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Thursday, October 13, 2016

Why Does Mike Rowe Love This Economics Book?

Hazlitt's text is about the real world


They say that authors are not the best judges of their greatest work. Only the wisdom of time can determine that. This seems especially true of Henry Hazlitt. Seventy years after he wrote Economics in One Lesson, the book is still going strong. Most recently, it was recommended by Mike Rowe:

Spend a few hours every week studying American history, human nature, and economic theory. Start with “Economics in One Lesson.” Then try Keynes. Then Hayek. Then Marx. Then Hegel. Develop a worldview that you can articulate as well as defend. Test your theory with people who disagree with you. Debate. Argue. Adjust your philosophy as necessary. Then, when the next election comes around, cast a vote for the candidate whose worldview seems most in line with your own.

Or, don’t. None of the freedoms spelled out in our Constitution were put there so people could cast uninformed ballots out of some misplaced sense of civic duty brought on by a celebrity guilt-trip. The right to assemble, to protest, to speak freely – these rights were included to help assure that the best ideas and the best candidates would emerge from the most transparent process possible.

Just last week, I heard Mike speak. He loves the real world – and I can understand his conviction of the sheer fakeness of the world imagined by politicians. Hazlitt shared that same view, and this comes through in the text.

This brings to mind one of the special moments in my life. Before his death in 1993, I sat in the back of a limousine on the way to dinner with Henry Hazlitt and discussed the book. I asked him if he felt pride that his book was still a best seller. He said that he did not, since he didn’t think it was very good. A book he felt genuinely proud of was Foundations of Morality – probably one of his least known works.

Pushed Out by the New York Times

Before starting his next job, Hazlitt decided to take a few weeks to write a primer on basic economics. His attitude is understandable when you consider the context in which Lesson was written. For twelve years, he had been writing daily editorials, mostly unsigned, for the New York Times. He was also writing book reviews under his own name for the Sunday paper. He was aware of the ideological conflicts at the paper. There were many partisans for the New Deal. He was not among them. But his status was protected there because of the desire for diversity of opinion.

But as the war was ending, the paper had to make a choice. Powerful elites had gathered to cobble together a post-war planning apparatus that included a world bank and a new system of monetary management. It was the new dollar standard – one not entirely divorced from gold, but the US dollar would be the only currency tied to gold. The rest of the developed world would tie their currencies to the dollar.

Hazlitt knew that it couldn’t work. The US was not in a position to determine the fiscal policies of other nations. They would not feel the discipline that gold would impose and would be incentivized to spend freely without facing downward currency pressure. This would ultimately cause gold outflows from the US as the demand for gold would rise, even as its dollar price was fixed. This would prompt unsustainable gold outflows. The imbalances would cry out for correction and the whole system would collapse.

Fired (Sort of)

Hazlitt explained this day after day. But as time went on, it became ever more clear that the Bretton Woods system was a foregone conclusion. The paper would have to adjust. The editor brought Hazlitt in and told him to stop editorializing against it. Hazlitt complied but also began to tidy his desk to prepare his resignation. He left in 1946.

His next job was writing for Newsweek, while also helping Leonard Read get the newly formed Foundation for Economic Education going. He had also become good friends with Ludwig von Mises, and eagerly anticipated serving as his literary champion.

It is doing for us in 2016 what it did for people in 1946: teaching the fundamental truths.But before starting his new job, Hazlitt decided to take a few weeks to write a primer on basic economics. After all, it was what the world needed now. He wrote it in a white heat, putting on paper all the apparatus he carried in his head. He avoided hard theory but jumped straight to the large lesson: economics is about the effects of policies on all groups over the long run, not isolated groups in the short run. He applied it as broadly as possible to all existing political and economic controversies.

Why does a book become a wild best seller? The title. The timing. The clarity of content. The benefit it provides to the reader. There are many reasons, and, for whatever reason, it all came together for Hazlitt in this one book. It would secure his reputation. To his private dismay, it would be the text that would define his legacy.

Since Rowe recommended it, has been blowing up with hits and downloads of the book. Good. It is doing for us in 2016 what it did for people in 1946: teaching the fundamental truths. And given the way things are going in this election, which has provided frequent occasions for  head-slapping for many months now, it is once again serving its intended purpose.

Economics must be taught anew in every generation. Hazlitt continues to be the world’s teacher.

Bretton Woods is long dead. But this book lives on.