June 8th, 2010


Ow, the brains

At sethimothy's suggestion, we began reading Economics in one Lesson by Henry Hazlitt.  It started straightforward enough, setting as its goal to discuss some common logical fallacies in relation to economic theory and practice.  The first couple chapters are fine; he seems to take a rather disgruntled tone, but it's difficult to find someone discussing economics without such things.  He introduces the concept that many people profit from disaster, believing that destruction creates demand, when all it really does is create need whether or not that need can be satisfied, and money is simply redistributed from some markets to others through destructive acts.  So far it's simple and pragmatic, as is the discussion of government spending in that spending to generate tax income is a fallacy in itself: the money you spend is from either tax income or debt, and must then be supplied with tax income, so it isn't generally creating new tax funds.

Then we get to the third chapter, where he equates this with jobs.  Hazlitt was a hard-line conservative libertarian, which is why we suspected his outlook would be unwelcome even if some of his information and insights might be useful.  He states without irony, "for every public job created by the bridge project a private job has been destroyed somewhere else."  This is nonsense.  The creation of one job does not automatically destroy another.  He's specifically discussing an example of public works projects done to create jobs, works that do things like create bridges which were unnecessary.  However one may feel about an unnecessary bridge — it's not the most appealing prospect — the creation of a bridge that wouldn't otherwise have been created doesn't rob anyone of work.  It does mean that tax money is going to a bridge rather than, say, education, public health, or what have you, but it doesn't automatically make existing employment disappear in favor of newer, temporary employment.  It doesn't disrupt the private industry, because the private industry wasn't interested in creating that bridge, and much of the time the government pays private industry to do its work anyway.

It's true that no new money is created, just redistributed, but that's part of the point.  The more people make money, the more they have money to save and to spend.  The wealthy and the corporations might have been spending that same money that instead became taxes that lead to government-funded projects, but the wealthy don't need more money; the poor do.  Fairness, of course, has never had a place in traditional economics, at least until the past some years that we've actually begun doing empirical research into economics to test theories and see what pans out.  We've learned over the past decade or two that indeed fairness is a very important part of economics, and people do not simply act only in self-interest, but this book was written before all that; this edition was from 1979, and the original was from 1946.

In any case, working to create jobs means more people saving money and spending small amounts of money, but more importantly, it means that unemployed people can gain experience in whatever tasks they perform, increasing their employment value; it means they're earning through production the money the government's paying them from taxes instead of gaining it through Food Stamps benefits or the like; and that income can help them gain better housing, better education, and so forth, which in turn means a more productive generation of citizens.  That isn't to say that building a useless bridge is a good idea, but there are always useful projects that can be done; one need not look far.  Unfortunately Hazlitt is simply spewing conservative libertarian propaganda and not bothering to notice his own logical fallacies.  Throughout the chapter, he makes it clear that he's against all public works which aren't specifically toward building government offices and the like which allow the government to function, and frankly that's just a silly prejudice.