Henry Hazlitt

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Henry Stuart Hazlitt (November 28, 1894July 9, 1993) was an American journalist who wrote about business and economics for such publications as The Wall Street Journal, The Nation, he American Mercury, Newsweek, and The New York Times.


  • Every man knows there are evils in this world which need setting right. Every man has pretty definite ideas as 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 consequence of their own particular evil-in-chief.
    • Henry Hazlitt, Thinking As A Science (1916).

Economics in One Lesson (1946)[edit]

Henry Hazlitt, Economics in One Lesson (1946).

The Lesson (ch. 1)[edit]

  • The art of economics consists in looking not merely at the immediate hut 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.
  • It is often sadly remarked that the bad economists present their errors to the public better than the good economists present their truths. It is often complained that demagogues can be more plausible in putting forward economic nonsense from the platform than the honest men who try to show what is wrong with it. But the basic reason for this ought not to be mysterious. The reason is that the demagogues and bad economists are presenting half-truths. They are speaking only of the immediate effect of a proposed policy or its effect upon a single group. As far as they go they may often be right. In these cases the answer consists in showing that the proposed policy would also have longer and less desirable effects, or that it could benefit one group only at the expense of all other groups. The answer consists in supplementing and correcting the half-truth with the other half. But to consider all the chief effects of a proposed course on everybody often requires a long, complicated, and dull chain of reasoning. Most of the audience finds this chain of reasoning difficult to follow and soon becomes bored and inattentive. The bad economists rationalize this intellectual debility and laziness by assuring the audience that it need not even attempt to follow the reasoning or judge it on its merits because it is only “classicism” or “laissez-faire,” or “capitalist apologetics” or whatever other term of abuse may happen to strike them as effective.

The Broken Window (ch. 2)[edit]

  • Let us begin with the simplest illustration possible: let us, emulating Bastiat, choose a broken pane of glass.

    A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.

    Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $50 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.

    The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.

The Blessings of Destruction (ch. 3)[edit]

  • So we have finished with the broken window. An elementary fallacy. Anybody, one would think, would be able to avoid it after a few moments’ thought. Yet the broken-window fallacy, under a hundred disguises, is the most persistent in the history of economics. It is more rampant now than at any time in the past. It is solemnly reaffirmed every day by great captains of industry, by chambers of commerce, by labor union leaders, by editorial writers and newspaper columnists and radio commentators, by learned statisticians using the most refined techniques, by professors of economics in our best universities. In their various ways they all dilate upon the advantages of destruction.
  • Though some of them would disdain to say that there are net benefits in small acts of destruction, they see almost endless benefits in enormous acts of destruction. They tell us how much better off economically we all are in war than in peace. They see “miracles of production” which it requires a war to achieve. And they see a postwar world made certainly prosperous by an enormous “accumulated” or “backed up” demand. In Europe they joyously count the houses, the whole cities that have been leveled to the ground and that “will have to be replaced.” In America they count the houses that could not be built during the war, the nylon stockings that could not be supplied, the worn-out automobiles and tires, the obsolescent radios and refrigerators. They bring together formidable totals.

    It is merely our old friend, the broken-window fallacy, in new clothing, and grown fat beyond recognition. This time it is supported by a whole bundle of related fallacies. It confuses need with demand.

The Curse of Machinery (ch. 7)[edit]

  • Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is long-continued mass unemployment, machines get the blame anew. This fallacy is still the basis of many labor union practices. The public tolerates these practices because it either believes at bottom that the unions are right, or is too confused to see just why they are wrong. The belief that machines cause unemployment, when held with any logical consistency, leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.
  • Suppose a clothing manufacturer learns of a machine that will make men’s and women's overcoats for half as much labor as previously. He installs the machines and drops half his labor force.

    This looks at first glance like a clear loss of employment. But the machine itself required labor to make it; so here, as one offset, are jobs that would not otherwise have existed. The manufacturer, how ever, would have adopted the machine only if it had either made better suits for half as much labor, or had made the same kind of suits at a smaller cost. If we assume the latter, we cannot assume that the amount of labor to make the machines was as great in terms of pay rolls as the amount of labor that the clothing manufacturer hopes to save in the long run by adopting the machine; otherwise there would have been no economy, and he would not have adopted it.

    So there is still a net loss of employment to be accounted for. But we should at least keep in mind the real possibility that even the first effect of the introduction of labor-saving machinery may be to increase employment on net balance; because it is usually only in the long run that the clothing manufacturer expects to save money by adopting the machine: it may take several years for the machine to "pay for itself."

    After the machine has produced economies sufficient to offset its cost, the clothing manufacturer has more profits than before. (We shall assume that he merely sells his coats for the same price as his competitors, and makes no effort to undersell them.) At this point, it may seem, labor has suffered a net loss of employment, while it is only the manufacturer, the capitalist, who has gained. But it is precisely out of these extra profits that the subsequent social gains must come. The manufacturer must use these extra profits in at least one of three ways, and possibly he will use part of them in all three: (1) he will use the extra profits to expand his operations by buying more machines to make more coats; or (2) he will invest the extra profits in some other industry; or (3) he will spend the extra profits on increasing his own consumption. Whichever of these three courses he takes, he will increase employment.

  • In brief, on net balance, machines, technological improvements, economies and efficiency do not throw men out of work.

Spread-the-Work Schemes (ch. 8)[edit]

  • The spread-the-work schemes, in brief, rest on the same sort of illusion that we have been considering.  The people who support such schemes think only of the employment they would provide for particular persons or groups; they do not stop to consider what their whole effect would be on everybody.

    The spread-the-work schemes rest also, as we began by pointing out, on the false assumption that there is just a fixed amount of work to be done.  There could be no greater fallacy.  There is no limit to the amount of work to be done as long as any human need or wish that work could fill remains unsatisfied.  In a modern exchange economy, the most work will be done when prices, costs, and wages are in the best relations to each other.

Where the Monetarists Go Wrong (1976)[edit]

Henry Hazlitt, "Where the Monetarists Go Wrong", The Freeman (Foundation for Economic Education, 1 August 1976).

  • In the last decade or two there has grown up in this country, principally under the leadership of Professor Milton Friedman, a school calling itself the Monetarists.  The leaders sometimes sum up their doctrine in the phrase: "Money matters," and even sometimes in the phrase: "Money matters most."
  • It is with considerable reluctance that I criticize the monetarists, because, though I consider their proposed monetary policy unfeasible, they are after all much more nearly right in their assumptions and prescriptions than the majority of present academic economists.  The simplistic form of the quantity theory of money that they hold is not tenable; but they are overwhelmingly right in insisting on how much "money matters," and they are right in insisting that in most circumstances, and over the long run, it is the quantity of money that is most influential in determining the purchasing power of the monetary unit.  Other things being equal, the more dollars that are issued, the smaller becomes the value of each individual dollar.  So at the moment the monetarists are more effective opponents of further inflation than the great bulk of politicians and even putative economists who still fail to recognize this basic truth.
  • I do not mean to suggest that all those who call themselves monetarists make this unconscious assumption that an inflation involves this uniform rise of prices.  But we may distinguish two schools of monetarism.  The first would prescribe a monthly or annual increase in the stock of money just sufficient, in their judgment, to keep prices stable.  The second school (which the first might dismiss as mere inflationists) wants a continuous increase in the stock of money sufficient to raise prices steadily by a "small" amount—2 or 3 per cent a year.  These are the advocates of a "creeping" inflation.  …  I made a distinction earlier between the monetarists strictly so called and the "creeping inflationists."  This distinction applies to the intent of their recommended policies rather than to the result.  The intent of the monetarists is not to keep raising the price "level" but simply to keep it from falling, i.e., simply to keep it "stable."  But it is impossible to know in advance precisely what uniform rate of money-supply increase would in fact do this.  The monetarists are right in assuming that in a prospering economy, if the stock of money were not increased, there would probably be a mild long-run tendency for prices to decline.  But they are wrong in assuming that this would necessarily threaten employment or production.  For in a free and flexible economy prices would be falling because productivity was increasing, that is, because costs of production were falling.  There would be no necessary reduction in real profit margins.  The American economy has often been prosperous in the past over periods when prices were declining.  Though money wage-rates may not increase in such periods, their purchasing power does increase.  So there is no need to keep increasing the stock of money to prevent prices from declining.  A fixed arbitrary annual increase in the money stock "to keep prices stable" could easily lead to a "creeping inflation" of prices.
  • But this brings us to what I consider the fatal flaw in the monetarist prescriptions.  If the leader of the school cannot make up his own mind regarding what the most desirable rate of monetary increase should be, what does he expect to happen when the decision is put in the hands of the politicians?  …  The fatal flaw in the monetarist prescription, in brief, is that it postulates that money should consist of irredeemable paper notes and that the final power of determining how many of these are issued should be placed in the hands of the government—that is, in the hands of the politicians in office.  The assumption that these politicians could be trusted to act responsibly, particularly for any prolonged period, seems incredibly naive.  The real problem today is the opposite of what the monetarists suggest.  It is how to get the arbitrary power over the stock of money out of the hands of the government, out of the hands of the politicians.

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