Henry Hazlitt’s Economics in One Lesson at 80

I first met the free-market journalist Henry Hazlitt (1894–1993) in June of 1974 at an Austrian economics conference in South Royalton, Vermont. I had been reading his articles and books for years, since I was around 14 or 15 years old, not long after I became interested in classical-liberal and libertarian ideas.  His famous volume Economics in One Lesson (1946), which is now celebrating its 80th anniversary, had helped open my eyes to the nature of the market economy and the contradictions in and dangers from a wide variety of interventionist and socialist policies.

I had, of course, brought with me my hard copy of Economics in One Lesson to the South Royalton conference to get him to autograph it. As I write this, now more than 50 years after that conference, I have the book next to me on my desk, opened to the fly page with his signature beneath his “warmest regards” to me.

In high school, I had an after-school job in the Hollywood Public Library in California, where my family lived. After completing my book-shelving tasks, I would hide on a balcony where the magazines and periodicals were stored. I combed through old issues from the 1930s for articles Hazlitt had written for The Nation magazine, the American Mercury, Current Events, and the Saturday Review of Books, among others. I then read through all 20 years of his Newsweek columns from 1946 to 1966. I would also watch out for each week’s issue of Human Events, where his syndicated column for the Los Angeles Times was regularly reprinted. And, of course, I read through all the articles that he wrote for The Freeman, published by the Foundation for Economic Education (FEE).

I also devoured as many of his books as I could get my hands on, including The Failure of the “New Economics” (1959), The Foundations of Morality (1964), What You Should Know About Inflation (1965), Time Will Run Back (1966), Man vs. the Welfare State (1969), The Conquest of Poverty (1972), and The Inflation Crisis, and How to Resolve It (1978). As valuable and insightful as they all were, none left the same impression and influence on me as Economics in One Lesson. Its power lies in its clarity, simplicity, and universality, in that it applies a core and inescapable set of ideas of about how markets work, the role and essentiality of the price system and the competitive process, the importance of incentives in a legal setting of respected and protected private-property rights, with impartial rule of law, and a government limited to securing the conditions for individual liberty and freedom of exchange in both domestic and foreign trade, along with a sound, noninflationary monetary system.

While talking with Hazlitt at the South Royalton conference, I mentioned that I had read an article of his written in the 1930s in which he had argued against the new federal minimum-wage law. I said that just a couple of months earlier, I had read another piece by him in Human Events, making the same basic arguments against the minimum wage in the 1970s as he had made in the 1930s, with the only difference being the mandated dollar amount. Didn’t he get tired having to make the same type of argument, over and over again, with seemingly no effect?

He admitted at times he did, but added that advocates of economic liberty had no alternative. It was all a matter of what he had argued in Economics in One Lesson and what the French economist Frederic Bastiat (1801–1850) had explained more than a century earlier: what is seen and what is not seen in government policy.

Hazlitt begins Economics in One Lesson by pointing out that economics is plagued by the attempt of various interest groups to use the government for privileges and favors for themselves at the expense of others in society. These hoped-for gains from government policies create strong incentives for such groups to propagandize and lobby those in government for the political benefits that can be obtained by burdening the rest of the population in the form of taxes, regulations, subsidies, trade protections, and other interventionist methods. Hazlitt then went on to say:

In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

In this lies almost the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been on or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups….

The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.

From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to 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.” [Italics in original]

Most of the remainder of the 225 pages of the book applies this perspective to a large array of economic policies and demonstrates the harmful and counterproductive consequences of a host of them. What is both useful and sometimes depressing about the chapters is how much of what Hazlitt analyzed eight decades ago is just as timely and relevant today. In other words, the same “bad economics” dominates economic policy discussion as much today as when Hazlitt wrote about it eight decades ago.

Minimum-wage laws and employment

Let’s take that example I mentioned to him of the minimum-wage law. Here is what Hazlitt wrote in Economics in One Lesson:

The first thing that happens, for example, when a law is passed that no one shall be paid less than $30 for a forty-hour week [that is, $1.33 an hour, or $23.60 per hour in 2025 inflation-adjusted dollars] is that no one who is not worth $30 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that is capable of rendering. In brief for a low wage you substitute unemployment. [The actual minimum wage in 1946 was $0.40 per hour, or $6.43 in 2025 inflation-adjusted dollars.]

In early 2025, 21 states and 48 municipal and state governments imposed higher mandatory minimum wages within their jurisdictions. For instance, in Seattle, Washington, the minimum wage was raised to $20.76 an hour in 2025, a huge amount above the current federal minimum wage of $7.25 per hour. So, what is seen? Well, all those who remain employed and receive the $20.76 are shown in the mainstream media as the gainers from the municipal increase. Their additional income provides a higher standard of living for them.

But what is not seen? All those whose value to those employers are less than $20.76 an hour and, thus, who are let go from their jobs, and now earn no income at all. Even more unseen are all those who might have been employed as a replacement when an existing worker retires or leaves his employment for whatever personal reason. Instead, the employer may look for some cost-efficient, labor-saving ways to operate his business with fewer workers. Or the job that does not appear at all because the employer decides to not increase his workforce due to the increased cost of doing so.

Also not seen are all those who may lose their jobs from the minimum-wage increase or who cannot find a low-skill, entry-level job because of it, who then turn to various government welfare programs for money and in-kind benefits redistributed from the working part of the labor force. Or the unseen and negative impact this may have on the psychology of being self-supporting and self-responsible, leading to a change in social attitudes such that a growing number come to believe that “the world owes them a living” via “entitlement” programs. This has a damaging impact on society when many think that a government handout is as respectable and honest as a paycheck that is earned in the marketplace.

Protectionism, tariffs, and trade

Another example that Hazlitt develops in one of the chapters is trade protectionism, a tariff, for example. A sweater manufacturer, for instance, argues against the elimination of an existing tariff that prevents a less-expensive foreign producer of sweaters, who has lower costs of production, from selling his product to Americans. American producers argue how beneficial it is to maintain the profitability of their business so that the jobs in their company will not be lost, as well as the related incomes in other parts of the economy that will be preserved by those domestic employees in the protected industry having the financial wherewithal to continue to buy other people’s goods and services. Wait a moment, says Hazlitt:

But the fallacy comes from looking merely at this manufacturer and his employees, or merely at the American sweater industry. It comes from noticing only the results that are immediately seen, and neglecting the results that are not seen because they are prevented from coming into existence….

[Suppose] the tariff is repealed: the [American] manufacturer goes out of business;
a thousand workers are laid off; the particular tradesmen when whom they patronized are hurt. This is the immediate result that is seen. But there are also results which, while much more difficult to trace, are no less immediate and no less real. For now sweaters that formerly cost $15 apiece can be bought for $10. Consumers can now buy the same quality of sweater for less money, or a much better one for the same money. If they buy the same quality of sweater, they not only get the sweater, but they have $5 left over, which they would not have had under the previous conditions, to buy something else. With the $10 that they pay for the imported sweater they help employment … in the sweater industry in England. With the $5 left over they help employment in any number of other industries in the United States

But the results do not end there. By buying English sweaters, they furnish the English with dollars to buy American goods here…. Because we have permitted the British to sell more to us, they are now able to buy more from us…. And though fewer people are now employed in the American sweater industry, more people are employed — and much more efficiently employed — in, say, the American automobile or washing-machine business. American employment on net has not gone down, but American and British production on net balance has gone up.

Labor in each country is more fully employed in doing just those things that it does best, instead of being forced to do things that it does inefficiently or badly [under the tariff]. Consumers in both countries are better off. They are able to buy what they want where they can get it cheapest. American consumers are better provided with sweaters, and British consumers are better provided with motor cars and washing machines.

Hazlitt then does the same with the tariff issue but in reverse, that is, starting with free trade between two countries and then surmising what happens when the American producers of sweaters lobby the U.S. government to impose a tariff to protect them from a foreign rival. If implemented, American consumers would no longer be able to purchase British sweaters for $10. With the tariff, the price of sweaters in the United States would rise to $15.

What would be seen more immediately would be the increased revenues and profits earned by the American sweater manufacturer and the increased number of workers hired and employed to produce more domestically made sweaters in place of some of the British ones. A variety of surrounding businesses that feed into American sweater production would also gain from greater sales, and so would the sellers of goods bought by those now employed in greater numbers by the sweater producer.

But Hazlitt then asks, what would be the unseen? First of all, American consumers of sweaters would now be paying $15 rather than the previous $10 for the garment. For any sweater they bought at this higher price, they would have to reduce their purchases of other things by $5. The producers of those other goods would see a decrease in business and profits. Some of their workers would be let go with the decline in demand for their services, and their purchases of various goods would also decline, meaning loss of business for those sectors of the economy.

In addition, since British manufacturers of sweaters would sell less of them in the United States, the workers employed there would earn fewer dollars, resulting in a reduction in their demand for American automobiles and washing machines. This clearly means that American export sales would decrease in line with the fall in the British imports of American goods, since they now earn fewer dollars to do so.

The overall result is that both American and British producers would be operating less efficiently than under free trade. More resources and labor would have to go into the manufacture of the American version of the sweaters, reflecting the $15 costs of domestic production. And the British would either have to produce at home, at a greater expense, some of the cars and washing machines they would like or purchase them from some other foreign seller to whom they may try to sell more sweaters. Either way, both American and British consumers would be relatively poorer, and each country’s scarce resources would be employed in more wasteful ways. Their respective standards of living would be lower than they were before the tariff was imposed, and therefore less than they could be if the tariff was repealed.

The relevance and cogency of Hazlitt’s argument on protectionism and tariffs could not be more timely under the current Trump administration, with its misguided and economically wrongheaded analysis of international trade. In Trump’s world, trade is a zero-sum game in which if one country gains, another must lose, rather than the positive-sum game that it is, in which each trader acquires what he values more highly than what he gives to acquire it. It is a world in which the president of the United States fails to understand that the benefits of trade are not measured by the amount of exports sold to other countries but rather in terms of the quantities and qualities of the imports that America’s exports enable us to buy on better terms than trying to make such foreign goods at home at higher costs.

Technological progress and the fear of machines

One of the common and dangerous economic fallacies, Hazlitt argues, is the fear of technological progress. The fear that machines will take away people’s jobs, leaving an increasingly larger and larger proportion of the population without a way to earn a living, has been a popular fear since the beginning of the Industrial Revolution, as Hazlitt explains with a variety of historical examples. Emotionally charged workers in 18th- and 19th-century Europe would break into places of business and destroy the machines being introduced as labor-saving devices.

The same fears have continued into the 20th century, Hazlitt bemoans. Once again, it is a matter of what is seen and not seen. The private enterpriser introduces machines that can do the work of, say, half his labor force for noticeably less than the cost of employing those who have been laid off. Those who are let go lose their current source of income, their standard of living falls, and those whose products they had been buying see a fall in the demand for the wares they sell, creating additional layoffs of members of the overall labor force. All this is what is more immediately seen.

If these fears were true, Hazlitt said:

Not only should we have to regard all further technical progress as a calamity; we should have to regard all past technical progress with equal horror…. The technophobes, if they were logical and consistent, would have to dismiss all this progress and ingenuity as not only useless but vicious. Why should freight be carried from New York to Chicago by railroads when we could employ enormously more men, for example, to carry it on their backs.

But what is unseen? The manufacturer introduces the new labor-saving machinery, the production of which will have required additional employment in the companies producing them. Different or new supply-chains of production and employment would emerge in the sectors serving and supplying the machinery manufacturers. Once the machines were put to work, they would be producing the same or a greater output at lower per unit costs. The result would be lower prices for this product, leaving more money in their pockets to purchase other things that previously may have been out of their reach at the formerly higher price for this good.

As a result, some of the freed-up hands from the introduction of the labor-saving machine would be employable in these other sectors of the economy to help fulfill the greater demands for other goods and services. Hazlitt does not discount or downplay the difficulties that those replaced by such labor-saving machinery may have learning new skills, having to change their location, accepting wages for a time that are less attractive than they had earned previously as they try to “retool” themselves.

But at the end of the day, in that longer-run perspective, such technological improvements are the basis of rising standards of living for virtually all in the society as more, better, and new and less-expensive goods are available on the market. This happened when “mechanization” replaced the very large number of people employed in agriculture in many places around the world. Those freed hands were then available to participate in work and production that previously was impossible to do as much or at all, when so many people were tied up — as they had been for thousands of years — just to meet the needs for food. Those freed hands entered manufacturing, industry, and consumer-oriented services sectors of the market, providing mankind as a whole with better and more comfortable lives.

The computer age and AI

Sixty or seventy years ago, every business employed people simply to do typing work — mailings and bills to customers, internal reports and memos, letters to the correspondents of the enterprise — with the larger firms often having “typing pools” employing dozens of people just working at their typewriters. Computers replaced the vast majority of them over time, as the desktops and laptops made it possible for everyone to just write things for themselves, including making changes and using spelling and grammar checks, without a typist having to manually redo every draft of changes and corrections, over and over again. Where did all those typists go, or what happened to those who were never hired when one of the employed typists retired, for instance? Those no longer needed for the more labor-intensive typing work learned to use computers to do similar or different work. Others just moved on to do all the other possible things for which hands and the minds guiding them had not been available to do before the arrival of the modern computer age.

The same fears are now being expressed about the new age of artificial intelligence. AI, it is said, will do away with the very need for people. “Thinking machines” will be so much more knowledgeable and efficient and productive that they will make human beings redundant. Everyone, except a small intellectual and technical “elite,” will be faced with unemployment or the most low-paying, unskilled jobs left over when AI machines control the world. The AI masters will crush the human slaves who originally created them.

These modern Luddites (named after the machine breakers of the nineteenth century) are merely the latest variation on that antimachinery theme. No doubt, if Henry Hazlitt were still alive today and issuing a revised edition of Economics in One Lesson, he would update the analysis to incorporate the AI fearmongers. Historically, major technological transformations carry in them so many changes in how and what people do that it is difficult to anticipate all that will come out of any new technological wave. This applies no less to artificial intelligence.

What can be said is that it will make it possible to do many types of physical and mental work that had been far more difficult, costly, and time-consuming in the past. All the applications and uses cannot even be imagined and anticipated with any degree of accuracy. After all, all of its uses will depend on the creative imaginings of those taking advantage of AI in the competitive processes of the marketplace. As Hazlitt says in the chapter on these technological changes, “The real result of the machine is to increase production, to raise the standard of living, to increase economic welfare…. They may do this in either of two ways: They do it by making goods cheaper for consumers … or they do it by increasing wages because they increase the productivity of the workers…. But in any case, machines, inventions, and discoveries increase real wages.”

We need to not forget that no matter how much we are warned about the bugaboo of “thinking” machines, AI is not the same thing as, and will not replace, the creative mystery that we call the human mind. Who could have imagined the world we take for granted today when the Industrial Revolution was starting to develop in the first decades of the nineteenth century? Who could have imagined all that the computer age has given us before the invention of the microchip in the 1950s? And I am inclined to think that when historians and social analysts look back at our time a hundred years from now, they will see many of the benefits of the AI revolution that we cannot even imagine at this present time, when it is only beginning. And, in retrospect, even with the short-run adjustments required for the integration of AI into our economic and social life over the coming years, those interpreters a century from now will say that the long-run benefits outweighed the short-run difficulties, as have most of the other technological and market-oriented transformations over the last three or four hundred years.

Space does not permit an appreciation of so many other themes Henry Hazlitt discusses in Economics in One Lesson, including, “The Fetish of Full Employment,” “Do Unions Really Raise Wages?,” “The Function of Profits,” “The Mirage of Inflation,” “The Assault on Savings,” and many others. It remains a permanent guidebook through the economic fallacies that constantly reappear in each generation.

The gracious gentleman

On a final personal note, during the summer of 1978, my graduate school colleague and friend, Don Lavoie (1951–2001), and I drove up in my car from New York City to Wilton, Connecticut, to spend part of the day at the home of Henry Hazlitt to do an interview with him that appeared in the October 1978 issue of Libertarian Review, edited by Roy Childs. Hazlitt and his wife Francis were most gracious hosts, feeding us a light lunch before starting the nearly four-hour taped interview.

Wanting to take our leave and not press any further on his time and strength (he was then nearly 84 years old), the Hazlitts insisted upon taking us out for dinner, having already, as it turned out, made reservations at a nearby restaurant. Delightful and charming conversation continued, with Francis telling us about her time at Paramount Pictures and how she came to know Ayn Rand.

Driving back to New York later that evening, Don Lavoie and I reflected on how fortunate we were to have had the opportunity to spend such a full day with one of the truly great and clear writers for freedom in the twentieth century. And how he would remain an inspiration for future generations through the insightful wisdom he left on the pages of the many books and articles he wrote as a legacy for the cause of liberty. And most especially Economics in One Lesson, now celebrating its 80th anniversary.

This article was originally published in the November 2025 issue of Future of Freedom.

The post Henry Hazlitt’s Economics in One Lesson at 80 appeared first on The Future of Freedom Foundation.