Henry Hazlitt in his book, Economics in one lesson brings out an analysis of economic fallacies that in the long run becomes a new orthodox that see only one special group pleading for self-interest. At the beginning of his book, the writer describes those problems associated with economic science that depict economic fallacies as more greatly exacerbated than other scientifically field due to the special interest within the government. According to Hazlitt (1), in agitating for their special interests, in-groups normally advocate for inclusion of policies which they are able to benefit from in expense of everyone else. He notes that at the face value, these public policies can be translated as would in long run benefit everyone; however, some of these policies would only benefit one group at the expense of the other people.
Stemming from the author’s assertion, many people normally believe on economic fallacies due to their mankind human nature. According to Hazlitt (1), this nature makes people only see the immediate-effect of an advocated policy or only its effects on a special group. In so doing, people tend to neglect the long-term effects and consequences on other groups that are contributed by outlined economic policy (Sowell, 23). While these fallacies do not occur on a daily basis, the writer notes that they widely dominate the field of economics. In this respect, long term effects could be separated from the policy that created them and anchored through economic fallacies. Therefore, this paper discusses how economic fallacies have interestingly devised for special self-interest. It hypothesizes that the economic fallacies breach the art of economics that consist of advocating for policies that merely benefit all the groups.
As defined by Denie (1), the art of economics entails more than looking at the immediate but rather long effects of any advocated or devised policy. She adds that this art of economics is an act of tracing all the implications of stipulated policy not for the interest of one group, but to that of every group. However, the aspect of using economic fallacies for self-interest tend to originated from economists who normally ignore essential lessons that are important in understanding the reality posed by policies being advocated. Hazlitt (4) argues that classical economists normally focus specifically on long-term consequences thereby failing to determine the immediate effects of the policy on certain groups (Hazlitt, 4).
The aspect of people overlooking the secondary consequence of a policy is widely contributed by economic fallacies as attributed to by bad economists. A bad economist normally uses economic fallacies in the expression of half-truths in order to selfishly realized interest. Such people therefore express the immediate beneficial effects of a policy or those benefits that would accrue for a certain group in order to plead for their selfish interest. According to Reed (1), a bad economist only concentrates on the policy’s immediate consequences. This contradicts a good economist who will always look beyond what strikes the eye. However, the portrayal audience of good economists in trying to explain the secondary consequences of any given policy through long chains of arguments or reasoning usually bores the general audience.
As Hazlitt (5) argues, bad economists have continued to exist because they are better at defending their errors. This enables them to convince the public in an easier way as compared to good economists especially through the way the package “the truth.” It is aggravated by people being easily dissuaded from listening to long arguments posed by good economists even though such arguments normally reflect the truth. This means that people fail to understand that the policies that are laid down before them are not for their advantage but rather for self interest of a certain group.
Forms of Economic Fallacies on Public Eye
There are a number of fallacies that the public has been made to swallow while in actual sense they are aimed at benefiting a particular group at the expense of all other groups. First, economic fallacy has been devised in enhancing the role of public works and that of taxation. Hazlitt (24) points out to public works and taxation as an example of bad economics. According to him, the general population has been made to believe that public work is a means of employment that adds a wealth for economic well-being of a society. However, this can only be achieved through funding of construction within the public work areas. Based on his assertion, people are persuaded and convinced to pay taxes believing that the amount obtained from revenue would then be used to enhance the development of their welfare and protect them along with other benefits.
However, the false argument on the benefits of public works that denotes errors attributed to economic fallacy can be overlooked by what is lost when imposing taxation. Imposing taxation on the public seems to undermine the freedom they would have had in case they would have decided to dispose off their income as they wish. Additionally, taxation seems to be more destructive than how it would be constructive to the society’s welfare. According to Hazlitt (12), taxation for public works, for instance housing projects, normally destroy many jobs that are in line with such projects. These include such projects as those concerned with un-built private homes. The fallacy in it is that people re made to believe that public works such as housing can only be financed by annual rent subsidies rather than a lump sum capital appropriation (Hazlitt, 23). This means that the cost of public work projects, which taxpayers are subjected to, is spread over many years rather than being concentrated on a particular year.
Secondly, economic fallacies have also been used in validating and supporting the government’s role in lending and overlapping on taxation. As pointed out by Mishan (45), private lenders normally incorporate lending polices that in most cases turn down high risk borrowers. The government then comes in to lend these borrowers the capital they would require for their business. The public are made to believe that this step is meant to uplift the economic status of these vulnerable people. According to Hazlitt (16), Congress has always proposed more credit to farmers who are not able to acquire loans from the existing lending institutions because of the established lending policies. But as he asserts, the eligibility of these borrowers for acquiring resources from government is the same as would be needed by low risk borrowers from private lenders. The fact that money being lent by the government to these high risk borrowers comes from taxpayers, means that the government takes risks with taxpayers’ money.
Thirdly, economic fallacy has also been developed to help in illustrating the synergy of technology, production, and more significantly, employment. According to Hazlitt (21), the general public has been made to believe, through labor unions, that machines are deployed for self-sufficiency and that such machines are threats to employment. The false belief that machines results into unemployment is either widely contributed by people believing that unions are right or because they are really confused to see why the unions are wrong. What is ignored by this argument is that the self-sufficient machines emerged out of technological advancements which have made life easier and have even enabled production to become more efficient. Mishan (78) notes that high production is a major contributor of high wages and standards of living that marks economic goal of any country.
The arguments of machinery and employment overlooks the fact that full production is equivalent to full employment, meaning each and everyone has something to do. For instance, when Arkwright invented cotton-spinning machinery in 1760, it had a total of 7,900 employees engaged in cotton textile production. This number rose to 320, 000, a 4,400 percent increase in 1787 due to the efficiency of the production machine that resulted into more production thereby leading to more employment (Hazlitt, 21).
On the other hand, economic fallacy has been created through the role played by tariffs in industries. Mishan (82) notes out that the imposition of tariffs has always been used in protecting the local industries from foreign competition especially by discouraging importation of certain goods. For instance, a domestic based American manufacturer of woolen sweater can advice either the Congress or State department for national disaster associated with removing or reducing tariffs on British made sweaters in a way that would make him sell the sweater at $30 each while the English manufacturer would sell the same sweater at $25 each (Hazlitt, 35). In this regard, $5 seems to be required by the manufacture in order to sustain the business. This in turn amounts to thousand being employed. Therefore, reducing or stopping tariffs on imported goods and services amount to creating unemployment.
What the above argument does not take into consideration is the necessity of importation of goods in generating income for other countries. Significantly, people tend to seek tariffs in order to protect themselves. Mishan (88) note that tariffs effectively protect a country’s net balance. This amounts to stagnant employment, income, and standard of living among the working people within the local industries.
In conclusion, Henry Hazlitt book gives an insightful understanding on economic fallacies. He clearly depicts economic fallacies ass tending to hinder the logical reasoning of people especially in understanding the long-term consequences of stipulated policy. It is therefore imperative to all shareholders to thoroughly scrutinize through inclusive debate, the proposed economic policies before they are implemented. Failure to do so will make the government intervene in a way that it offers the right and interest of certain special groups in expense to the entire population.