The One and Only Lesson
By: Marcela Richardson
In the book Economics in One Lesson, Henry Hazlitt states the lesson in the first pages of the book. This lesson refers to the difference between good and bad economists. The good economist focuses on long-term effects of the application of any public policy and focusing on providing benefits to all, rather than just a few. On the other hand, the bad economists think only in the short- term effect of the policies, and focus the benefits in a small group. It is pertinent to pay close attention to the lesson and really understand this distinction because, we have politicians acting as bad economists every time they want to install a new policy that benefits a small sector and provides immediate “cure” not thinking in the bad long-term effects this is providing.
It is very clear with the example of the Broken Window Fallacy, that states that there is a person that wants to boost the economy of the city (let’s say a kid has this mindset), so he comes with a rock and throws it to a bakery’s window. All the people that come around, see that the immediate result is that the window is broken, and the person that produces glass will increase his production because the baker needs a new window for his shop. They all applaud. But that’s the problem, most people are blinded only by what has been seen, not what could have happen. Hearing the other side of the story, the baker was planning in buying a pair of shoes with $150 he had earned, but because somebody has broken his shop window, he has the need to re install it buying a new glass that costs him $150 too. So he has to opt to buy the window to the new pair of shoes he was wishing to pay from his hard work. This is the unseen that has only happen in the mind of the baker, and couldn’t actually be portrayed into the market economy because there was the other need of repairing his window. Creating damage or destruction does not create progress in economy, on the contraire it slows it down, and hinders incentives to invest in things of our interests.
This exactly happens when politicians pass new laws that are obligating the individuals to pay a certain amount of taxes for the public policies that will benefit all. We are now aware that most of the time, when government takes into their hands public money for public projects, their use is inefficient and the tools and resources are more expensive. The governments claims the importance of building bridges for all, having pavement roads, but what they don’t say and are not aware of is that the money they are taking by obligation to the citizens, could have a better use. And that use is the one that only each individual knows where to invest it and what he gives more value to. That money could have been used for other investment the individuals think necessary for the well being of all, but they can’t because it has already been taken from them for other use, that doesn’t provide benefits to anyone except the policies makers.
In conclusion, the lesson really has become part of me after reading the entire book. This was not only referring to economics in my opinion, but as human beings we often act by the nature of our instincts, and don’t reason out most of our actions, because they are heredity reactions that we are used to see, and repeat. We think often for the immediate effects certain things will provide satisfaction for our wants, but are very little aware of the long-term effect we are causing ourselves every time we decide to do the same exact thing all over again. I think we need to create more awareness into thinking the long-term effects of our actions, as well as the benefits that brings to all, rather than just a small group of people. Having this lesson in mind, can help you achieve many things in life, that is why is the one and only most important lesson one must always keep in mind.
In the book Economics in One Lesson, Henry Hazlitt states the lesson in the first pages of the book. This lesson refers to the difference between good and bad economists. The good economist focuses on long-term effects of the application of any public policy and focusing on providing benefits to all, rather than just a few. On the other hand, the bad economists think only in the short- term effect of the policies, and focus the benefits in a small group. It is pertinent to pay close attention to the lesson and really understand this distinction because, we have politicians acting as bad economists every time they want to install a new policy that benefits a small sector and provides immediate “cure” not thinking in the bad long-term effects this is providing.
It is very clear with the example of the Broken Window Fallacy, that states that there is a person that wants to boost the economy of the city (let’s say a kid has this mindset), so he comes with a rock and throws it to a bakery’s window. All the people that come around, see that the immediate result is that the window is broken, and the person that produces glass will increase his production because the baker needs a new window for his shop. They all applaud. But that’s the problem, most people are blinded only by what has been seen, not what could have happen. Hearing the other side of the story, the baker was planning in buying a pair of shoes with $150 he had earned, but because somebody has broken his shop window, he has the need to re install it buying a new glass that costs him $150 too. So he has to opt to buy the window to the new pair of shoes he was wishing to pay from his hard work. This is the unseen that has only happen in the mind of the baker, and couldn’t actually be portrayed into the market economy because there was the other need of repairing his window. Creating damage or destruction does not create progress in economy, on the contraire it slows it down, and hinders incentives to invest in things of our interests.
This exactly happens when politicians pass new laws that are obligating the individuals to pay a certain amount of taxes for the public policies that will benefit all. We are now aware that most of the time, when government takes into their hands public money for public projects, their use is inefficient and the tools and resources are more expensive. The governments claims the importance of building bridges for all, having pavement roads, but what they don’t say and are not aware of is that the money they are taking by obligation to the citizens, could have a better use. And that use is the one that only each individual knows where to invest it and what he gives more value to. That money could have been used for other investment the individuals think necessary for the well being of all, but they can’t because it has already been taken from them for other use, that doesn’t provide benefits to anyone except the policies makers.
In conclusion, the lesson really has become part of me after reading the entire book. This was not only referring to economics in my opinion, but as human beings we often act by the nature of our instincts, and don’t reason out most of our actions, because they are heredity reactions that we are used to see, and repeat. We think often for the immediate effects certain things will provide satisfaction for our wants, but are very little aware of the long-term effect we are causing ourselves every time we decide to do the same exact thing all over again. I think we need to create more awareness into thinking the long-term effects of our actions, as well as the benefits that brings to all, rather than just a small group of people. Having this lesson in mind, can help you achieve many things in life, that is why is the one and only most important lesson one must always keep in mind.