Congratulations to Brad DeLong, the king of economist bloggers, for drawing attention to Henry Hazlitt’s Economics in One Lesson, if only to criticize him. One wonders if perhaps Hazlitt’s book is, next to Samuelson, the biggest selling econ book of all time. It came out in 1946, and has been a constant seller ever since.
Alex Tabarrok easily deals with DeLong’s claim that Hazlitt distorted Keynes: Keynes was indeed criticizing classical economics and the need for savings when he said that “in the long run we are all dead.”
(It does appear that Hazlitt’s systematic critique of Keynes, The Failure of the ‘New Economics’, is out of print.)
DeLong says that he is amazed that Hazlitt didn’t revise his opinion in favor of markets since Hazlitt himself lived through the Great Depression. “Yet the Great Depression years seem to have had no impact on Hazlitt whatsoever.”
Actually, it was the Depression years that first turned Hazlitt’s full attention to issues of macroeconomics. He decided that FDR’s NRA was a disaster. It was his decisive embrace of old-style liberalism, and complete rejection of new liberalism, that prompted his departure as literary editor at The Nation. The last issue in which Hazlitt was employed there ran an article repudiating classical economics and Hazlitt’s position–and embracing the NRA. It was a critical moment in the history of American liberalism, which decided it could dispense with economic liberty and still promote civil and personal liberty. Here’s an article that discusses the whole incident.
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Mr. DeLong should read Rothbard’s America’s Great Depression. And if he needs more information, Benjamin Anderson’s Economics and the Public Welfare, although not easy reading, is also excellent. Given that Anderson has generally not been labeled an “ideologue” or “extremist” like Rothbard has been by some of his detractors, it is revealing that Anderson states in this book that the New Deal began in 1924 with certain discounting operations that the Fed engaged in at that time. Furthermore, it would helpful if Mr. DeLong knew some money and banking theory, although on this point he seems to be in prominent company in that Keynes, arguably, knew little correct theory in these areas. I believe it was Hazlitt who said, and I paraphrase, that Keynes said nothing in the General Theory that is both new and correct. And as a practical matter, Keynes’s observation concerning “green cheese” and the labor unions has proved to be wrong.
Additionally, I have read Hazlitt’s “The Failure of the New Economics”, and I believe he does an excellent job at fairly presenting Keynes’s views. In fact, I think it was Keynes, with his typical intellectual arrogance, who distorted Say’s Law by incorrectly stating it; for some unexplainable (ha) reason, Keynes left out the part regarding price flexibility.
I read “The Failure of the New Economics” twenty
nine years ago and havent looked at it since. Yet
certain passages are stuck in my mind forever.
Notably, Hazlitt examines Keynes assertion that
with government manipulation of interest rates,
“It should be possible to reduce the marginal value of capital to zero in a couple of generations”.
Hazlitt then restates this fantastic idea in plain language.The reader is left wondering why
anyone took Keynes seriously.
For DeLong to say that he is “amazed that Hazlitt didn’t revise his opinion in favor of markets since Hazlitt himself lived through the Great Depression” is a bit like people criticizing libertarians today for not altering their opinion of government after living through 9/11.
DeLong is an interesting thinker–I assign one of his essays in my Intermediate Macro class–but he is a Keynesian thinker first. For myself, I am equally amazed that DeLong has not altered his opinion about Keynesian interventionism after living through the 1970s or after witnessing countless examples of government failure since then.
Nonetheless, his was an encouraging essay. Let’s hope he is addressing Hazlitt because of Hazlitt’s growing influence–even at Berkeley.
When Keynes said “In the long run we are all dead,” he was saying that it is not sufficient for things to be good in the long run (once the metaphorical storm has passed). We also want things to be good in the short run, which we have to live through. Economists should pay attention to the short run in addition to the long run.
Hazlitt’s use of the quote implies that Keynesians think that it is not necessary for things to be good in the long run. All that matters is that things are good in the short run. Why should I care if things are good after I’m dead? Hazlitt has Keynesians saying that economists should pay attention to the short run instead of the short run.
That is the misrepresentation that DeLong is complaining about. Keynes was criticizing classical economics when he said that we are all dead in the long run, but he was not saying that the long run is irrelevant, as Hazlitt implies.
I haven’t read enough to get involved in the larger Hazlitt (& Tabarrok) vs. Keynes (& DeLong) debate.
Correction: I meant to write “Hazlitt has Keynesians saying that economists should pay attention to the short run instead of the long run.” What I actually wrote, “… the short run instead of the short run,” makes no sense. My apologies.
Correction: I meant to write “Hazlitt has Keynesians saying that economists should pay attention to the short run instead of the long run.” What I actually wrote, “… the short run instead of the short run,” makes no sense. My apologies.
I’m sure that I’m reiterating what Mises, Rothbard, Hazlitt, Hayek, and others many times have said about Keynesian economics, but three points stand out as to why it has been and still is taken seriously. Firstly, it expresses certain ideas in algebraic terms, which fit in well with the major change to a positivist methodology that occurred in economics in the early- and mid-20th century. Secondly, and possibly most importantly, it gave “scientific”, although entirely fallacious, justification for much more government intervention into economic affairs. Interestingly, this interventionism had already been practiced by the governments of virtually all major industrialized countries for several years prior to the publication of “The General Theory” (so much for Keynes’s supposed originality). And of course, with all this government intervention now required and “scientifically justified,” governments would need legions of technical advisors to guide them in their endeavors. The Keynesian-trained “economist” fit this requirement perfectly. Thirdly, Keynesian economics appeals to the nonsense that animates all too many individuals: the printing presses, and interest rate manipulation by governments and their economic advisors can solve the problems of the scarcity of capital and “inadequate” demand.
What any good economist analyzes is not just the immediate or short-term effects of actions but also the longer-term effects. The point Hazlitt and others were trying to make is that certain actions and governmetal policies have negative longer-term consequnces that necessarily will occurr. The fact that they don’t occurr in the short-term is only a matter of timing and not the result of cause and effect. While some people’s time preferences may be such that they value the more remote periods of the future extremely low, an economist, as an objective scientist, should also point out the longer-term consequences of actions and policies. And as a practical matter, the longer-term may very well arrive much sooner than initially anticipated.
Mr. Blar:
It is not necessary (for either side) to nit-pick fine points about what Keynes intended to convey–and whether it deliberately suggested a neglect of long-run consequences in favor of those of the shorter-run–and whether Hazlitt might or might not have misrepresented that position.
The plain fact is that the entire enterprise on which Keynes was embarked, the justification (and expansion) of authoritarian interference in market phenomena (and, as has been noted, a not-unknown practice throughout history up to that time) is, in and of itself, an expressed preference for the emergent short-run effects. Essentially, whether or not the full range of longer-term consequences (of interference)–to the degree they may be assessed–has been explored or not is short-circuited, partly by insufficient attention paid and partly by no attention whatsoever paid. It is the elevation of the will of dominant politicians and (to a far-lesser degree) their constituents over the economic affairs and well-being of the entire polity.
The market economy “works” and does so in a reasonably demonstrable way primarily because it is, is continually (and, therefore, at any specific point in time) the composite effect of all its, acting, choosing, satisfaction-maximizing participants. Although it is possible (in the theoretic sense of that word) for authoritarian interference to effect a net increase in overall satisfaction (considering both long and short horizons), it is yet a “long shot”–for reasons very similar to those for which authority is a poor source for artistic, intellectual, social, and entrepreneurial innovation.
The sad part (from an Austrian view), of course, is that the very inattention or ignorance of the rightly-considered long-run (“macro” in the true sense of the word) consequences virtually guarantees the emergence of those consequences and their deleterious effects not only on the relative few whose welfare it was the deliberate intent of the policy-makers to injure (or at least to ignore) but of the great mass of their own supporters as well (as well as to very many only indirectly impinged–as by international consequences).
It is no accident that we have crises of various sorts in every direction we may turn our gaze. Nor is it an ‘accident” that, in almost every case, such criticality can be traced directly to interference of an authoritrian nature. Without Social Security, we’d have no Social Security crisis (and whether we’d have millions of starving, indigent aged is entirely questionable. The crisis in education is entirely a product of that commodity’s compulsory, state-funded status; the pouring of vast quantities of extorted wealth down the sinkholes of programs of charity, of education, and of subsidy aid to failing and wealthy agricultural enterprises alike–are the product of Keynesian thinking.
The “problem” which Keynes (and all “reformers”) sought (and seek) to address is
that of “unsatisfactory conditions”; it is the very same problem which everyone seeks to improve in everyday life. Melioration is, by and large, and has been throughout the history of the human race, a slow process, occasionally accelerated by dramatic improvements in methods or materials through discovery by alert individuals. Almost all attempts to improve whatever are the unsatisfactory conditions are foreordained to failure (at best) or exacerbation of the very conditions addressed. The inability or (very likely) self-interested unwillingness to understand and consider such matters is the heart of the mis- or malfeasance of Keynes (and followers).
Delong is an interesting (and disagreeable) phenomenon. Thanks for reminding me of him, Jeff. Delong’s (linked) article has FAR more comments than I’ve ever seen (or hope to see) on a Mises article. And while the comments are predictably wrong-headed, they’re otherwise not only articulate and sophisticated, but even lucid in their limited scope of understanding. A formidable group, I’d reckon.
Delong’s presentation of the CONTEXT of Keynes’s remark certainly changes the view I have taken of its original spirit in the decades I have known of it. This distortion is NOT of Hazlitt’s creation, although like me, H may have fallen victim to it (a lapse in itself, except that he really was describing the public’s reaction to it rather than, necessarily, Keynes’s meaning in making it). Hazlitt’s complaint remains valid, but cannot be directed against Keynes. It must be directed against Keynes’s (too numerous) followers.
I don’t see why the objection can’t still be directed against Keynes. He did advocate short-sighted policies.
I posted a critical comment on DeLong’s blog, noting the general ignorance of the posters on his site of Hazlitt. He deleted it as a “troll”. I’ll let the readers be the judge of that:
The comments on DeLong’s blog illustrate an ignorance of Hazlitt, and make it seem unlikely that the commentors read him. Not once was the word “Austrian” mentioned, despite the fact that Hazlitt was an Austrian economist, and as such did not believe in any of the ridiculous assumptions of the neoclassicals (such as perfect competition). This is not specialty knowledge. It is available to anyone who so-much as types in “Henry Hazlitt” in google. Yet, all posters on DeLong’s blog who mentioned the issue, were highly perplexed that Hazlitt could support the free market in absent of those nirvana-assumptions.
Since his _Economics in One Lesson_ is available online, as is a detailed biography of him, there really is no excuse. A detailed bibliography of him is available on Mises.org, which anyone who searched for him on Google would have immediately found (2nd result). Even within Hazlitt’s book, there are Austrian references and ideas. He refers to Mises, Hayek, Robbins, Roeptke, all Austrians (or in Robbins’ case, former-Austrian). His discussion of inflation is decidedly Austrian. It seems reasonable to ask that those who criticize someone at least know what his position was.
DeLong’s own entry omitted a few things. While not pertinent to _Economics in One Lesson_, this is pertinent to Hazlitt: He wrote a chapter-by-chapter criticism of Keynes, _The Failure of New Economics_. It is thus correct to say that One Lesson didn’t take Keynes on, but this may imply that Hazlitt never did. You mentioned that you were surprised that Hazlitt didn’t abandon his free-market position after living through the Depression. This would be completely unsurprising to anyone, once you consider that Hazlitt agreed with the theory of the business cycle that Mises developed, and Hayek later refined (of which Rothbard also applied specifically to the Great Depression).
In short, Hazlitt thought that depressions were caused by inflation, the creation of money and credit out of thin air, which caused malinvestments to accumulate. As such, depressions were the negative consequences of government-intervention in the free market. He most also would have agreed that any hamperings in the free market’s adjustment process (after crash) would only slow down recovery, causing a protracted state of crisis. I’m sure that you think this is completely wrong. Nevertheless, when considering that Hazlitt accepted it, it shouldn’t be anymore surprising that Hazlitt didn’t revise his prof-free-market opinion following the Depression that that neither did Mises or Hayek. Since his _Economics in One Lesson_ is available online, as is a detailed biography of him, there really is no excuse. A detailed bibliography of him is available on Mises.org, which anyone who searched for him on Google would have immediately found (2nd result). Even within Hazlitt’s book, there are Austrian references and ideas. He refers to Mises, Hayek, Robbins, Roeptke, all Austrians (or in Robbins’ case, former-Austrian). His discussion of inflation is decidedly Austrian. It seems reasonable to ask that those who criticize someone at least know what his position was.
DeLong’s own entry omitted a few things. While not pertinent to _Economics in One Lesson_, this is pertinent to Hazlitt: He wrote a chapter-by-chapter criticism of Keynes, _The Failure of New Economics_. It is thus correct to say that One Lesson didn’t take Keynes on, but this may imply that Hazlitt never did. DeLong mentioned that he were surprised that Hazlitt didn’t abandon his free-market position after living through the Depression. This would be completely unsurprising to anyone, once you consider that Hazlitt agreed with the theory of the business cycle that Mises developed, and Hayek later refined (of which Rothbard also applied specifically to the Great Depression).
In short, Hazlitt thought that depressions were caused by inflation, the creation of money and credit out of thin air, which caused malinvestments to accumulate. As such, depressions were the negative consequences of government-intervention in the free market. He most also would have agreed that any hamperings in the free market’s adjustment process (after crash) would only slow down recovery, causing a protracted state of crisis. I’m sure that DeLong thinks this is completely wrong. Nevertheless, when considering that Hazlitt accepted it, it shouldn’t be anymore surprising that Hazlitt didn’t revise his pro-free-market opinion following the Depression that that neither did Mises or Hayek.
That DeLong was “surprised” by this suggests to me that he also didn’t read Hazlitt’s book (at least completely).
One characteristic of Keynes’s academic work was that his position fluctuated, so it was not always easy to determine what his position actually was on a topic. I believe Hayek has attested to this as a result of his debates with Keynes in the early 1930s concerning monetary theory. In addition, as Hazlitt has demonstrated, Keynes’s use of terminology and definitions was not always consistent, also complicating the analysis of his work. Furthermore, what are we to make of Keynes’s argument regarding “green cheese”? Is this another one of his comments that was taken out of context or misunderstood? I don’t think so. Finally, Hazlitt was highly critical of the Bretton Woods international monetary agreement, of which Keynes was a major architect, and for this stance Hazlitt evidently lost his editorial position at the New York Times. But Hazlitt’s theoretical analysis was correct, and Bretton Woods collapsed in approximately a quarter of a century. But I’m convinced that scientific correctness matters very little; what matters is how well science is manipulated to fit the dominant political ideology.
Pete, thanks for the info about Keynes’s wife.
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