Economcis in One Lesson

Economics in One Lesson is a book that talks about all the aspects that relate to how the economy changes and how this affects in all of its aspects. The first part of the book talks about how people fail to see the long-term effects of what is happening in the economy. People want quick answers that will only focus on the short-term effects. This causes many misconceptions and result in negative consequences to private and public sector economies. People tend to focus on the negative that long-term changes will prevail and want to focus on the fast, and easier solutions that the short-term benefits provide. The main purpose of this book is to inform the readers that in the long run, this will be worse than if there is a plan that will give long-term benefits, even though it will take longer time. Hazlitt explains in his arguments using examples of these misconceptions that most people are led to believe causing them to conform with these short term reforms that cause more harm than not to the economy. Hazlitt points out many faults in the economy. There are many influences to such, and causes for its change. The government and taxation, technological advancements, employment, pricing, wages, and inflation are just a few topics that are broken down. Each chapter talks about a different subject and gives an argument talking about the misconception and the actual economic theory behind it, using common examples.
Hazlitt mentions are about the government’s failure of informing the people correctly about these issues and acting to the benefit of those not qualified to manage loans at the expense of the taxpayer’s money. This has been an issue reflected since the economy crash in 2008, and an issue that was very present during the 2012 elections. Thousands of people are in debt and so is the US because of these loans, causing unemployment, low wages. These issues are talked about later in the book, but we can see how they are all related to each other, and how a “domino effect” exists when it comes to economics. In my opinion, I think that Hazlitt does a very good job proving his point. Most of the examples that he refers to are very simple and easy to understand. One of the first chapters makes a comparison with a broken window at a shop. Breaking down complicated economic theories into simple and every-day examples helps people who are not aware of the technical concepts to understand what he is trying to say. Examples such as these are easily and more efficiently remembered by people and can be applied to their lives. Another good thing that the author does very well is the putting points into both perspectives. He gives the argument that is thought by many people, which is a misconception, and he will turn it around to another point of view and proving it wrong. For example, he talks about how people think that technological advancements cause unemployment because machines replace the work that people do. He then compares employment and productivity. He says that technology makes everything more efficient by increasing productivity and work hours, and how some people that are fully employed are not reaching their productivity maximum, and this causes set backs for the contribution in the economy. Hazlitt does a very good job putting his arguments in paper and having this book not only be an easy read, but educational with concepts that will remain in the reader’s mind.

Section 2 – My favorite chapter of this book is chapter 4: Public Work Means Taxes. I have found this chapter to help me explain many arguments that I have previously thought about. I also find this chapter very relevant to every-day situations in which taxpayers find themselves, and we hear about these issues all the time. The issue on taxation has been one of the most popular topics that people comment on President Obama’s government. We have seen taxes imposed on almost everything, and for being higher than ever, the question goes whether the government is using the tax money appropriately.
Hazlitt says that, “every dollar of government spending must be raised through a dollar of taxation.” We all understand that there is necessary spending in the government. Public works and services, such as police departments, the building and repairing of roads and bridges, and the maintaining of cities, are few examples. These kids of works are essential to maintain a country running properly. The problem comes when the government does not understand the difference between what must be done and what can be done. Government has lately had the tendency to create jobs such as the building of bridges or roads not because they are needed, but because it will create employment. People fail to see the tremendous problem that this has been causing to the economy. The building of this work will cause temporary employment to the construction workers, but it is taking wealth away from the taxpayers who would rather use that money to spend on their essential needs. The lack of purchasing these needs have caused lower production because of lower demand. These construction workers could have been employed at another company where their labor hours would have been put to use for something that was needed, versus something that was wanted.
Another example of common misconceptions is public housing, better known as “The Projects.” The government puts out two benefits for such works: 1. It creates employment, and 2. Wealth would otherwise not be produced. Hazlitt claims these two to be false. Whatever amount of jobs that public works such as these creates, it removes jobs from private sectors, therefore reduces production in companies as well. The building of private homes would come from taxpayers with higher income who do not benefit at all form the construction of the public housing.
I can relate to this issue because many people are concerned about the fact that the government is shifting form a capitalist point of view and feeding people with socialist ideas. I think about my education, and all of the time, effort, and money that not only me, but also my parents, are putting into it. Is it my obligation to work long hours, and invest on my education to get the best job I can, and receive the best income I can, so that I pay for people’s laziness and unwillingness? I can say that many of my friends and classmates feel the same way. Discussing it with a few, we concluded that we view the social ladder as form of competition. We see this as the animals in the wild life. They must all compete with each other for survival, and work every day in order to survive. People who don’t wish to succeed in life should not be given “free rides,” and the government should not oblige higher income people to pay for them.

Section 3 – For this section I have chosen chapter ten: The Fetish of Full Employment. Hazlitt opens the chapter with “The economic goal of any nation, as of any individual, is to get the greatest results with the least effort.” He argues that employment should not be considered as the means to an end (production), but an end in itself. He compares how tribes have full employment, and how previous governments have achieved full employment. An issue of simple math can be applied to this topic. For example, pretend 200 work hours are needed to complete a task in one week. If a workweek per individual consists of 40 hours, then the company would need to hire 5 employees. If 8 employees need to be hired in order to reach full employment, then the workweek would be reduced from 40 hours to 25 hours per individual. Lets suppose that there is a $10/hour wage rate. If we follow this example, similar to Hazlitt’s, would the employees pay be reduced from $400 per week to $250? In order to avoid inflation, measures as such should be taken into consideration.
Going back to the comparison to previous governments that have achieved full employment, I am left to assume that these other forms of government wanted to provide everyone with a job, disregarding their actual need in the field. If I have not failed to understand his argument, I think that this is slightly contradictory to other previous statements. The taxpayer’s dollars would be used to pay for such, while full production is not being achieved, and this money is spent on wages rather than products. Later on the chapter he refers back to the inefficiency that full employment would produce, leaving it only as a means to the end that is maximum production.
We can apply the opening line to a production company. The company would like to create the best product possible for the lower cost. This chapter makes a note to 1950. I immediately realized that Hazlitt did not experience the job outsourcing that we have come to since the 90’s when manufacturing in China started to become more popular. The reason for taking jobs to foreign countries is that: greatest result with least effort (cost). Then again, the reducing of production in the country and the need to increase employment has left people with lower wages, suffering from inflation and money deficits.

Section 4 – After reading this book I can definitely say that the debates for the 2012 Elections make much more sense. The main issues covered in these debates was mostly relating to the aftermath of the economic crisis that we have been dealing since 2008 that President Obama took office. The people’s main concern consists of when will the country reduce their debts, and so will the people. Taxes and employment are the two main topics discussed in the debates. After reading what Hazlitt’s arguments to these issues, I feel I can give a more educated opinion on the topics. President Obama and Senator Romney talked about “creating jobs.” In section 2 and 3, I discussed the issue of creating unnecessary jobs on the taxpayer’s money. I agree with Hazlitt, and say that the jobs created should not be to build more things that are not necessary. They should be jobs in manufacturing and production companies. They should regulate imports, and focus on exports. They should limit how much product is brought in form China, or form India, or from other third world countries where labor is cheaper. Even though this would reduce costs of production, it also takes away money form the US and sends it to the other side of the world. The products produced are then not only purchased by Americans themselves, but can be exported to other countries and bring money into the country instead of taking it out.
I understand that it is not as simple. The impatience and desperation of the US citizens suffering from the crisis have clouded their judgment. Voters were told what they wanted to hear, and as usual, were led to believe something that will not bring what is being promised. Political leaders should not manipulate and influence voters into believing what they preach; political leaders should inspire voters to educate themselves on the matter and issues being addressed and work progressively towards rebuilding the economy. People fail to see the big picture and as Hazlitt repeats throughout the book, only focus on the immediate effects, and eventually blame a political leader for their ignorance and failure at understanding the issues thoroughly.