Economics in One Lesson question

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    Hi, all –

    First, my confession: I am new here, and I’m just now acclimating myself to the musings of rational economic thought. There are still; however, ghosts in the machine, so apologies if my question comes off as juvenile. Luckily, I can’t see the rolling eyes in this form!

    My question is a general one. As a conservative, I have been accostomed to arguing against the liberal norm which assumes a “closed economic system”. He or she will routinely argue that capitalism creates the class conflict we see today. The cause of so much wealth being concentrated is due to so much poverty. I often argue against this mindset by saying that we don’t live in a “zero-sum” system where Prince Philip’s wealth creates my poverty. A dollar created gained by Dr. Woods, isn’t a dollar taken away from me.

    It seems that Economics in One Lesson has this same flavor to its arguments (i.e. – the one lesson is that we can’t see capital, jobs, innovations that are never introduced into society because this capital is taken and diverted to a government project). Doesn’t this smack of a “closed economic system”? What would prevent my liberal friend from taking a page from my book to say, “but I thought we didn’t live in a system where money given to one party has been taken from another”.

    Now we see the problem. My premises are clearly misdirected here. I have such an enormous respect for the folks who recommend this book (Dr. Woods, Jr, Lew Rockwell, etc.) that I know my approach must be misguided! Any thoughts are appreciated. The only thing I am falling back on is that the cases presented by Hazlit in EIOL are cases where money is forcefully transferred by a third party rather than voluntarily given by a willing party. I think this is critical in the answer, but that tumbler hasn’t quite fallen in the lock yet!



    Here are some off-the-cuff ideas that might help:

    (1) The ONLY way (aside from inheritance/luck) to get wealthy in a free market society is to produce goods or provide services that others demand (i.e. need or want). Challenge your friend to DEMONSTRATE A CAUSAL CONNECTION between one person accumulating wealth and another person subsequently falling into poverty. There is none to be found, since none exists. He may produce numbers pointing to increasing poverty rates, but those will be bogus because “poverty” changes in definition, and relative to the times, “poor” people today are way better off (materialistically) than rich people in the 18th century.

    (2) I think you have too narrowly framed “the lesson.” I know it was not your intention to give the book definition of it, but just want to make sure it’s clear. Hazlitt’s point is that there are two economic fallacies commonly committed, which lead to negative outcomes The first is that people ONLY look at short-run consequences rather than long run consequences. The second is that people ONLY look at the effects of policy on specific group(s) rather than the effects for all groups.

    (3) I honestly am not familiar with the term “closed economic system.” (I am quite new to liberty myself). Perhaps these remarks are relevant to the issue. We do NOT live in a system where money given to one party has been TAKEN from another. You are correct that the key is there is no forceful transfer of goods on a free market. Exchange on a free market is VOLUNTARY which necessarily means that both parties benefit from the exchange. It is not the exploitation of another man to charge him $25 for sneakers; it is the wonderful benefit of a system where the man may spend as he wishes.


    Yep, I think that’s the key point. People only get rich at the expense of others when property rights are not protected (i.e. robbery, government subsidies, having the benefit of access to newly created money under old prices, etc).

    In a free market, exchanges only occur when both sides value the exchange to be in their favor. While there will still be cases where someone may feel that the other person got a better improvement than himself during the exchange, improvement still occurred for both sides. This “bargaining range” decreases as the market develops (if I understand it correctly).

    Excellent book. I recommend it to anyone for their first step in exploring the effects of government intervention. I saw this quote the other day by a anti-keynsian economist in China… “We human beings always seek happiness,” says Mr. Zhang. “Now there are two ways. You make yourself happy by making other people unhappy—I call that the logic of robbery. The other way, you make yourself happy by making other people happy—that’s the logic of the market. Which way do you prefer?”

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