Hazlitt's One Lesson

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Nine-tenths of the economic fallacies that are working such dreadful harm in the world today are the result of ignoring this lesson. Those fallacies all stem from one of two central fallacies, or both: that of looking only at the immediate consequences of an act or proposal, and that of looking at the consequences only for a particular group to the neglect of other groups.

It is true, of course, that the opposite error is possible. In considering a policy we ought not to concentrate only on its long-run results to the community as a whole. This is the error often made by the classical economists. It resulted in a certain callousness toward the fate of groups that were immediately hurt by policies or developments which proved to be beneficial on net balance and in the long run.

But comparatively few people today make this error; and those few consist mainly of professional economists. The most frequent fallacy by far today, the fallacy that emerges again and again in nearly every conversation that touches on economic affairs, the error of a thousand political speeches, the central sophism of the "new" economics, is to concentrate on the short-run effects of policies on special groups and to ignore or belittle the long-run effects on the community as a whole.

The "new" economists flatter themselves that this is a great, almost a revolutionary advance over the methods of the "classical" or "orthodox" economists, because the former take into consideration short-run effects which the latter often ignored. But in themselves ignoring or slighting the long-run effects, they are making the far more serious error. They overlook the woods in their precise and minute examination of particular trees. Their methods and conclusions are often profoundly reactionary. They are sometimes surprised to find themselves in accord with 17th-century mercantilism. They fall, in fact, into all the ancient errors (or would, if they were not so inconsistent) that the classical economists, we had hoped, had once for all got rid of.

It is often sadly remarked that the bad economists present their errors to the public better than the good economists present their truths. It is often complained that demagogues can be more plausible in putting forward economic nonsense from the platform than the honest men who try to show what is wrong with it. But the basic reason for this ought not to be mysterious. The reason is that the demagogues and bad economists are presenting half-truths. They are speaking only of the immediate effect of a proposed policy or its effect upon a single group. As far as they go they may often be right. In these cases the answer consists in showing that the proposed policy would also have longer and less desirable effects, or that it could benefit one group only at the expense of all other groups. The answer consists in supplementing and correcting the half-truth with the other half. But to consider all the chief effects of a proposed course on everybody often requires a long, complicated, and dull chain of reasoning. Most of the audience finds this chain of reasoning difficult to follow and soon becomes bored and inattentive. The bad economists rationalize this intellectual debility and laziness by assuring the audience that it need not even attempt to follow the reasoning or judge it on its merits because it is only "classicism" or "laissez faire" or "capitalist apologetics" or whatever other term of abuse may happen to strike them as effective.

The White Man's Burden

by Rudyard Kipling.

Like it or not, you should know it.

Take up the White man's burden --
Send forth the best ye breed --
Go bind your sons to exile
To serve your captives' need;
To wait in heavy harness
On fluttered folk and wild --
Your new-caught, sullen peoples,
Half devil and half child.

Take up the White Man's burden --
In patience to abide,
To veil the threat of terror
And check the show of pride;
By open speech and simple,
An hundred times mad plain.
To seek another's profit,
And work another's gain.

Take up the White Man's burden --
The savage wars of peace --
Fill full the mouth of Famine
And bid the sickness cease;
And when your goal is nearest
The end for others sought,
Watch Sloth and heathen Folly
Bring all your hope to nought.

Take up the White Man's burden --
No tawdry rule of kings,
But toil of serf and sweeper --
The tale of common things.
The ports ye shall not enter,
The roads ye shall not tread,
Go make them with your living,
And mark them with your dead!

Take up the White man's burden --
And reap his old reward:
The blame of those ye better,
The hate of those ye guard --
The cry of hosts ye humour
(Ah, slowly!) toward the light: --
"Why brought ye us from bondage,
"Our loved Egyptian night?"

Take up the White Man's burden --
Ye dare not stoop to less --
Nor call too loud on freedom
To cloak your weariness;
By all ye cry or whisper,
By all ye leave or do,
The silent, sullen peoples
Shall weigh your Gods and you.

Take up the White Man's burden --
Have done with childish days --
The lightly proffered laurel,
The easy, ungrudged praise.
Comes now, to search your manhood
Through all the thankless years,
Cold-edged with dear-bought wisdom,
The judgment of your peers!

Seems to me that, as Kipling presents the matter here, the value gained is insufficient to justify the price paid.

Not to mention the assumption that White Men should be doing these things.

This fellow has other thoughts on the matter.

Name That Tune!

A work in progress:

Physiocrats are posers as libertar-EE-ans
Objectivists hate us 'cuz we let in cretins
Conservatives hate us too for the same thing
Liberals think we're all of the Right Wing

Once you get the hang of it, feel free to try to lend a hand.

Time Will Run Back, a couple excerpts

"But I'm still bothered, chief, and I'm sure most people are still bothered, by the huge profits made by a few enterprisers. Surely such huge profits aren't necessary in order to get them to produce the right goods!"

"Your trouble, Adams, and the trouble of these people you speak of, is that you and they still persist in looking only at the winners of the biggest prizes. You assume these to be typical; you forget about the offsetting losses of the losers. Let's look at a lottery. Let's say that the man who runs the lottery sells 1,000,000 goldgrams worth of tickets, and hands out 900,000 goldgrams in prizes, keeping 100,000 goldgrams for himself."

"Very reasonable of him," said Adams sarcastically.

"I'm not interested in him for the moment," continued Peter. "I'm talking about the subscribers to the lottery. Collectively they must lose money."

"Collectively they lose 100,000 goldgrams."

"Right, Adams. But each individual who subscribes dismisses this collective result from his mind, if it ever occurs to him. He subscribes precisely because he hopes that he, individually, will be a winner. He is not interested in the fate of the other subscribers. Now if the people outside of the lottery looked only at the winners of the huge prizes and thought these were typical, and forgot about the huge mass of losers, and if they began to talk as if these winnings were made at their - the outsiders' - expense, they would be talking the same way you are talking about profits under our new free enterprise system."

"But aren't these big profits, chief, at the expense of workers?"

"You will usually find, Adams, that the enterprisers who make the biggest profits pay the highest wages. If the profits of the successful enterprisers are at the 'expense' of anybody, I should say that they were mainly at the expense of the unsuccessful enterprisers who made the poor guesses and misdirected labor and capital....And why should you assume that the high profits of the successful enterprisers are any more at the expense of their own workers than at the expense of the owners of their borrowed capital, or of the consumers?"

Adams seemed lost in thought.

...
These two quotes come from different conversations. I felt the need to mention that. BTW, Adams is uncomfortable with calling Peter Uldanov, dictator of Wonworld, by his first name, as but he feels comfortable with "chief." Once you've read the book, you can point out how the previous sentence is inaccurate, but then you'll also know why. Shh.

"...Then it wouldn't be very accurate, chief, to call your new system a 'profit' system?"

"Certainly not in a declining or even in a stationary economy. It is of course, a profit-seeking system. But then I suppose there is a sense in which all of us are seeking 'profit' under any conceivable system. We speak. We speak of spending a 'profitable' evening when we mean merely that we have enjoyed ourselves. We say that reading a book has been 'profitable' when we mean that we have been instructed by it. 'Profitable' action of any sort is merely action that achieves, or partly achieves, the end we are seeking, regardless of whether that end is self-regarding or not.... I can't understand this unpopularity of 'profit' except as envy of the successful. Why should there be any more stigma attached to the word 'profit' than to the word 'wage' or salary'? Why should one form of income be considered less honorable than another? Why should the people who are afraid to take risks begrudge the rewards of those who have taken them successfully?"
...

I mentioned that you can download the book for free from Mises.org, and that I'd tell you how to buy a copy after the excerpts. Actually, I forgot that I can make the title into a link on this blog, so that's what I've done.

I don't suppose the boys would mind if I posted the blurb from the Mises Print on Demand Store:

A novel by Henry Hazlitt, first published in 1951 and revised in 1966. The plot line explores the economic theories of capitalism and socialism. It begins in a fully socialist society in which the new leader begins to rethink the economic basis of the system. Slowly, piece by piece, he dismantles central planning and replaces it with a market system. All the while, the characters engaged in a Socratic-style discussion about the implications of money, exchange, ownership, markets, entrepreneurship, and more. Hazlitt was well equipped to be a fiction writer. He was literary editor of The Nation for 3 years and the successor to H.L. Mencken at the American Mercury. This novel is an excellent introduction to the problems of economic systems, and can be a great benefit to young people who are curious about the meaning of economic analysis. It is, in fact, suitable for all ages.

There was one other bit that I thought was awesome. Let's see if I can find it...

Oh, here! From page 290-1 of the pdf:

"Precisely, Adams. We must absolutely forbid coercive monopoly. Perhaps that was the central evil of state socialism. The state's monopoly of power, and its monopoly of production. But we must do more than fight monopoly and encourage competition. We must draft our laws in such a way as to raise the level of competition. We must so draft them that a man who seeks his personal profit cannot attain that selfish goal except by promoting the public welfare."

"And how are we going to do that?"

"We must forbid him, Adams, to do anything that injures the public welfare. Therefore we must forbid theft, fraud, deceit and all misrepresentation of goods. We must illegalize every form of force violence, extortion, intimidation, coercion. We must compel men to keep their contractual promises, to pay their just obligations and to fulfill their contracts. The corollary to private property is private responsibility. We must not allow a private industry to thrive at the cost of killing or maiming its workers, or injuring consumers of its products, or menacing the public health, or polluting public streams, or polluting the air, or smudging whole communities with the residue of smoke. We must force every industry to pay the costs of the injury it inflicts on the person or property of others."

That's actually the earliest of the excerpts. Perhaps it would be better salesmanship on my part to place that one first. But I'm just too lazy.

Philistine Philosophy from Hans-Hermann Hoppe

Actually, it's bourgeois philosophy, but I like the aliteration. Sorry I let this blog sit so long. This is from Hoppe's introduction to Murray Rothbard's The Ethics of Liberty (which is also available online here):

Rothbard sought and found support for his contention regarding the possibility of a rational ethic and the reintegration of ethics and economics based on the notion of private property in the works of the late Scholastics and, in their footsteps, such "modern" natural-rights theorists as Grotius, Pufendorf, and Locke. Building upon their work, in The Ethics of Liberty Rothbard gives the following answer to the question of what I am justified doing here and now: every person owns his own physical body as well as all nature-given goods which he puts to use with the help of his body before anyone else does; this ownership implies his right to employ these resources as one sees fit so long as one does not thereby uninvitedly change the physical integrity of another's property or delimit another's control over it without his consent. In particular, once a good has been first appropriated or homesteaded by "mixing one's labor" with it (Locke's phrase), then ownership of it can only be acquired by means of a voluntary (contractual) transfer of its property title from a previous to a later owner. These rights are absolute. Any infringement on them is subject to lawful prosecution by the victim of this infringement or his agent, and is actionable in accordance with the principles of strict liability and the proportionality of punishment.

It's much later, but if I add this things will be clearer:

Inspired in particular by the nineteenth-century American anarchist political theorists Lysander Spooner and Benjamin Tucker and the Belgian economist Gustave de Molinari, from the outset Rothbard's anarchism took it for granted that there will always be murderers, thieves, thugs, con artists, etc., and that life in society would be impossible if they were not punished by physical force. As a reflection of this fundamental realism — anti-utopianism — of his private-property anarchism, Rothbard, unlike most contemporary political philosophers, accorded central importance to the subject of punishment. For him, private property and the right to physical defense were inseparable. No one can be said to be the owner of something if he is not permitted to defend his property by physical violence against invaders and invasions. "Would," Rothbard asked, "somebody be allowed to 'take the law into his own hands'? Would the victim, or a friend of the victim, be allowed to exact justice personally on the criminal?" and he answered, "of course, Yes, since all rights of punishment derive from the victim's right of self-defense" (p. 90). Hence, the question is not whether or not evil and aggression exist, but how to deal with its existence justly and efficiently, and it is only in the answer to this question that Rothbard reaches conclusions which qualify him as an anarchist.

The classical liberal answer, from the American Declaration of Independence to Mises, was to assign the indispensable task of protecting life, liberty, and property to government as its sole function. Rothbard rejected this conclusion as a non sequitur (if government was defined by its power to tax and ultimate decision-making [territorial monopoly of jurisdiction]). Private-property ownership, as the result of acts of original appropriation, production, or exchange from prior to later owner, implies the owner's right to exclusive jurisdiction regarding his property. In fact, it is the very purpose of private property to establish physically separate domains of exclusive jurisdiction (so as to avoid possible conflicts concerning the use of scarce resources). No private-property owner can possibly surrender his right to ultimate jurisdiction over and physical defense of his property to someone else — unless he sold or otherwise transferred his property (in which case someone else would have exclusive jurisdiction over it).

There have been some things missing from the Classical Liberal answers I've been studying. This book promises to provide them.

But I think I'll have to stop quoting from Mr. Hoppe's brilliant summation, lest I tread upon his copyright. The link is the title bar.

I urge you to read it.