Henry Hazlitt in One Lesson

Few people have worked as tirelessly to advance the cause of liberty as did Henry Stuart Hazlitt (1894–1993). Hazlitt was an American journalist, literary critic, economist, and philosopher who wrote about business, literature, and economics for such publications as the Wall Street Journal, The Nation, the American Mercury, Newsweek, the New York Daily Herald, and the New York Times.

A proponent of laissez-faire capitalism and the Austrian school of economics, Hazlitt was a founder of the Mises Institute and a founding editor of the libertarian publication The Freeman. The Freeman was later acquired by the Foundation for Economic Education (FEE). Both FEE and the Mises Institute offer a large selection of Hazlitt’s writing and books for free via their respective websites.¹

Hazlitt was a prolific writer. Over a career that spanned more than seventy years, he introduced millions of people to the ideas of classical liberalism and individual freedom. He was also well known for connecting free market advocates. For example, Hazlitt introduced Ayn Rand to Ludwig von Mises. In fact, Hazlitt told Rand that Mises had called her “the most courageous man in America,” a mistake that delighted her. It’s not surprising that people gravitated to Hazlitt because, by all accounts, he was a class act. As Bettina Bien Greaves, who was Mises’s bibliographer and a close friend of Hazlitt’s, relates:

He was easy to approach; his manner was pleasant, not aloof or overbearing. He was of average height. His features were regular, and he wore a mustache. He dressed appropriately for a journalist working in midtown Manhattan in his day—in suit and tie. He was modest, always thoughtful of others, and one of the kindest and most gracious men I have known.²

Best known for his classic book, Economics in One Lesson, Hazlitt wrote twenty books in all as well as more than ten-thousand editorials, articles, and columns. His other contributions include Thinking as a Science, The Anatomy of Criticism, Man vs. the Welfare State, The Foundations of Morality, The Failure of the New Economics, The Conquest of Poverty, the novel Time Will Run Back, several edited volumes, and countless book chapters, articles, commentaries, and reviews. He once estimated that he had written ten million words and that his collected works would run to 150 volumes. Starting at the age of twenty, almost every day Hazlitt wrote something to advance liberty.

What set Hazlitt apart from other writers on economics was the incredible clarity of his writing and his ability to make the subject interesting to laymen. He did this by focusing on principles, using practical examples, and writing in a direct and conversational style. He also avoided the technical jargon and reliance on statistics that stud the writing of most economists—to the bane of most readers. When H. L. Mencken selected Hazlitt to succeed him as literary editor at the American Mercury, he called Hazlitt the “only competent critic of the arts that I have heard of who was at the same time a competent economist,” as well as “one of the few economists in human history who could really write.”³

A Self-Reliant Youth

Henry Hazlitt was born on November 28, 1894, in Philadelphia. His father died when he was just two years old, leaving the family in dire poverty. His mother sent him to a school for poor, fatherless boys in Philadelphia. When Henry was nine, his mother remarried Frederick Piebes, who was employed in manufacturing, and their fortunes improved for a time. The family moved to Brooklyn, where Henry went to public school. Tragically, his stepfather, who was an alcoholic, died when Henry was thirteen, leaving the family in dire straits once again. Hazlitt said that in his last year of high school he “developed what I suppose might be called intellectual awareness.”

I got interested in philosophy and psychology. My great gods were Herbert Spencer and William James. I was going to go to Harvard, and become a professor of psychology, writing a little philosophy on the side, like William James. But none of this was to be, because of something called a shortage of funds.⁴

After high school, instead of Harvard, he enrolled at New York City’s free-tuition City College. However, a few months after he enrolled, Hazlitt dropped out of college and took a series of menial jobs in order to support his widowed mother. Instead of being bitter about this turn of events, he became more determined than ever to succeed. As he later wrote, his short time at college “had a greater influence than may at first sight be supposed, not as much from the knowledge gained there, as from the increased consciousness of the knowledge which I still had to gain and the consequent ambition to attain it.”⁵

Hazlitt became determined to gain as much knowledge as he could and to learn how to make a success of himself. Books became his university, and he embarked on a self-imposed home-study course, reading and writing prodigiously. He made great use of libraries, studied the classics, read college textbooks, and developed shorthand and typing skills. He still harbored a burning desire to become a writer.

All of his efforts paid off when he landed a job with the fledgling Wall Street Journal, which was then a small, niche publication covering only the news of Wall Street. He described his job there as “part stenographer and part reporter.” Incredibly, while working at the Journal, he also wrote a book on the side titled Thinking as a Science and got it published in 1916 at the age of twenty-one. He wrote the book because he realized—through his intense process of self-education—that it was more important to think clearly than to merely absorb information. As he explains in the opening pages of Thinking as a Science:

Every man knows there are evils in the world which need setting right. Every man has pretty definite ideas as to what these evils are. But to most men one in particular stands out vividly. To some, in fact, this stands out with such startling vividness that they lose sight of other evils, or look upon them as the natural consequences of their own particular evil-in-chief.

To the Socialist this evil is the capitalistic system; to the prohibitionist it is intemperance; to the feminist it is the subjection of women; to the clergyman it is the decline of religion; to Andrew Carnegie it is war; to the staunch Republican it is the Democratic Party, and so on, ad infinitum.

I, too, have a pet little evil, to which in more passionate moments I am apt to attribute all the others. This evil is the neglect of thinking. And when I say thinking I mean real thinking, independent thinking, hard thinking.⁶

The book is quite remarkable considering the tender age at which Hazlitt wrote it and the difficulties he had endured growing up. In his discussion of the relationship between theory and practice, one can see the seeds of his later writing and his approach to economic analysis.

When World War I broke out, Hazlitt joined the Army Air Service and was sent to Texas. When the war ended he returned to New York and continued writing for various newspapers—as financial editor, literary editor, editorial writer, and then as a member of the editorial staff of the New York Times, where he wrote most of its economic editorials.

It turns out that Hazlitt had no need for college. He acquired his real education through self-study, hard thinking, and on-the-job learning. Henry Hazlitt was a real-life Horatio Alger hero, the epitome of a self-made man.⁷

Key Influences

As Hazlitt’s career as a business and finance writer progressed, he developed a growing interest in economics. He explains: “I made the amazing discovery that economics required just as much hard thought, subtle thought, precise thought as the most abstruse problems of philosophy or psychology or physical science.” He saw that far from being a “dismal science,” economics was a crucially important subject because it has such a profound influence on government policy. (E.g., how different would the world be had Karl Marx not promoted his economic theories?)⁸

Hazlitt then came across a book titled The Common Sense of Political Economy, by Philip H. Wicksteed, of which he said, “For the first time the world of economics really opened up for me, and I caught my first glimpse of the fact—which Ludwig von Mises was later to make more explicit—that the world of economics is almost coextensive with the whole world of human action and of human decision.”⁹

Another major influence on his economic thinking was Benjamin M. Anderson, an economist at the Bank of Commerce and later at Chase National Bank. He read Anderson’s classic book The Value of Money, and they later became friends. In the early 1920s when Hazlitt was the financial editor of the New York Evening Mail, he and Anderson met on a regular basis to discuss economic developments.

Hazlitt also studied the ideas of Ludwig von Mises, and the two became close friends when Mises immigrated to America. Hazlitt said of Mises, “His thought has had more influence on me than the thought of any other single person in the last 25 years.”¹⁰ As one of the most influential literary critics and book reviewers in the country, Hazlitt introduced Americans to Mises’s ideas. Hazlitt reviewed Mises’s Socialism—the first of his books to be translated into English—and thereby turned it into an instant classic in America. Likewise, Hazlitt’s review of F. A. Hayek’s Road to Serfdom resulted in Reader’s Digest publishing the condensed version, catapulting Hayek to fame.

Through years of study, writing, and discourse with some of the top minds in economics, Hazlitt developed the ability to see the downstream consequences of economic policies, and he acted consistently on that knowledge. For example, Hazlitt immediately saw the inflationary dangers of the creation of the International Monetary Fund (IMF) and World Bank, which were proposed after World War II. While these proposals were being discussed at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire, in 1946, Hazlitt was writing powerful editorials in the New York Times opposing the measures. However, after the IMF and World Bank were endorsed by forty-three countries, the publisher of the Times, Arthur Sulzberger, told Hazlitt that he could no longer editorialize against either. Hazlitt complied for a time while searching for another job, then resigned from the Times.

Economics in One Lesson

That same year, Hazlitt wrote a two-hundred plus page book, Economics in One Lesson, in only forty-five days. Subtitled The Shortest & Surest Way to Understand Basic Economics, it went on to become the most popular basic economics book of all time, selling millions of copies—and it still sells well today. What makes the book unique is the way Hazlitt reduces the complex field of economics to simple principles that anyone can understand and validate by observation. Indeed, he says “the whole of economics can be reduced to a single lesson.” What is that lesson? “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.”¹¹

He proceeds to illustrate this principle throughout the book with myriad examples, giving readers a broad and deep understanding of economics. Most important, Hazlitt points out the vital need to understand economic policies in terms of how they impact the individual, saying, “What is harmful or disastrous to an individual must be equally harmful or disastrous to the collection of individuals that make up a nation.”¹²

Hazlitt demolishes the major economic fallacies that are promoted by power-lusting politicians and collectivists of every stripe, such as that government spending and bailouts stimulate the economy, that public works projects increase the wealth of a community, that unions and minimum wage laws raise real wages, that free trade creates unemployment, that rent control helps to house the poor, that saving hurts the economy, that corporate profits are taken at the expense of workers. Hazlitt’s writing is so lucid and his analysis so convincing, it is hard to believe that anyone could read his book and still fall for these fallacies.

One of Hazlitt’s heroes was the French economist Frederic Bastiat. Like Bastiat, Hazlitt was a master at reductio ad absurdum—the method of refuting a position by showing it to be absurd when taken to its logical conclusion. In Economics in One Lesson, he uses this effectively against economic illiterates and Luddites. For example, in chapter 7, “The Curse of Machinery,” Hazlitt says, “Mrs. Eleanor Roosevelt . . . wrote: ‘We have reached a point today where labor-saving devices are good only when they do not throw the worker out of his job.’” Hazlitt gets right to the essence of the fallacy involved here: “Why should freight be carried from Chicago to New York by railroad when we could employ enormously more men, for example, to carry it all on their backs?”

Another application of the lesson can be seen in his discussion of tariffs. After lamenting that politicians still have not caught up with Adam Smith on free trade, he explains that tariffs are a classic example of only considering the immediate effect on one group without considering others. Using the example of an American sweater manufacturer, he discusses the effect on consumers who will have to pay more for the protected goods due to the tariff:

Because he has to pay more for sweaters and other protected goods, he can buy less of everything else. The general purchasing power of his income has therefore been reduced. Whether the net effect of the tariff is to lower money wages or to raise money prices will depend upon the monetary policies that are followed. But what is clear is that the tariff—though it may increase wages above what they would have been in the protected industries—must on net balance, when all occupations are considered, reduce real wages.

Only minds corrupted by generations of misleading propaganda can regard this conclusion as paradoxical. What other result could we expect from a policy of deliberately using our resources of capital and manpower in less efficient ways than we know how to use them? What other result could we expect from deliberately erecting artificial obstacles to trade and transportation?¹³

By showing that sound economic thinking consists in considering long-term consequences for all groups—and by demonstrating this with myriad examples—Hazlitt has taught generations of readers a science that is widely held to be the province of obscure academics.

Hazlitt vs. Marx and Keynes

One of the greatest services Hazlitt provided over many decades was his exposition of the fallacies and errors of two highly influential—and dangerously misleading—economic theorists: Karl Marx and John Maynard Keynes. In his wonderfully direct style, Hazlitt encapsulated Marxism as follows:

The whole gospel of Karl Marx can be summed up in a single sentence: Hate the man who is better off than you are. Never under any circumstances admit that his success may be due to his own efforts, to the productive contribution he has made to the whole community. Always attribute his success to the exploitation, the cheating, the more or less open robbery of others.

Never under any circumstances admit that your own failure may be owing to your own weakness, or that the failure of anyone else may be due to his own defects—his laziness, incompetence, improvidence or stupidity. Never believe in the honesty or disinterestedness of anyone who disagrees with you.

This basic hatred is the heart of Marxism. This is its animating force. You can throw away the dialectical materialism, the Hegelian framework, the technical jargon, the “scientific” analysis, and millions of pretentious words, and you still have the core: the implacable hatred and envy that are the raison d’etre for all the rest.¹⁴

Hazlitt clearly saw that Keynes was a neo-Marxist, and the devastation wrought by Keynes’s influence on economic policies motivated Hazlitt to write a book that refuted Keynes, point by point. Titled The Failure of the New Economics: An Analysis of the Keynesian Fallacies, it dealt a devastating critique of Keynes’s The General Theory of Employment, Interest, and Money. In General Theory, Keynes offered music to the ears of power-lusting politicians the world over. The book provided a rationale for unbridled statism and central planning. Keynes claimed that prices in a free market don’t work, private investment is unstable, the “barbarous relic” of the gold standard should be scrapped, and massive government intervention was needed in order to shore up the capitalist system and save it from itself. Amazingly, economists around the globe lapped up this nonsense, and almost all of them became Keynesians.

Hazlitt, though virtually alone in opposing Keynes, would have none of it. He proceeded line by line through General Theory and evaluated it based on observations and integrations of what we see in an actual marketplace. Hazlitt’s approach provides a brilliant counterpoint to Keynes, who started almost every chapter of General Theory by arguing that some aspect of classical (free-market) economic theory is wrong. Hazlitt starts each chapter by showing how Keynes has misstated the free-market theory, and then demonstrating the facts of the matter. For example, he quotes Keynes, who writes in General Theory:

An act of individual saving means—so to speak—a decision not to have dinner today. But it does not necessitate a decision to have dinner or to buy a pair of boots a week hence or a year hence or to consume any specified thing at any specified date. Thus it depresses the business of preparing today’s dinner without stimulating the business of making ready for some future act of consumption. It is not a substitution of future consumption demand for present consumption demand,—it is a net diminution of such demand.¹⁵

To this, Hazlitt responds:

The truth is that an act of individual saving means, for the overwhelming majority of savers, merely a decision not to have two dinners today. It is much more sensible all around to put aside enough to make sure that one also has a dinner tomorrow. . . . On the basis of Keynes’s own formal definitions of saving and investment earlier in the General Theory, according to which ‘they are necessarily equal in amount, being, for the community as a whole, merely different aspects of the same thing,’ this whole passage is nonsensical and self-contradictory. We can make sense of it only if we re-define saving merely as non-spending of money. . . . But in the modern economic-world, an act of saving, if it is not followed within a month or so by an equivalent spending, is almost invariably accompanied or followed by an act of investment. This is merely a way of saying that people in a modern economic community do not simply hoard money in a sock or under the mattress. Even if they merely deposit it in a checking account, the great bulk of it is immediately loaned out by the bank. If they deposit it in a savings account, the whole of it is invested for them.¹⁶

It is difficult to imagine any intelligent or rational person reading both books and favoring the convoluted, muddled, pretentious, self-contradictory Keynes over the lucid, principled, and logically consistent Hazlitt. Hazlitt even calls out Keynes on his style, which consisted of unclear writing and pretentious jargon. For example, Hazlitt writes:

And still again, “the elasticity of money-prices in response to changes in effective demand measured in terms of money,” could have been phrased simply “the response of prices to changes in demand.” It is largely on such pretentious pleonasms and circumlocutions that Keynes’s reputation for profundity seems to rest.¹⁷

Unfortunately, Keynes’s ideas had a huge influence on America starting with FDR, and they are now so woven into government policy that few politicians question the ideas or understand how destructive they are. Nonetheless, Hazlitt condemned these ideas as soon as they surfaced and showed why they are false.

Hazlitt on Moral Philosophy

From a young age, Hazlitt was interested in philosophy, and he knew that ethics and economics were intimately related. Despite the unassailable fact that capitalism gives rise to wealth and prosperity, Hazlitt saw that attacks against it were advancing, not receding. He realized that capitalism had to be defended on moral grounds:

What is under attack is the capitalist system; and it is attacked mainly on ethical grounds, as being materialistic, selfish, unjust, immoral, savagely competitive, callous, cruel, destructive. If the capitalistic system is really worth preserving, it is futile today to defend it merely on technical grounds (as being more productive, for example) unless we can show also that the socialist attacks on ethical grounds are false and baseless.¹⁸

In 1964, at the age of seventy, he wrote an extensive philosophical treatise titled The Foundations of Morality, which aimed at providing a moral defense of capitalism and liberty. He later reflected that of all of his books, this was the one of which he was most proud. It was, in certain respects, his worst.

He wrote, “The real distinction we need to make for ethical clarity is not that between the individual and society, or even between ‘egoism’ and ‘altruism’ but between interests in the short run and those in the long run.”¹⁹ He identified the fact that there is no conflict between the rational, long-term interests of individuals.

Should moral rules be framed primarily to promote the long run happiness of the individual or the long run happiness of society? The question assumes a false antithesis. Only a rule that would do the first would do the second, and vice versa. The society is the individuals that compose it.²⁰

However, without defining either egoism or altruism, Hazlitt claimed that these “two attitudes” were not opposed and that “when we consider the long run . . . the tendency of their aims . . . coalesce.”²¹ He called his philosophy—which he claimed inhabits the “twilight zone” between egoism and altruism—“mutualism” or “cooperatism.”

In its essentials, this system is difficult to distinguish from utilitarianism. He held that the maximum of human happiness and well-being of the whole community is the ultimate good. He also stipulated that occasional self-sacrifice is among the legitimate means to that end.

In a chapter titled “The Problem of Self-Sacrifice,” he wrote: “Self-sacrifice is only required or justified where it is necessary to secure for another or others a greater good than that sacrificed.” He further explained: “I must content myself here to say that I consider self-sacrifice essentially a means—a means sometimes necessary for promoting the end of maximum happiness and well-being for the whole community.”

This is precisely the argument that has been used by collectivists, statists, and tyrants throughout the ages for sacrificing the individual to an alleged greater good. How could a lifelong freedom fighter have endorsed these ideas, given their logical and practical consequences? The answer is that Hazlitt erroneously equated altruism with benevolence, and he accepted and quoted Moritz Schlick’s characterization of egoism as “just ‘inconsiderateness with respect to the interests of fellow men, the pursuit of personal ends at the cost of those others.’” This error is less forgivable given Hazlitt’s occasional interaction with Ayn Rand, who demonstrated (a) that altruism is the morality of self-sacrifice, collectivism, socialism, and death—and (b) that egoism is the morality of non-sacrifice, mutual self-interest, and the foundation for individual rights and capitalism. Had Hazlitt fully grasped Rand’s conception of rational egoism and the nature of altruism, his errors would have been impossible (without evasion).

However, Hazlitt does deserve credit for not seeking to ground his defense of capitalism with appeals to faith—the modus operandi of conservatives. As he writes:

It is not the function of the moral philosopher as such to proclaim the truth of his religious faith or try to maintain it. His function is, rather, to insist on the rational basis of all morality, to point out that it does not need any supernatural assumptions, and to show that the rules of morality are or ought to be those rules of conduct that tend most to increase human cooperation, happiness and well-being in this our present life.²²

Eschewing faith-based argument helped Hazlitt to realize that “the term Natural Rights, like the term Natural Law, is in some respects unfortunate. It has helped to perpetuate a mystique which regards such rights as having existed since the beginning of time; as having been handed down from heaven; as being simple, self-evident, and easily stated.”²³

The book also demonstrates Hazlitt’s substantial familiarity with the history of philosophy and he draws heavily from the writings of Aristotle, Thomas Aquinas, David Hume, Adam Smith, Jeremy Bentham, John Stuart Mill, Philip Wicksteed, Ludwig von Mises, and F. A. Hayek. He also critiques other ethical systems, including those of Marx, Immanuel Kant, and Christianity. Thus, despite the book’s substantial flaws, it is worth reading for its rich treatment of the history of moral and political philosophy.

Another of Hazlitt’s cherished accomplishments was his novel, Time Will Run Back. In the preface, he describes the theme: “If capitalism did not exist, it would be necessary to invent it—and its discovery would be rightly regarded as one of the great triumphs of the human mind.” The book’s “reverse dystopian” plot dramatizes the differences between communism and freedom. It tells the story of an ignorant young man who inherits control over a communist dictatorship but questions whether it is the best possible system. His journey concretizes the logical transition from a dictatorship to a purely free market. Near the end of the novel, the idealistic hero, Peter Uldanov, explains his view of the proper role of government during a conversation with his economic adviser, Comrade Adams. Adams tells him that, although he admires the productiveness of the new system, he still doubts it because it is “selfish and acquisitive.” Uldanov responds with the following:

If you forbid what is harmful to others, you have a big enough job for any government to take care of. Moreover, you have definite logical boundaries to that job. But if you begin to demand altruism, legally, there are no logical limits until everybody has been forced to give away all he has earned or all he has earned above those who have earned less, and then you are back again to the point where no one has any incentive, whatsoever, to earn or produce anything.

Any society worth living in must of course be infused with a spirit of generosity and benevolence. It cannot depend solely on negative virtues, on people’s merely respecting one another’s liberty or their abstaining from deceit or violence. I concede all of that to be true, but it isn’t the function of the government to force people into these positive virtues, it couldn’t do it if it tried and the attempt would merely lead to horrible abuses. These positive virtues must come from within the society, itself, and that is merely another way of saying that they must come from within the individual.²⁴

By springboarding in the opposite direction from typical dystopian themes, Hazlitt created a work in a genre of its own. With its promise of material progress and spiritual rebirth, the book—although not philosophically flawless—is powerful, illuminating, and uplifting.

A Giant of Liberty

If American journalism had not been controlled by leftists in Hazlitt’s time, he may have been showered in Pulitzer prizes. He was a principled and tireless champion of liberty and capitalism over the course of eight decades. No matter the policy or issue, Hazlitt could always be counted on to cut to the quick and explain it clearly in terms of essentials, then analyze how well it comported with the American ideals of free enterprise and political liberty.

This is why Ludwig von Mises proclaimed the following during Hazlitt’s seventieth birthday celebration in 1964:

In this age of the great struggle in favor of freedom and the social system in which men can live as free men, you are our leader. You have indefatigably fought against the step-by-step advance of the powers anxious to destroy everything that human civilization has created over a long period of centuries. . . . You are the economic conscience of our country and of our nation.²⁵

At the same dinner, Hazlitt gave a speech titled “Reflections at 70,” which looked back on his career and assessed the state of human liberty. His overall account was rather pessimistic, noting that true advocates of liberty were in the distinct minority. However, he reminded everyone:

None of us are yet on the torture rack; we are not yet in jail; we’re getting various harassments and annoyances, but what we mainly risk is merely our popularity, the danger that we will be called nasty names. . . . We have a duty to speak even more clearly and courageously, to work hard, and to keep fighting this battle while the strength is still in us. . . . Even those of us who have reached and passed our 70th birthdays cannot afford to rest on our oars and spend the rest of our lives dozing in the Florida sun. The times call for courage. The times call for hard work. But if the demands are high, it is because the stakes are even higher. They are nothing less than the future of liberty, which means the future of civilization. . . . Be of good heart: be of good spirit. If the battle is not yet won, it is not yet lost either.²⁶

Hazlitt went on to live and work for another twenty-eight years after that speech, and he remained a powerful voice throughout that time. The legacy that Hazlitt left through his writings is extremely relevant today and far more valuable than that of his academic peers. He remains the best writer on economics this country has seen, and anyone would profit from studying his works.

Above all, Henry Hazlitt understood that ideas have consequences and that the future of freedom depends on a more widespread understanding of the propriety of free markets. As he said, “I’ve been preaching liberty as against coercion; I’ve been preaching capitalism as against socialism; and I’ve been preaching this doctrine in every form and with any excuse.” And so he did, right up to his ninety-eighth year.

While in his nineties, Hazlitt, along with his wife, Frances, compiled a book titled The Wisdom of the Stoics. The book consisted of their favorite passages and quotations from the stoic philosophers Seneca, Epictetus, and Marcus Aurelius. One of the quotes they selected from Seneca reads: “Honors, monuments, and all the works of vanity and ambition, are demolished and destroyed by time; but the reputation of wisdom is venerable to posterity.”²⁷

Whatever time may demolish, Henry Hazlitt’s words of wisdom will continue enlightening minds about the vital science of economics.

About Tom Malone

Tom Malone is an entrepreneur and technology consultant in the greater Boston area, and the author of A Defense of American Ideals.

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