secondly, the chapter was pretty much chosen at random.  There are plenty of problems with the preceding chapters I just choose chapter XX.  Not that it matters, there is very little 'flow' to the book and the chapters could be in practically any order.

[myrkul]

Why would I argue that working for $0 is better than $1?  What did I say that leads you to believe that?

He next sees unemployment as the worst possible outcome, not under-employment or working at slave wages.  This is a reoccurring theme in the book.

[niemivh]

Oversimplified and flawed is what I would describe the book as a whole. Actually I found the book bit arrogant as first Hazlitt started with explaining what is proper reasoning in economics, and then fails to follow it himself.
...
As book dealing mainly with economic fallacies, I find the omittance of law of comparative advantage a huge flaw as it is so unintuitive and thus leads to many fallacious reasonings regarding free trade.
...
That being said, I agree with many of the conclusions in the book. Nevertheless, I think Hazlitt's reasoning hardly qualifies him for the reputation he seems to have.

Mittlyle, I appreciate reading your critiques; I was otherwise worried this thread would be stillborn. I realize someone posted the book as "the final word" or "must read before comment on econ". Indeed, that is why I read it. I agree with you that Hazlitt presents gross simplifications which might have been better expressed in a book 10% the size.

I think the running thesis, the one lesson, is to recognize not only the apparent results of economic policy but also the hidden or subsequent distributed losses.

While I think you correctly argue that Hazlitt tends to argue a zero-sum-game, his accusation is none the less true, that democracies past and present create policy with visible results irrespective of hidden losses, whether for political gain or ignorance.

Reason: the closer to 100% of the labor force that is unionized the more rapidly wages rise in relation to non-wage money flows; which is exactly what the monied interests don't want. The workers income rising against the rich's assets they consider "inflation" (totally ignoring the actual underpinning economic growth, but more on that later), this is the "inflation" that central bankers speak about (it's truly code for rising wages) and why they hate Full Employment so much, the skyrocketing cost of living increases that you see while your wages remain flat or are declining are totally ignored by Bernanke and crew.  They have a blind spot toward speculative commodities prices, and why shouldn't they?  The price that a super rich person pay in relation to their total assets in higher commodity prices is incredibly negligible compared to the infinitely more visible 'loss' (which is really isn't, but more on that later) of having to pay higher wages for worker bees.

This is interesting. While the economy is contracting the Fed and central banks are inflating money supplies (devaluing currencies) to prop up housing and stock markets. Food and energy prices are increasing disproportionate to wages. How could anyone claim that inflation remains low and that deflation (monetary or price) is our greatest concern? But "inflation...truly code for rising wages" is the most succinct wording I've yet read.

The faux argument of Inflation or Deflation? is much to simplistic to be of any use to people.  There is inflation in the market and deflation at the same time, depends on what you are talking about.  Housing prices down and being held on life-support.  Commodity prices up, stock prices up.  Wages flat or deflating.  I've heard Peter Schiff and some other people argue Inflation / Deflation all day long and the end result is that people are looking at the system as a whole rather than the specifics, which may be good for some people's investment strategy, but for constructing policy and living your daily life aren't.

[niemivh]

Why would I argue that working for $0 is better than $1?  What did I say that leads you to believe that?

He next sees unemployment as the worst possible outcome, not under-employment or working at slave wages.  This is a reoccurring theme in the book.

Ok, I think I got it.

Am I to assume that you think that the existence of a unemployment insurance program or 'social safety net' isn't a 'given' and shouldn't exist whatsoever?

Can you please illustrate why you think it is economically inefficient to have such a program?  Sorry I didn't know that we were all to assume that no such program existed even though they do in all 1st world modern economies (that I'm aware of).

Hence why I didn't explicitly spell out that such a program exists, because it already does.

[NghtRppr]

Why would I argue that working for $0 is better than $1?

No, the question was, would you argue that not working and getting $0 an hour is better than working and getting $1 an hour. Also, assuming you say it's better to not work and get $0 an hour then do you think this is just your personal opinion or is it something that should be enforced everyone regardless of what they believe?

[myrkul]

Can you please illustrate why you think it is economically inefficient to have such a program?  Sorry I didn't know that we were all to assume that no such program existed even though they do in all 1st world modern economies (that I'm aware of).

There are numerous explanations of why welfare programs not only do not work, but are actually bad for the economy. Here's a simple one:

Government unemployment programs not only remove the incentive to find a job (replacing it with an incentive to look like you're trying to find a job), but drain funds from those who do have jobs to do so.

Distribution of wealth programs all have the same result. Everyone's poorer, except those doing the distribution.

[niemivh]

If you show a single quote where they misrepresent someone, or ignore obvious evidence, or commit a logical fallacy, then that's enough for me not to trust the rest of the Author's conclusions, a reason I dismissed both Rothbard and Rand for example. So you can make a very strong argument against the book by just focusing on a particular part which annoyed you.

You shouldn't trust anyone's conclusions. The reason all the stuff before the conclusion is there is so that you can make a decision about what to do with the conclusion.

Any author that has written a significant amount of work has almost certainly written something that misrepresents someone, ignores obvious evidence, or commits a logical fallacy. It is crazy to dismiss all of that author's work just for that. Rand, for example, wrote a lot of really idiotic things about gender roles and art. That's no reason to dismiss much less idiotic things she said about epistemology.

Well put.  I disagree with a lot of what Ayn Rand said yet The Fountainhead is one of my favorite novels.  I am reading a Joseph Stiglitz book and while I disagree with many things he says he also says a lot I agree with.  With Hazlitt, there is some things that he puts very well in the book but it doesn't mean that it's a good book.  At some point if a book is 75% - 90% repackaged trash then you have to say something about it.

I believe that far too many people are using as what could be described as 'pack based' socio-dynamics, as in that they ally their beliefs with a mindset or dogma or prevailing philosophy and then see opposition to that as some external threat (like the tribe over the mountain) to which they reinforce their patterns of thought (beliefs) against.  The most extreme form of this thinking you see in religious circles yet it is not exclusively a religious phenomenon.  How else could one describe people on this forum that appear to be, from everything I've ever heard them write, exact clones of famous authors and economists of the past era?  How else could it be that a person would agree with every single position and belief that some notable had already had?  Perhaps those that fall into that category should quit reading books as a simple 'I'm going to dump the contents of this book into my brain' instead adopting a more dialectical approach as if you would when politely arguing with someone.  Questioning everything that they are reading on a sentence-by-sentence basis, taking notes, doing research and fact checking while reading.  For each book I read I usually have about 10-15% of the length of the book in notes I have taken by the time I'm done reading it.  It's a good strategy if you care to have what you 'believe' be actually supported by historical reality.

[niemivh]

Why would I argue that working for $0 is better than $1?

No, the question was, would you argue that not working and getting $0 an hour is better than working and getting $1 an hour. Also, assuming you say it's better to not work and get $0 an hour then do you think this is just your personal opinion or is it something that should be enforced everyone regardless of what they believe?

Unemployment insurance I'm sure exists for vastly different reasons in your opinion than mine.

You go first.

 

[niemivh]

Can you please illustrate why you think it is economically inefficient to have such a program?  Sorry I didn't know that we were all to assume that no such program existed even though they do in all 1st world modern economies (that I'm aware of).

There are numerous explanations of why welfare programs not only do not work, but are actually bad for the economy. Here's a simple one:

Government unemployment programs not only remove the incentive to find a job (replacing it with an incentive to look like you're trying to find a job), but drain funds from those who do have jobs to do so.

Distribution of wealth programs all have the same result. Everyone's poorer, except those doing the distribution.

Wrong again.

Unemployment insurance prevent a large amount of under-employment and destitution than would otherwise occur.  If a factory goes bust and empties out 100 low-skilled laborers and 10 high-level engineers what is the cost to the overall economy if 6 of the 10 of those engineers have to become underemployed in order to make ends meet?  What is the total cost if 40 of the 100 low-skilled workers become destitute?  Is that 'cheaper' than simply paying them a monthly stipend so that they aren't starving and homeless?  How much would crime increase for those desperate people?  Why have an engineer flipping burgers when he can be building things?  Labor is not totally liquid and not having this system would drastically lower everyone's wages as there would always be some near-starving hapless wretch to take your job from you (much more so for unskilled labor).

Contrary to the hateful monetarist dogma, people = wealth.  A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy than having the law of the jungle prevail; there is a reason that all other modern economies have seen the benefit of these programs. 

[myrkul]

A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy. 

Oh, on this I agree. But I fail to see how stealing from productive people to help pay the unproductive people to stay unproductive accomplishes this goal.

[NghtRppr]

Unemployment insurance I'm sure exists for vastly different reasons in your opinion than mine.

I'm not talking about unemployment insurance which doesn't last forever. The point is, if eventually the option is to not work and get nothing or work and get very little then some people might prefer to work and get very little rather than to do nothing and get nothing. Who are you to enforce your personal opinions on them?

[niemivh]

A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy. 

Oh, on this I agree. But I fail to see how stealing from productive people to help pay the unproductive people to stay unproductive accomplishes this goal.

Fallacy #1: That all the money for this program is coming from 'stealing from productive people'. 
Reality #1: The money collected for Employment Insurance Programs (EIPs) comes from a variety of places, some of which is from taxation of various flavors and of a tax actually paid by the person employed.  So effectively it's a subsidized insurance program into which the person receiving assistance had paid into.  To say that it is money 'from Peter to Paul' (if you like that often-used glib) is false.

Fallacy #2: That we 'helping pay the unproductive people to stay unproductive'.
Reality #2: So you see 0 problem of massive levels of underemployment?  You've dodged that question and instead repeated your simplistic talking point.  That you could have (and do) people of very high skill working jobs far people their capacity due to this Great Recession or even just standard economic displacement?  That it's worse to help that person along to find similar level of productive capacity than to have them work at McDonalds?

Fallacy #3:  That being 'productive' is completely self-deterministic.
Reality #3:  Sorry, don't want to be a "collectivist" here and I'm aware that your rugged individuality is probably so great that you can not only pull yourself up by your boot-straps but pull them so hard that you take off into flight like a squatting version of Superman --- BUT, the reality is that we live in a society of complex specialization and cooperative enterprise with very complex systems over-layed one over the other; point 'being productive' is not a purely subjective, self-determined action.  There are many that would like to work in our existing economy yet there is no jobs for them and no demand for them to start their own business.  How is this explained by the world view that you expose of a simple "producers" and "leeches" paradigm?

Fallacy #4:  That taxation is "stealing"
Reality #4:  This is so juvenile a view that I perhaps will have to write a whole thread on it.

[niemivh]

Unemployment insurance I'm sure exists for vastly different reasons in your opinion than mine.

I'm not talking about unemployment insurance which doesn't last forever. The point is, if eventually the option is to not work and get nothing or work and get very little then some people might prefer to work and get very little rather than to do nothing and get nothing. Who are you to enforce your personal opinions on them?

Who are you to enforce destitution, under-employment and starvation on them?

You are basing your argument on the false belief that your view of the market is somehow pure or that the lack of a unemployment program is 'the market in its natural state' as opposed to my view which I'm sure you view as 'meddling' with the market which is tantamount to mortals trespassing in the affairs of gods.

The fallacy that you aren't seeing is that the entire construct of "The Market" to which you want to kneel and pray to is an artificial construction.  It is a legal fiction.  It is defined by a set of legal parameters and political decisions, it always has been, it always will be.

The quicker way to get to the bottom of this, since this is where your irrationality is stemming from, is for you to provide just 1 example of a "Free Market" in the world that has ever existed or does presently exists and to WHY you think it is a "Free Market".  Shortly thereafter we'll all be able to see that no such thing has ever existed nor is such a thing even definable.  It is like asking different people what the word "God" means to them, all they can offer is some illusory vague nondescript euphonic pleasantries rather than any constructed system exists or can exist.

[NghtRppr]

Who are you to enforce destitution, under-employment and starvation on them?

So if I have food and I don't give you any, I'm enforcing starvation on you?

The rest of your post is being ignored because it's based on a bunch of false assumptions. You don't know me so don't pretend to know why I favor markets.

[myrkul]

A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy. 

Oh, on this I agree. But I fail to see how stealing from productive people to help pay the unproductive people to stay unproductive accomplishes this goal.

Fallacy #1: That all the money for this program is coming from 'stealing from productive people'. 
Reality #1: The money collected for Employment Insurance Programs (EIPs) comes from a variety of places, some of which is from taxation of various flavors and of a tax actually paid by the person employed.  So effectively it's a subsidized insurance program into which the person receiving assistance had paid into.  To say that it is money 'from Peter to Paul' (if you like that often-used glib) is false.

Fallacy #2: That we 'helping pay the unproductive people to stay unproductive'.
Reality #2: So you see 0 problem of massive levels of underemployment?  You've dodged that question and instead repeated your simplistic talking point.  That you could have (and do) people of very high skill working jobs far people their capacity due to this Great Recession or even just standard economic displacement?  That it's worse to help that person along to find similar level of productive capacity than to have them work at McDonalds?

Fallacy #3:  That being 'productive' is completely self-deterministic.
Reality #3:  Sorry, don't want to be a "collectivist" here and I'm aware that your rugged individuality is probably so great that you can not only pull yourself up by your boot-straps but pull them so hard that you take off into flight like a squatting version of Superman --- BUT, the reality is that we live in a society of complex specialization and cooperative enterprise with very complex systems over-layed one over the other; point 'being productive' is not a purely subjective, self-determined action.  There are many that would like to work in our existing economy yet there is no jobs for them and no demand for them to start their own business.  How is this explained by the world view that you expose of a simple "producers" and "leeches" paradigm?

Fallacy #4:  That taxation is "stealing"
Reality #4:  This is so juvenile a view that I perhaps will have to write a whole thread on it.

1: I never said ALL the money was from tax. Thus the 'helping'
2: You seem to miss the underlying reasons WHY I have a degree in electronics and worked at Mcdonalds. (Yes, I, too suffered from the dreaded underemployment)
3: "Productive" = working. "Unproductive" = walking out to the mailbox for the monthly check.
4: Oh, please do. I shall greatly enjoy destroying your arguments.

[niemivh]

A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy.  

Oh, on this I agree. But I fail to see how stealing from productive people to help pay the unproductive people to stay unproductive accomplishes this goal.

Fallacy #1: That all the money for this program is coming from 'stealing from productive people'.  
Reality #1: The money collected for Employment Insurance Programs (EIPs) comes from a variety of places, some of which is from taxation of various flavors and of a tax actually paid by the person employed.  So effectively it's a subsidized insurance program into which the person receiving assistance had paid into.  To say that it is money 'from Peter to Paul' (if you like that often-used glib) is false.

Fallacy #2: That we 'helping pay the unproductive people to stay unproductive'.
Reality #2: So you see 0 problem of massive levels of underemployment?  You've dodged that question and instead repeated your simplistic talking point.  That you could have (and do) people of very high skill working jobs far people their capacity due to this Great Recession or even just standard economic displacement?  That it's worse to help that person along to find similar level of productive capacity than to have them work at McDonalds?

Fallacy #3:  That being 'productive' is completely self-deterministic.
Reality #3:  Sorry, don't want to be a "collectivist" here and I'm aware that your rugged individuality is probably so great that you can not only pull yourself up by your boot-straps but pull them so hard that you take off into flight like a squatting version of Superman --- BUT, the reality is that we live in a society of complex specialization and cooperative enterprise with very complex systems over-layed one over the other; point 'being productive' is not a purely subjective, self-determined action.  There are many that would like to work in our existing economy yet there is no jobs for them and no demand for them to start their own business.  How is this explained by the world view that you expose of a simple "producers" and "leeches" paradigm?

Fallacy #4:  That taxation is "stealing"
Reality #4:  This is so juvenile a view that I perhaps will have to write a whole thread on it.

1: I never said ALL the money was from tax. Thus the 'helping'
2: You seem to miss the underlying reasons WHY I have a degree in electronics and worked at Mcdonalds. (Yes, I, too suffered from the dreaded underemployment)
3: "Productive" = working. "Unproductive" = walking out to the mailbox for the monthly check.
4: Oh, please do. I shall greatly enjoy destroying your arguments.

You have yet to rebuff any thing that I posed, you're just repeating your simplistic nonsense.

You apparently don't admit that underemployment exists, but what you are alluding to in your 'rebuttal' is so vague i could interpret it in many ways.  Please write complete thoughts rather than fortune-cookie length blurbs that supposedly "destroy" me.

That goes for what you determine as productive and not.  Is everyone 'working' productive?  By your definition yes but I would argue otherwise.  Is everyone 'not working' not productive?

As patriotism is the last refuge of the scoundrel, brevity must be the first refuge of the ignoramus.  

Prove me wrong.

 

[niemivh]

Who are you to enforce destitution, under-employment and starvation on them?

So if I have food and I don't give you any, I'm enforcing starvation on you?

The rest of your post is being ignored because it's based on a bunch of false assumptions. You don't know me so don't pretend to know why I favor markets.

Then please tell me "why you favor markets".

I'm listening.

[niemivh]

With all due respect, I think you are very misguided on economics if you can't see the quality of Hazlitt's book. He manages to demonstrate in simple form, the most common economic fallacies that people believe in.

The book demonstrates how the problem of theories promoting economic interventionism is always one of not seeing beyond what is seen to what is unseen.

The naked class warfare of this book was so blatant

There is absolutely no promotion of class warfare in the book. It's a refutation of the class warfare that Marxism preaches.

Maybe just to get a litmus test here, do you believe that there is class warfare being waged from the side of the rich and super-rich against the rest of us?  Or that they are all like Ayn Rand wrote about and are all Howard Roark and Hank Rearden like figures?

[niemivh]

But to be fair, it is nowhere as bad as "Capitalism and Freedom" by Milton Friedman.

 


This information doesn't surprise me at all.  It just goes to show how willing people are to gobble up anything, no matter how far-fetched, illogical, ridiculous, or just flat out wrong, if it confirms their worldview.  Fox News has made a fortune operating on this principle.

I'm very interested in hearing criticism of Milton's book, if either of you wish to post a link, or simply point out any bad arguments or evidence. He strikes me as so logical that an illogical leap pointed out would change my opinion of him quite dramatically (assuming he refused to correct it).

Logic and reason are only marginally useful without facts.  You can't sit in a darkened room and rationalize how the natural world works and in the same mode you can't determine how economics work without actual evidence.  Milton and Hazlitt's books that I've read (and Hayek, to a lesser degree) follow the model of a person doing though-experiments to determine how the world actually is.  They don't seek out how it actually works it is just sophistry weaving a tale of A causes B causes C causes the collapse of society.  Many of the slippery slope and doomsday scenarios they setup are completely unobserved phenomenon.  As in, they have never observably happened in the ways or for the reasons that the author professes.

I'll write a longer thread on Milton Friedman's book later, but the paperback version that I bought had no bibliography at all!  Think of writing a research paper without any citations of facts.  Definitely fits the bill of a man writing in a world detached from the realm of facts or reality.

[niemivh]

The book can be found as free pdf at http://www.hacer.org/pdf/Hazlitt00.pdf

I'm looking forward to reading it as it is often used as reference for arguments I find unfounded. So either I'm going learn new stuff on economics or new straw mans on economics, in both cases it should be worthwhile reading.

I don't think this is the same book OP read. It can't be. Granted, I'm only about a third of the way through (finally decided to read it, so I could participate in this thread), But so far I haven't seen any "naked class warfare" or "polemical mouth-frothing vitriol". Maybe he accidentally picked up a copy of "Property is Theft"?

Is it your position that if the monied interests in the world wanted to influence the study of the system of production and political economy to which money is a primary focus (economics) then they would do it in completely open language and forthright bravado?

[niemivh]

If anything, I'm getting sick of his furious backpedaling at the end of every chapter. "Now, don't get me wrong, I'm not trying to say we don't need ANY tax/tarrifs/etc"

 

It's hard to convince a populace to economically slit their own throat in one little book like this.  It's more like boiling a frog, just a little bit at a time.

Look how far closer to the dream-world painted by Milton and Hazlitt in the past many decades from where we were when they wrote their books.  Are we better off as a people?  As a country?  Individually?

[myrkul]

You have yet to rebuff any thing that I posed to you just repeating your simplistic nonsense.

You apparently don't admit that underemployment exists, but what you are alluding to in your 'rebuttal' is so vague i could interpret it in many ways.  Please write complete thoughts rather than fortune-cookie length blurbs that supposedly "destroy" me.

That goes for what you determine as productive and not.  Is everyone 'working' productive?  By your definition yes but I would argue otherwise.  Is everyone 'not working' not productive?

As patriotism is the last refuge of the scoundrel, brevity must be the first refuge of the ignoramus. 

Prove me wrong.

 

Oh no, I freely admit underemployment exists... a careful reading will show you that I even admit to suffering from it. I think, however, that we disagree on the cause.

As for the working/not working productive/not productive: Trading hours for money - at any rate - to an employer or customer is being productive. You are providing them with a service, or they would not be paying you. Doing nothing - and getting paid for it - is not being productive, it is leaching off those who are.

[niemivh]

If you show a single quote where they misrepresent someone, or ignore obvious evidence, or commit a logical fallacy, then that's enough for me not to trust the rest of the Author's conclusions, a reason I dismissed both Rothbard and Rand for example. So you can make a very strong argument against the book by just focusing on a particular part which annoyed you.

I have one argument that I believe seriously hampers the main arguments in the book:

The author seems oblivious of consumption function (and improved models with similar content), which was first introduced by Keynes in his The General Theory at 1936. Simplified model of consumption function is shown here:

The x-axis is the persons income and f(x), the black line, is his consumption. The vertical difference x - f(x) is what person's accumulates. The point where the black and red line intersect is the so called brake-even point. Above that person accumulates money and below either spends his savings or has to take debt. The consuption function is in reality not linear but the slope is reduced when the income increases.

Important concept here is MPC, or marginal propensity to consume. If we give a person extra money, the ratio of it that will increase consumption is the so called MPC. The MPC is simply the slope of the consumption function. In the simplified model all income-classes would have same MPC. In reality, however, average poor people have higher MPC than average rich, as the slope is reduced with x. This leads us to very important conclusion: aggregate demand is not indifferent to transfer of wealth.

Many of the Hazlitts arguments are of form: When you take x from person A (by taxation, accident or other means) and give it for entity B to consume, the loss of consumption of A cancels the positive effects of consumption of B, and as consumption of B is inherently less effective as not being decided by the markets, the net effect is negative. This completely ignores MPC. Consider for example employing somebody with taxation. Somebody loses money in the process. If he has lower MPC than the one employed then aggregate demand will increase thus improving the employment rate in aggregate. In addition, if the job filled is improving circumstances for business (law-enforcement, infrastructure...) it is in effect investment improving prospects for economy. Also, the taxed money is used to increase domestic employment rather than foreign.

This argument does not clearly refute any of the arguments, but clearly shows the book is using straw-mans. There were few other smaller ones, but I'll post them maybe later to keep things bite-size.

The type of strawmen employed by Hazlitt are of the lowest order and so easily refutable for those of us that have the capacity to critically think.

Thanks for the post.

[niemivh]

Thanks Mittlyle for some meaty critique. I'll take a stab...

The author seems oblivious of consumption function (and improved models with similar content), which was first introduced by Keynes in his The General Theory at 1936.

And Keynes was likewise oblivious to economists he preceded. Such as the life cycle hypothesis or Friedman's permanent income hypothesis stating that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term income expectations. Transitory, short-term changes in income have little effect on consumer spending behavior. Consumption trends follow income, whether up or down.

Keynes rightly argues that the rich consume less personally than the poor. But the rich invest. Hazlitts argues that the investor is better equipped to evaluate efficient use of his own savings, both risk and gains, whereas the government through taxation takes from properly risk/gain calibrated investment to necessarily less efficient projects.

You can argue that some projects (law-enforcement, infrastructure...) have a benefit to all of society for which no single investor would see gains that compensate his risk. I don't recall Hazlitt denying this (I believe an earlier post referred to it as 'back peddling') but argued against subverting private investment to fund private debtors who could not otherwise receive favorable loans - ie subsidizing bad investment at the loss of good investment.

As science is now the main driver of the economy I disagree that 'the rich' as a block are better able to invest their money for the best societal returns.  The 'market' is a very poor allocator of capital to research programs, I'm not sure if there is anyone here that has drank so much Free Market Kool-Aid that they think otherwise but if so please explain why by typing it on your computer over the Internet so I can read it, even though the PC and the Internet are both examples of technology that wouldn't have existed without government research programs.

We know where the rich invest their money, where the highest monetary reward will be with the least risk.  Observably we've seen the rich take their money to Wall St hedge funds which turn around and speculate and use it for High Frequency Trading among other non-productive parasitical enterprises.

[niemivh]

You have yet to rebuff any thing that I posed to you just repeating your simplistic nonsense.

You apparently don't admit that underemployment exists, but what you are alluding to in your 'rebuttal' is so vague i could interpret it in many ways.  Please write complete thoughts rather than fortune-cookie length blurbs that supposedly "destroy" me.

That goes for what you determine as productive and not.  Is everyone 'working' productive?  By your definition yes but I would argue otherwise.  Is everyone 'not working' not productive?

As patriotism is the last refuge of the scoundrel, brevity must be the first refuge of the ignoramus. 

Prove me wrong.

 

Oh no, I freely admit underemployment exists... a careful reading will show you that I even admit to suffering from it. I think, however, that we disagree on the cause.

As for the working/not working productive/not productive: Trading hours for money - at any rate - to an employer or customer is being productive. You are providing them with a service, or they would not be paying you. Doing nothing - and getting paid for it - is not being productive, it is leaching off those who are.

We probably disagree on a lot less than you might think.  I am no liberal nor conservative, not left or right, both parties are ideologically bankrupt: the right are raving monetarist lunatics and the left are a pile of kittens with ecological fanatic beliefs and feel guilty for being human.  Both parties fall on a spectrum of how much corporate whoring they do, we truly have 1 party in varying degrees.

I'd like you to reconsider what you consider productive.  It is too simplistic.  As if getting paid were the ultimate end and that productivity can be ordained by an employeer of any stripe.  Digging holes and filling them up is not productive yet it is work.  Same with the Broken Window Theory to which Hazlitt deserves much credit in identifying.  Much of what is going on in the wild west of the deregulated market that we have, and who's profiteers would be calling the "free market" are provably anti-productive and parasitical.  Is research productive?  How about being a doctor?  Within the strict language, they are not, but we would both agree that they are useful; muddying what you profess about 'being productive'.

[myrkul]

I'd like you to reconsider what you consider productive.  It is too simplistic.  As if getting paid were the ultimate end and that productivity can be ordained by an employeer of any stripe.  Digging holes and filling them up is not productive yet it is work.  Same with the Broken Window Theory to which Hazlitt deserves much credit in identifying.  Much of what is going on in the wild west of the deregulated market that we have, and who's profiteers would be calling the "free market" are provably anti-productive and parasitical.  Is research productive?  How about being a doctor?  Within the strict language, they are not, but we would both agree that they are useful; muddying what you profess about 'being productive'.

What sane employer is going to hire people to dig holes and then fill them (assuming there isn't something else going in the holes, like wiring)? No, It takes a government to throw money away like that, simply to create employment. Research and doctoring, under my definition, both fit 'productive'

[niemivh]

I'd like you to reconsider what you consider productive.  It is too simplistic.  As if getting paid were the ultimate end and that productivity can be ordained by an employeer of any stripe.  Digging holes and filling them up is not productive yet it is work.  Same with the Broken Window Theory to which Hazlitt deserves much credit in identifying.  Much of what is going on in the wild west of the deregulated market that we have, and who's profiteers would be calling the "free market" are provably anti-productive and parasitical.  Is research productive?  How about being a doctor?  Within the strict language, they are not, but we would both agree that they are useful; muddying what you profess about 'being productive'.

What sane employer is going to hire people to dig holes and then fill them (assuming there isn't something else going in the holes, like wiring)? No, It takes a government to throw money away like that, simply to create employment. Research and doctoring, under my definition, both fit 'productive'

So anything where the costs are externalized wouldn't fit this bill?  Where a private business creates effective 'holes' that the public must fill and where the net benefit to the system as a whole is negative due to the cost externalization?

If you follow my Tobin Tax thread we've proven (at least it's yet to be refuted) that much of the trading going on is totally parasitical.  Is that productive?  How about mega leveraged banks gambling with derivatives?  Is that productive?

[myrkul]

So anything where the costs are externalized wouldn't fit this bill?  Where a private business creates effective 'holes' that the public must fill and where the net benefit to the system as a whole is negative due to the cost externalization?

Externalized costs often end up benefiting the customer, psychologically, at least - case in point: Self-checkout lines. I know I'd rather run my groceries across the scanner and bag them myself, than let the pimply-faced high-school kid toss my eggs into the bag, on top of the bread... but under the can of beans. The other, negative cost externalizations, say, polluting, get handed right back to the business in the form of damage claims.

As for the rest, I am not so conceited to believe I know the answer to everything, so rather than debate poorly, I will avoid that issue. Perhaps someone with better knowledge can answer you re: derivatives.

[niemivh]

The Next Chapter of Bankruptcy is a Short One:

Chapter V: Taxes Discourage Production

This chapter is like a small mud puddle.  It's trite and blurs the lines of everything he's talking about into a whirlwind of confusion.

He argues basically the quintessential argument of the modern day Republicans: that lowering taxes as a general rule promote 'jobs'.  Another often used term is "job killing taxes" as if all taxes were equal.

The argument that people will not start businesses because they have to pay corporate income taxes may sound reasonable at first blush but in practice is absurd.  Is there any entrepreneur that has a wonderful idea and that is able to convince venture capital and bank(s) to lend him money to start his firm going to simply not attempt to enact his vision because he'll have to pay a supposed 48% corporate tax on his earnings (using the author's numbers)?  That he would enact it if he could be worth 10 million but won't (in an Atlas Shrugged fashion of going on strike) because he'll only be able to make 5 million?  I agree that if this number was 90% or something close to that no company could even survive under that level of taxation and no reasonable policy maker would ever attempt to create policies that would result in national suicide by choking off the private market like that.

But the arguments posed by Hazlitt are presently being used by modern Republicans to justify that even 0% tax is too much.  Various Republican politicians when confronted with the fact that various mega-corps pay 0% tax, they say that they pay too much in taxes.  So 0% is too much, think about that.  When told that many mega-corps like Goldman Sachs, GE and many others pay no tax through loopholes and effectively get corporate welfare in the form of subsidies and tax refunds on taxes they didn't pay then does it set off any alarm bells in your head that maybe this whole argument was corrupt from the get go?  Nay, not 'corrupt' (for that is too simple) but just the self interest of a specific group (the rich and corporate interests) expressing their wants in a veiled means.  For those that argued that 48% was too high just as equally argued that 40% was too high, then 35% and onward and onward until they pay nothing - then further onward when we start to pay them.  Do you notice a pattern of who's interests Hazlitt supports in practice?

Why is it that Hazlitt alludes to a number in saying: "A certain amount of taxes is of course indispensable to carry on essential government functions." without ever specifiying a number or a rule that could determine what that number should be?

A few sentences later he says "But the larger the percentage of the national income taken by taxes the greater the deterrent to private production and employment."  There are numerous problems with this sentence but we'll focus on just one: presently many corporations pay 0% or near 0% corporate taxes.  Hazlitt argues in the previous sentence that there are "essential government functions" yet an increase from a 0% tax rate would be a "deterrent to private production".  While not directly contradictory these two things are at such odds with each other that any spread of taxation, or lack thereof, can be justified in any degree.  In addition they are at odds with theories he later advocates in the book regarding saving.  What is an essential government function?  How do you validate that a company was going to use that money for 'production' and not golden parachutes for the CEO and upper management?  This is vague on purpose, like a bible verse that can be used to justify anything, this and other similar arguments have been used to reduce corporate taxes down to nothing.

Nobody can argue that we aren't much further down the road of less taxes on the rich and corporate powers than when he wrote this yet nobody can argue that the power that the rich and corporations have used with this additional money is to buy up our political system at the expense of the rest of us.  By this same token the middle class are much poorer as these policies have moved forward.

He then steps into briefly talking about personal income taxes on the higher income level folks.  I'm not the hugest fan of income taxes at present, I think that they are a method by which unscrupulous politicians basically buy patronage from the voters with their own money, and an elimination of them (at the lower end) would perhaps cause a more nuanced discussion of what creates prosperity rather than the mouth-breathing moronic level of discourse that we currently have where voters will follow a President off a cliff if only he lowers their income taxes.  Yet I can see the lack of justification that Hazlitt has for removing them and the benefit to society when they are applied in a progressive fashion.  That is presently not what we have at all in our system, and if they were re-implemented as originally intended with the middle class paying very little or nothing and it starting to go up at the upper-middle class levels then it would radically change the discussion in the country.

***CASE IN POINT***
http://www.youtube.com/watch?v=zeN0JRFGPD0&feature=related

Such as this poor wretch at a Tea Party convention, who thinks that even though she works 70 hours a week that her primary problem is 'government spending' and 'I pay enough taxes already'.  Sorry maam, but first of all your primary problem is that you work 70 hours a week.  The second problem you have no idea why you work 70 hours a week just to make ends meet, you are just repeating things you heard Glen Beck say.  Lastly, the fact that you work 70 hours a week is not come sort of credential for being an expert in economic policy just as being a janitor for decades at Intel doesn't make you qualified to be the CEO and just like being a solder in the trenches for X number of years doesn't automatically qualify for being a General.
***CASE IN POINT OVER***

The reasons that a highly progressive income tax isn't 'bad' much less 'bad for investment':
1)  The allocator of resources in a company (capital investment, money, labor) is primarily the CEO. If the CEO wanted to try to convince the board to put himself into a higher tax bracket (since he effectively has a liberal degree of opportunity to assign his own wages) that would make him pay 90% of it in income taxes the board would have little incentive to let him; in addition to the fact that the company is presently able to write that off as an expense with no upper cap.  So this is a multi-causal problem to which having a very high progressive income tax can do much in stopping.  The other is capping or eliminating the ability for the corporation to write off the entire pay of the CEO.  So what happens to that extra money that would have gone into the pockets of the CEO and upper management if prevented by tax policy?  Well, if we look at history that money was reinvested into the company and rose everyone's standard of living as a function of economic growth.  Economic growth is much higher for everyone if there is the maximum amount of reinvestment, this is what the very high progressive income tax promotes.

2)  Assume the CEO got the money in the above scenario (since we live in a world now that has very low income tax rates (on the high end), the ability for the company to write off the 'salary' of the CEO in addition to massive loopholes and tax avoidance).  Now what does he do with it?  Does he start a new startup company?  Not likely at all, after working for a company enough to get a CEO position why start over as a 'small timer' again?  Why do anything but perform your tenure at the company you're CEO at and then retire?  Life is too short to not enjoy a hefty retirement with millions in the bank.  Ok, does he invest it all as an angel investor?  Not likely again.  Most start-ups are bank funded or are only willing to deal with private investors in a very limited degree as they don't want to be owned completely just for the function of being able to borrow money, most would certainly rather go public than turn to 'angel' investors.  Entrepreneurs start businesses; people that make a bunch of money in the stock market don't, people that are existing CEO's don't, people that come from dynastic families of great wealth don't, at least they don't in any greater observable proportion than the general populace - or in any statistics that I've ever seen.  If you want evidence of this please look at Fortune 500 CEOs and what their background was, if this 'theory' that the rich create jobs and by extension taxing the rich is a destroyer of jobs was correct you'd at least expect to see a larger proportional amount of the previously rich in these roles.  For those of you who are unaware: the point of being rich is that you no longer have to work; and there are very few that could honestly say that they would continue to do the hard work it takes to be a CEO when they could otherwise be living in the lap of luxury.  So what becomes of the extra money the CEO was able to pay himself due to a lower tax rate on high earners?  Well, money is actually quite easy to predict where it'll go: to the place with the highest profits and least risk.  He'll likely turn his money over to a hedge fund, investment firm or bank that will use his deposits to determine how much debt can be issued (notice that they aren't actually investing his money, rather it is collateral and a limitation against the newly issued debt).  Here we begin an interesting point of argumentation, but I think I've shown that there isn't a disagreement that 'trickle down' economics (to which this really is) has worked.  In summation: A.) People with ideas start businesses not those with incredible sums of money.   B.) Newly founded businesses typically borrow from banks and are self financed by-in-large over the private investor to which lower income taxes benefit.

3)  The upper income earners spend very little of their income in comparison to the lower and middle classes spend.  This is Keynes and was cited earlier in the thread.  So having a massive concentration of wealth in the system is effectively removing a large portion of that money from the economy of buying and selling goods and consumption.  This is a weaker argument than the previous two, I'm not that big of a fan of it, so I expound on it unless someone else wants me to further discuss it.

I've wrote 4 pages on dissecting a chapter that is literally 2 pages long so while there is much more I could say on the topic I'll leave it at this for now.