The fallacy of contemporary economic thought is, according to Hazlitt, essentially an inability (or refusal) to ‘see the forest for the trees,’ complicated further by the special pleading of interest groups (15). This tendency to only view the short term effects or the impact on a particular group, to the neglect of studying the long-term effects, Hazlitt dubs the “fallacy of overlooking secondary consequences (15-16).”
The Lesson then, is this:
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 (17).
In one sense, this is a perfectly obvious and common-sense statement, truisms and cliches for which abound. And as far as the truism aspect of the statement goes, I’m wholly on board. Nobody should be willfully short-sighted. That is foolishness.
In addition, Mr. Hazlitt properly qualifies the statement of this lesson, guarding against the mirror-image fallacy (though I think he improperly downplays it’s significance in popular “conservative” thought):
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 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 (17).
Mostly to the good thus far. The concerns I have at this point are not with the principles explicitly stated in “The Lesson”: Rather, I am troubled by some of Mr. Hazlitt’s presuppositions which are implied in the way he frames his exposition of this lesson. Both of my current concerns stem from what I see as assumptions that reveal the “tradition” out of which Hazlitt is operating.
My first concern is more vague, and may be nothing more than a semantic quibble (though I doubt it, in light of his statement of purpose in the preface): Mr. Hazlitt seems to presuppose that economics is primarily a question of governmental “policy”; whether that policy be comprehensive rational organization enforced from the top down (socialism) or some kind of Lockean protection of “rights” such that “natural laws” may proceed upon their merry way unimpeded (or a combination thereof). We will have to see how this plays out in Hazlitt’s critiques of so-called “fallacies” in later chapters, but I expect that his views of the relationship between economics, government, and right behavior will bring us into conflict at some point.
My second (though related) concern is highlighted as Hazlitt waxes eloquent on the errors of the “new” economists:
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 seventeenth-century mercantilism. They fall, in fact, into all the ancient errors…that the classical economists, we had hoped, had once and for all got rid of [emphasis mine] (18).
Such a sweeping chronological snobbery is revelatory of a significant blind-spot in Mr. Hazlitt’s thinking: “Orthodoxy” is defined by your god. And anyone who has studied the Enlightenment should be just a little uneasy with this statement, however it works out in subsequent chapters.
Henry Hazlitt, Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics, (New York: Three River’s Press, 1979).