Sunday, September 13, 2009

Economics in One Lesson

Economics is one of those topics on which I've intended to get better educated for some time now. The events since the latter half of '08 have definitely bumped that intention up several notches in my list of priorities. The first problem I really had to tackle was figuring out where to start, which is to say, deciding exactly what and whom I should be reading. I knew just enough to determine that pretty much anything from a Keynesian perspective—which, with differences that are in the final analysis inconsequential, has represented the mainstream positions of both the political right and left for the last several generations—was out. Also out was any nonsense coming out of the far left, i.e. socialism or fascism, unfortunately including a number of Christian writers who have adopted these positions and labored to make them somehow compatible with their Faith.

Eventually I found out about the Austrian School Economists, generally liked what I was hearing from that perspective (with important qualifications noted below) and decided to dive in by first tackling Henry Hazlitt's (1894-1993) well lauded primer Economics in One Lesson. Turns out that it was a great choice. Who would have ever thought that a book on economics could be a page turner on par with an Agatha Christie novel? Far from seeming stale or out of date (the volume was first published in 1946 and last updated by the author in 1979), the material is immanently relevant given our current state of affairs, and delightfully readable to boot. I started off underlining what I thought were key sentences from the Prologue and Chapter One, and then gave up when I realized that the whole thing needed underlining! (Just read the first two-and-a-half pages from Chapter One on Amazon and you will see what I'm talking about.)

Hazlitt's thesis statement, for which the book as a whole is simply a cyclical reiteration is as follows:

…the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. 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.(p17)

In each chapter of the book, Hazlitt re-illustrates this fundamental principle by applying it to matters such as government subsidies, government attempts at manipulating supply and demand via price fixing, controls on imports and exports (including tariffs), rent controls, minimum wage laws, inflation, and a number of other all too familiar phenomena.

To sum up, I really enjoyed and profited from this book, and plan to read further on this topic from other writers of the Austrian School. That said, I don't want to hold forth a generally glowing review without acknowledging that these guys do have their own blind spots and that those are not insignificant. As a Christian, I am bound to affirm that the fear of the Lord is the beginning of all knowledge and wisdom (Proverbs 1:7; 9:10; 15:33). That includes wisdom and knowledge in the area of economics. Through the mechanism of common grace, I believe that the Austrian Economists are generally right-on in their astute observations of how the economic aspect of the world works and are generally far less deluded than other competing schools of thought on the matter. However, their essentially secular viewpoint does leave them open to certain deceptions and shortcomings, the chief of these being the fundamental assumption that man is basically good and that his greatest problem is not sin but ignorance. In addition, I must also bear witness that true and enduring freedom and liberty—in all their various forms, including economic—are blessings that are only found in Jesus Christ. Any attempts to idolize individual freedom and liberty by abstracting them and attempting to construct a comprehensive worldview around them (e.g. Ayn Rand, a noted favorite of both the Austrian Economists and their Libertarian political chums) is just as much doomed to frustration, failure and wretchedness as any other false ideology.


  1. I have two main questions.

    1. If someone is sinning, aren't they ignorant?

    2. How is constructing a worldview of economics in any way relevant to religion? How is this different then say a constructing a worldview of how to battle heart disease or cancer?

  2. Robert,

    To answer as briefly as I can:

    1) No, not necessarily at all. Just because someone knows cognitively the difference between right and wrong is no guarantee that they will necessarily choose the former over the latter. In fact, the thrust of the Apostle Paul's argument in the first 3 chapters of Romans is precisely that this is the case: at a fundamental level we all choose to sin willfully, with our eyes in wide open rebellion.

    2) I would maintain that formulating a worldview on any narrowly defined topic (economics in this case) necessitates a set or a priori assumptions regarding right and wrong, good and bad, ought and ought not, etc. and that these assumptions are always, at base, religious assumptions. (I would maintain that this is the case even for avowed atheists or agnostics.) To approach the question from a slightly different angle, my posts here under the heading Dominion and the Arts are an attempt to articulate this very thing, i.e., the fact that the Christian Faith is a comprehensive system of thinking, of living, of laboring — of existing—that is supposed to be applied to other things (ultimately to everything) rather than being strictly confined to what we often tend to think of as religion per se.

    Hope that helps.

  3. 1. So you are saying that someone would knowingly choose hell over heaven, even if he understood the consequences of both?

    2. I would maintain that formulating a worldview on any narrowly defined topic (economics in this case) necessitates a set or a priori assumptions regarding right and wrong, good and bad, ought and ought not, etc. and that these assumptions are always, at base, religious assumptions.

    Could you give me an example of these a prioi assumptions in, say, physics?

  4. I am a Christian and without being too specific support Austro-Libertarian theories in regards to economics and government. I personally find their theories to be in closest harmony to Christianity than any other "worldview." I do understand your point of fallibility and feel if I were not a Christian it would be very difficult to understand.

  5. Robert,

    First off, BTW, I had the privilege of meeting an acquaintance of yours last night: Bob Murphy, who is associated with the Ludwig VonMises Institute. Bob took part in a local discussion group that I've recently joined and shared a lot of great insights with the folks who were there. Somehow it came out in a conversation that he was the source of the connection with you, so that answered that question.

    I'm happy to pursue this trajectory further, but I think it might be helpful to take a couple of steps back at this point before doing so. At least for the sake of efficiency, it might help if we knew a bit more about each other in order to more handily ascertain the shape of our differences, and so that neither of us has to waste time and words by misjudging what the other is really driving at, trying to establish some point where we might already agree anyway, etc.

    As for me, I'm a Christian (obviously), evangelical, protestant—think of me as sort of a high church Calvinist or Anglo-Presbyterian, if such labels are helpful to you at all.

    Politically, I'd probably be best described as a Classical liberal, which translates into a modern conservative who generally votes Independent, Republican or possibly Libertarian. (Obviously as per the above post I have some serious misgivings about Libertarianism, but hopefully you get the picture.)

    How 'bout you?

  6. I don't mind butting in if nobody else does...

    First off, this book of Hazlitt's is very good. Second, I'm just about the same page as Abrahamus in regards to his views on Libertarianism.

    Another good reference on this topic can be found here:

    So, my answer to Robert's first question - Yes. People gamble with their lives every day (theft, murder, etc.). Why should we assume that man is willing to gamble his life short term and not long term? We're some screwed up people. Just look around. Ayn Rand, in Atlas Shrugged, depicts some great examples of people who are evil, know they are evil, and are evil anyway. But then, for some reason, she goes on a diatribe via John Gault trying to deny the existence of original sin. I haven't quite figured out what happened to her synapses in the jump from one to the other, unless it was to deify mankind -- which is likely. But how can she equally deify and vilify mankind without accounting for the difference? Education, in her novels, won over some, but not all.

    To Robert's second question - I'll leave the physics question to someone else, but a good a priori assumption that has to be made before you can have any meaningful conversations on economics would be what or who is man. A secular would argue that man is a superior animal. The Christian argues that man is a being created in the image of God, distinct from animals.