To read mainstream economics reporting regularly is to encounter one blood pressure-raising falsehood after another.
Do you, the reader, own any Apple products? Are there Dell computers in your office, or at home? Have you purchased anything on Amazon in the past month?
The world would be a much better place if economists, politicians and pundits had this line from Henry Hazlitt memorized: “What is harmful or disastrous to an individual must be equally harmful of disastrous to the collection of individuals that make up a nation.”
It’s arguably the most important line ever written in any economics book. Hazlitt (1894-1993) was making the essential point that an economy is not a living, breathing blob; rather it’s a collection of individuals.
“The sole use of money is to circulate consumable goods.” – Adam Smith
In a recent op-ed for the Wall Street Journal, Morgan Stanley economist Ruchir Sharma observed that while the world is seemingly “turning inward,” this comes “in a period when countries are more beholden than ever to one institution, the U.S. Federal Reserve.” Interesting about Sharma’s piece is that if anything, it revealed the Fed’s growing irrelevance.
Commenting on the health of big U.S. banks last week, former Fed Chairman Ben Bernanke wrote on his Brookings blog that “a lot of progress has been made (and more is in train) toward reducing the risks that large, complex financial institutions pose for the financial system and the economy.” Bernanke’s observation came after Minneapolis Fed president Neel Kashkari’s recent commentary about the need to reduce the alleged problem of “Too Big To Fail” within banking. Some readers could be excused for wondering why Bernanke would have any opinion on the matter at all.
Suze Orman writes for an audience in search of investment advice and financial security, and her great success can be measured in numerous bestsellers. An Orman book sells really well because it properly makes simple what is simple: the common-sense path to financial health. Unsurprisingly, Orman doesn’t much excite economists, whose profession seems intent on turning human action into that which is bland and utterly incomprehensible. Economists “find her investment advice simplistic,” write George A. Akerlof and Robert J. Shiller, adding that “Our economist friends cannot stand [Orman’s] mommy-knows-best/I-told-you-to-do-that voice.” Yet their book Phishing for Phools: The Economics of Manipulation and Deception uses…
John Tamny comes to Liberty Law Talk to discuss his excellent new book Popular Economics. Many will recall the first time they read Hazlitt’s Economics in One Lesson. That book’s clear prose and striking examples provided a foundational introduction to free markets. But, as is often true, our practices are better than our theories. We instinctively grasp economics in our daily habits and choices but misunderstand the conditions and principles that support economic growth. Americans are confused about inequality, trade deficits, antitrust policy, fiscal policy, minimum wage, job creation, etc, despite pursuing their own economic self-interest without much thought. Dispelling such…