Learning to think like an economist

Bryan Hyde is a news commentator and co-host of the Perspectives morning show on Fox News 1450 AM 96.7 FM. The opinions stated in this article are solely his and not those of St. George News.

OPINION –Most of us think of economics in terms of the flow of markets, goods and services with a dose of government regulation thrown in to make it all work.  A simpler, more concise definition would define economics as the study of human choices as they relate to ends and means.

It shouldn’t require multiple graduate degrees and an incomprehensible vocabulary to discuss or understand economics.

As our national economy gasps along on life support, we cannot leave the thinking to so-called experts any longer.

Growing fear and uncertainty have compounded the difficulty of being able to clearly see the bigger picture. After numerous costly bailouts, each of us must have a clear understanding of what’s at stake to better root out the widely held economic fallacies being pushed on us as solutions.

Those who wish to increase their knowledge of economics will find a remarkable resource in the book “Economics in One Lesson” by Henry Hazlitt.

First published in 1946, Hazlitt’s lesson provides the reader with a clear understanding of economic principles using real world examples to illustrate his points. The single most important idea of his entire lesson is: “When studying the effects of any given economic proposal we must trace not merely the immediate results but the results in the long run, not merely the primary consequences but the secondary consequences, and not merely the effects on some special group but the effects on everyone.”

Hazlitt’s thesis echoes the wisdom of a 19th Century French economist named Frederic Bastiat.  In Bastiat’s timeless essay, “That Which Is Seen and That Which Is Not Seen,” he makes a powerful case that the immediate effect seldom remains the only effect of a given policy or law.

For instance, government bailouts of failing businesses produce the immediate result of a taxpayer-funded subsidy from Washington D.C. via an infusion of money to companies in need. But the long-term results will definitely affect more than just those companies and their employees.

The bailed-out companies benefit to the exact degree that the taxpayer loses, as the money being transferred out of the taxpayer’s pockets will not be used to support other more viable industries the taxpayer may have chosen to support.

In short, valuable resources have been diverted to an industry where they are being less efficiently employed.

In recent years this created the appearance of good news for failing banks and or autoworkers, but the bigger picture reveals that the long-term effects have not been so good for other industries or for taxpayers.

This can best be illustrated by the fact that the national debt has soared from $9 trillion to upwards of $15.3 trillion since the bailouts. This, in turn, has left Congress looking to boost revenues by raising taxes on those who produce wealth.  When the productive are taxed for growing their businesses, it negatively impacts consumer prices and unemployment.

The thought of any business failing is disturbing to many, but Hazlitt shows that keeping dying businesses alive artificially, through government subsidy, tends to lower the production of wealth and to retard economic and scientific progress.  This would be the unforeseen consequence that impacts far more than the recipients of the government subsidies.

The health of a dynamic economy requires that dying industries be allowed to die and that growing industries be allowed to grow without government intervention.  There was considerable outcry for buggy whip makers when the automobile came along, but no one seriously suggests a return to travelling by horse and buggy.  Instead, other opportunities and innovations moved forward to fill the gap.

We, as citizens, must be capable of distinguishing sound economic policies from the unsound policies that have buried us in debt and are destroying the value of the dollar.  Hazlitt’s Economics in One Lesson is a great primer for those who wish to understand the economic principles upon which wise choices are based.

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Copyright 2012 St. George News. 


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