[BOOKS] ✫ The Failure of the New Economics By Henry Hazlitt – Saudionline.co.uk

  • Paperback
  • 451 pages
  • The Failure of the New Economics
  • Henry Hazlitt
  • English
  • 24 December 2019
  • 9781933550114

10 thoughts on “The Failure of the New Economics

  1. says:

    This detailed critique of John Maynard Keynes s The General Theory of Employment, Interest, and Money is much better written and cogent than the book it examines.As I mentioned in my review of Keynes s work, I learned about Hazlitt s book from an review of the General Theory and felt inspired to take the reviewer s advice and read the two books together, in tandem I would read a little bit of General Theory, then I would read Hazlitt s commentary on the text This made Keynes s impenetrable book understandable, and enabled me to read the whole thing skimming certain portions.Hazlitt admits that he himself has difficulty understanding what Keynes is saying in many places, and offers his best guess at a translation into plain language As a reader of both books, I was grateful that Hazlitt had both the training and the patience to tackle this task, for I have neither, even though I realize that Keynes s work has been and continues to be a major influence on the world of economics, which is to say, on the lives of each of us On the other hand I would not want to lend too much credence to Keynes s own assertion near the beginning of his book that it is addressed mainly to his fellow economists, and that therefore laymen may find it heavy going For I doubt that Keynes s ideas are recondite rather, the problem is that they are, by him, so poorly expressed.Hazlitt s own stance is that of classical economics, or anyway is descended from that line In chapter 1 of his excellent primer, Economics In One Lesson, Hazlitt sums up all of economics in not just one lesson but in a single sentence 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.In contrast, Keynes is famous for his response to the question about the long term consequences of his suggestions In the long run run we re all dead Maybe this flippant remark was not meant to be taken seriously, but in fact his ideas have been applied and implemented with a willful blindness to their long term effects.In this book Hazlitt does his best to distill the meaning from Keynes s thickets of words Flipping open Keynes s book at random, I arrive at this on page 163, where Keynes is trying to summarize the thinking of those mainstream economists with whom he differs In any given industry we have a demand schedule for the product relating the quantities which can be sold to the prices asked we have a series of supply schedules relating the prices which will be asked for the sale of different quantities on various bases of cost and these schedules between them lead up to a further schedule which, on the assumption that other costs are unchanged except as a result of the change in output , gives us the demand schedule for labor in the industry relating the quantity of employment to different levels of wages, the shape of the curve at any point furnishing the elasticity of demand for labor.A point that Hazlitt makes again and again is that Keynes sets out to refute positions that no one actually holds That is, much of his book is an instance of the straw man fallacy Would any economist, much less all of them, assuming that he could unpack the meaning of the above sentence, agree that it represents his understanding of how things work It s most unlikely Keynes would have been convincing if he had quoted some authority verbatim and then set out to refute him But Keynes quotes few other authors, and these are mainly those he approves of.Another serious recurring problem is the slipperiness of Keynes s own definitions Hazlitt points out repeatedly how these implicitly change from chapter to chapter, rendering them meaningless Beyond this, some of his definitions are meaningless as stated One of these is the notion of the labor unit About this Keynes writes Insofar as different grades and kinds of labor and salaried assistance enjoy a or less fixed relative remuneration, the quantity of employment can be sufficiently defined by taking an hour s employment of ordinary labor as our unit and weighting an hour s employment of special labor in proportion to its remuneration.If you ve read Capital by Karl Marx then you will recognize this definition, for it is essentially the same, as Hazlitt points out Hazlitt continues Keynes s quantity of employment is not a quantity of employment It is the quantity of money received by laborers who are employed.Keynes is measuring labor in units of dollars.Not that it makes much difference, for the definition does not play much part in his argument But it is a sign of intellectual carelessness It s as though Keynes s reputation was already so great when he wrote his book that he felt no need for consistency or even evidence a lack that Hazlitt takes him to task for Instead of providing evidence, here and there Keynes will say something like, statistics could be found to show this Hazlitt actually looks for statistics and other data to try to substantiate Keynes s assertions in each case the data goes against the assertions.In Hazlitt s book Keynes appears in a poor light Not only are his thinking and writing shown to be inadequate, but Hazlitt draws attention to Keynes s patronizing and authoritarian digressions Keynes has contempt for capitalists, rentiers, landlords, and even for regular working people insofar as they perversely try to save some of their earnings For their own good, all of these people need to be brought under the control of the state and its wise officials.Indeed, in reading Hazlitt s book, which is clear, understandable, and sensible, it is hard to believe that whole generations of economists and politicians have been enthralled with Keynes s ideas As Hazlitt points out at the end, there have been barely a handful of works written in criticism of Keynes, while whole libraries have been filled with laudatory and enthusiastic exegeses I m left with the impression that his obscurity has been mistaken for brilliance.Based on my own experience, I don t think you should attempt Keynes s General Theory without a copy of Hazlitt s book by your side I would go further if you want to find out what Keynes s ideas are, just read Hazlitt and forget about the General Theory In it you will learn everything about Keynes that you could ever need to know, while also enjoying a clear, fluent read.

  2. says:

    John Maynard Keynes published The General Theory of Employment, Interest and Money in 1936 Keynes s work has had influence on modern macroeconomics than any other It continues to shape economic discussions by the media and policies implemented by the Fed and elected officials Full disclosure I haven t read Keynes s General Theory From what I understand, his main argument was a direct assault on classical economics Keynes argues that unemployment arises from insufficient aggregate demand and not an artificially high price of labor as classical economists posit To achieve full employment, the government can and should work to increase demand This can be accomplished through monetary policy the Fed lowering interest rates to spur borrowing and investment and fiscal policy the government increasing expenditures on public works projects, welfare, warfare, etc Keynes coined a term called the multiplier, which is basically a measure of the amount of increased aggregate demand that an additional dollar of spending creates The idea is that the U.S government can spend 100 and create additional GDP of 150 because the money will percolate through the economy and spur productive activity Keynes also argues that he has solved the problem of booms and busts He can give us a perpetual boom by the government keeping interest rates below where they would be in a free market He says, The Remedy for the boom is not a higher rate of interest but a lower rate of interest For that may enable the boom to last The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi slump but in abolishing slumps and thus keeping us permanently in a quasi boom Henry Hazlitt was a classical economist, who, here, ruthlessly dismantles Keynes s magnum opus HH asserts that Keynes s work was so widely regarded for a couple of reasons First, it was opaque and convoluted, so few people could both understand it and had the courage to challenge it Second, it played into the proclivities of the people in power politicians loved the idea of being able to spend , and big business was close enough to those politicians to benefit themselves The most recent financial crisis seems to bear this out Look at the benefits recently bestowed upon GM, Chrysler, Wall Street banks, and Fannie and Freddie.HH says Keynes has it all wrong There is no multiplier, and government dictating the price of money i.e., the interest rates creates booms and busts or at least greatly magnifies them Moreover, keeping interest rates low discourages saving, which is the prerequisite to capital accumulation and an increased standard of living There are no free lunches You can t magically wave away scarcity of capital through currency manipulation Inflation is a bad thing that harms consumers, and it necessarily results from low interest rates or printing money To criticize Keynes s faulty reasoning and reveal his numerous errors, Hazlitt analyzes Keynes s General Theory chapter by chapter, and sometimes line by line Because the General Theory is technical and inaccessible, The Failure of the New Economics often follows suit My mind wandered, and I will not remember the specific arguments going forward Towards the end of the book, however, HH has provided a nice summary of each of the chapters, and I will provide some of the quotes below The book reminded me of a conversation with my mother I had long ago One of my earliest memories is a ride in the backseat of my mom s 1988 Honda Accord It was sometime around 1990 and I was about 5 years old The image is foggy But I can see the car has a silver exterior and dark brown interior We are headed north to school My mom hands me two quarters, which I could use after school to get a fistful of candy Skittles, Runts, or MMs and a coke I am very pleased with these two quarters I understand from experience that they will be converted into tasty treats later in the day.Suddenly, a question strikes me The two pieces of silver metal in my hands contain some mysterious, almost magical power that makes me very happy I wonder where they come from and why can t there be of them I decide to ask.Me Mom, where does money come from Mom I get money from working at the hospital.Me Where does the hospital get money Mom From patients.Me Where do patients get money Mom From their jobs.Me But where do these coins and dollars come from Mom They come from the government The government makes them.Me Well, why doesn t the government just make a whole bunch of them and give them to everyone so everyone can get as much stuff as they want That s where my memory ends I don t remember the rest because I didn t understand my mom s answer My mother must have provided some explanation that the metal coins and paper bills were merely representations of things that people really wanted, like Skittles and coke We couldn t eat the metal and paper She must have told me that merely printing paper dollars would not actually make Skittles This was too confusing and abstract for my young mind to handle In my mind, the value of money and the value of goods were identical.In that memory, I am to Keynes as my mom is to Hazlitt.Memorable quotes Though Keynes has been praised as the peer of Adam Smith, Ricardo, and even Darwin, not a single important doctrine in his work is both true and original Keynes did not succeed in refuting Say s Law of Markets His attempted refutation consisted merely in ignoring the qualifications that the classical economists themselves insisted on as an integral part of the doctrine Keynes s thought is honeycombed with contradictions His central idea of an equilibrium with unemployment is self contradictory by the very concept and definition of equilibrium Keynes s definitions of his key terms Income, Saving, and Investment are merely circular they are all defined in terms of each other He so defines Saving and Investment that they are not only necessarily equal, but identical He repudiates and apologizes for his confusing definitions of these same terms as given in his Treatise on Money, but absent mindedly returns to these old definitions in his subsequent discussion, particularly when he tries to prove that investment increases employment and that saving reduces it Keynes treated saving with contempt as far back as The Consequences of the Peace, in 1919 His General Theory was merely his last rationalization of that contempt Keynes s investment multiplier is a myth There is never any fixed, predictable multiplier there is never any precise, predeterminable, or mechanical relationship between social income, consumption, investment, and extent of employment An equilibrium with unemployment is a contradiction in terms Keynes s arguments against liquidity and against speculation are untenable Speculative anticipations and risks are necessarily involved in all economic activity Somebody must bear them What Keynes is saying is that people cannot be trusted to invest the money they have themselves earned, and that this money should be seized from them by government officials and spent or invested in the directions in which those officials seeking to hold on to political power deem best Inflation is at once an uncertain remedy for unemployment, an unnecessary remedy for unemployment, and a dangerous remedy for unemployment Keynes s system, as he came to recognize at the end of the General Theory, was actually a reversion to the na ve and discredited theories of the mercantilists and underconsumption theorists, from Mandeville and Malthus to Hobson It was also a reversion to all the inflationist theories of the currency cranks, from John Law to Silvio Gesell Keynes s proposals for the euthanasia of the rentier, of the functionless investor, were proposals to rob the productive and expropriate their savings Keynes s plan for the socialization of investment would inevitably entail socialism and state planning Seriously carried out, it would remove any significant field for the exercise of private initiative and responsibility Keynes, in brief, recommended de facto socialism under the guise of reforming and preserving capitalism Domestic laissez faire and an international gold standard, blamed by Keynes as among the economic causes of war, were, in fact, powerful forces for peace and international cooperation It is the national planning policies recommended by Keynes that would tend to provoke wars Now though I have analyzed Keynes s General Theory in the following pages theorem by theorem, chapter by chapter, and sometimes even sentence by sentence, to what to some readers may appear a tedious length, I have been unable to find in it a single important doctrine that is both true and original What is original in the book is not true and what is true is not original I have found in Keynes s General Theory an incredible number of fallacies, inconsistencies, vaguenesses, shifting definitions and usages of words, and plain errors of fact My desire for thoroughness in pointing these out has carried the length of this book much beyond what I originally intended The whole of the General Theory might be described as an exercise in obfuscation, and the obfuscation begins at an early point The virtue of Keynes s teaching is that it praised thriftlessness, reckless spending, and unbalanced budgets and was therefore extremely palatable to the politicians in power.

  3. says:

    The book of Henry Hazlitt, published in 1959, is a criticism of John Maynard Keynes earlier book The General Theory of Employment, Interest, and Money, published in 1936 In his book, Keynes tried to disprove the traditional economic belief that free market capitalism will have only a small amount of unemployment Keynes book was published during the Great Depression, when there was widespread unemployment Keynes used his theory in order to justify government intervention in the economy Current pro capitalist economists say that unemployment is not caused by a failure of the market, but rather by government intervention in the economy, often blaming the Federal Reserve, which was created in 1913, as a primary cause of the Great Depression As part of his attack on the classical economists, in particular, on Jean Baptiste Say, Keynes misrepresented Say s ideas Keynes asserted that Say said that there is no unemployment under free market capitalism, but what Say actually said was that it takes time for knowledge of changes in supply in demand to travel through the market, so that there may be temporary, small pockets of unemployment here and there, but with time these pockets will shrink Keynes also accused classical economists of devising a theory that was true only in idealized situations Keynes claimed that his theory was general and realistic But the theory Keynes described that applies only in idealized situations is not classical economics, but rather Keynes simple minded misrepresentation of it This is called putting up a straw man Hazlitt also makes many other criticisms of Keynes Keynes introduced unnecessary new terms Keynes shifted his definitions of terms during the course of his book Keynes disparages saving and praises consumption Keynes contradicts himself by praising investment but disparaging saving which is required for there to be money to invest Keynes often considers the effect of a transaction on only one of the parties, and ignores the effect on the other party In particular, he ignores the effect of interest rates on lenders, and he ignores the effect of wage rates on employers Keynes sometimes dismisses the arguments of his opponents, rather than providing evidence or rational arguments against them For example, Keynes dismisses the assertion that unjustifiably high wages are a cause of unemployment by calling it not very plausible , without showing why it is implausible.

  4. says:

    A fantastic example of what happens when a logical, concise and excellent writer encounters the masterwork of a scatter brain.

  5. says:

    Although the statistics are extremely hard to listen to and follow, it was still a complete tear down of John Maynard Keynes and his economics that have done damage to western countries all around the world In short, destroy your economy to save the wage rate And now that we re 18 Trillion in debt, his economic beliefs have pushed us most likely past the point of no return.

  6. says:

    For me, it is a great book I always disliked Keynesian macroeconomics and this is great ste by step critical analysis of its errors But for positive explanation of economic theory there are other books From Hazlitt himself e.g Economics in one lesson.

  7. says:

    2.5 stars and DNF.The 2.5 stars is not an indication that this is a bad book, I just wasn t liking this style, especially compared to his Economics in one lesson In this book he responds to Keynes major work, however he responds by copying that same style which is one I didn t care for His arguments are solid and logical, and if only rating this book on what he said, it would be notably higher I simply never got into this book, especially that I was primarily reading it in short sections and rarely than 20 minutes at a time Perhaps I will try this book again at a later date.

  8. says:

    Beautiful polemics to deal with a polemicist.

  9. says:

    Henry Hazlett hits the nail on the head in this stunning and scathing treatise on John Maynard Keynes general theory of economics as was offered in the book The General Theory of Employment, Interest and Money Hazlett takes on this dazzling rebuke of the theories of Keynes picking apart the book chapter by chapter skillfully showing the great fallacies which Keynes presented with little to no discernible basis for the mathematical functions save for Keynes own assertions As Hazlett points out on numerous occasions throughout this work, mere assertion is no basis for a working functions in mathematically dealing with the myriad of variables in calculating economic principals.All in all, This work is a prime example of the severe shortcomings and outright misrepresentations to the blatant falsehoods and self serving manipulations within the elaborations into the Keynesian economic theory.

  10. says:

    I would have a tough time recommending this book to anyone without at least a little bit of background in economics, and Hazlitt does seem to over parse a bit at times, but overall an excellent book.Unfortunately, the bad economics peddled by Keynes is so seductive to people that want to be important and take wealth without earning it that it still holds sway with academia and government today I can heartily recommend this book to Paulson, Bernacke, Geithner, and all the other guys currently administering poison to the sick patient.And Hazlitt does write with a certain cool mid century style PS, this essay is in a sense a condensed version of the major themes of this book albeit by a different author if you want to get a brief introduction to the topic and decide if you then want to consume a whole book.

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The Failure of the New Economicscharacters The Failure of the New Economics, audiobook The Failure of the New Economics, files book The Failure of the New Economics, today The Failure of the New Economics, The Failure of the New Economics be73c Henry Hazlitt Did The Seemingly Impossible, Something That Was And Is A Magnificent Service To All People Everywhere He Wrote A Line By Line Commentary And Refutation Of One Of The Most Destructive, Fallacious, And Convoluted Books Of The Century The Target Here Is John Maynard Keynes S General Theory, The Book That Appeared InAnd Swept All Before It In Economic Science, Keynes Changed Everything He Supposedly Demonstrated That Prices Don T Work, That Private Investment Is Unstable, That Sound Money Is Intolerable, And That Government Was Needed To Shore Up The System And Save It It Was Simply Astonishing How Economists The World Over Put Up With This, But It Happened He Converted A Whole Generation In The Late Period Of The Great Depression By The S, Almost Everyone Was Keynesian But Hazlitt, The Nation S Economics Teacher, Would Have None Of It And He Did The Hard Work Of Actually Going Through The Book To Evaluate Its Logic According To Austrian Style Logical Reasoning The Result APage Masterpiece Of Exposition Murray Rothbard Was Blown Away

About the Author: Henry Hazlitt

Henry Hazlitt was a libertarian philosopher, an economist, and a journalist for various publications including The Wall Street Journal and The New York Times, and Newsweek He was the founding vice president of the Foundation for Economic Education and an early editor of The Freeman, an important libertarian magazine In 1946 Hazlitt wrote Economics in One Lesson, his seminal text on free market