Just a casual reading of Hazlitt's acclaimed work.
The book is 425 pages long. When do you all think is a reasonable finish date? As soon as we work out some approximate dates, I'll edit the OP and include them. I propose we set a certain number of pages to read by Monday, so as to give time to others who want to join in. From then on, we could go weekly, reading about 30 - 50 pages per week? Let me know your thoughts.
Feel free to post summaries, questions, comments, concerns, or anything else you may feel is of importance as we read along.
Here's the link to pdf and ebook versions: http://mises.org/document/3655
As well, here's a study guide, though I'm not sure how good it is: http://mises.org/pdf/failure_of_new_economics_study_guide.pdf
- Week 1 Reading: (4/17-4/23): Read from page 1-42 (Chapter 1-3)
i like the idea. im in
Cool :P
I guess it'd actually be better to go by chapter than page number, right?
NonAntiAnarchist:I guess it'd actually be better to go by chapter than page number, right?
Aww Yeah!
If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH
But what about an end date?! Two months from now? As soon as we figure that out we can get this ish poppin'.
if we start monday and have two months to finish it sounds good. im new to read groups so would a weekly recap on a chapter be best?
Williamloveseconomics:[...] would a weekly recap on a chapter be best?
Maybe not if by "recap" you mean a "summary." We all would have read the same text. Of course questions/concerns/comments, on the other hand, would provide a similar function as a summary as well as clarify anything that needs clarifying as well as to highlight certain points.
Okay sounds good to me. i've had the book for a couple of months now so i see no better time than now.
Don't hold me to it, but I may write weekly summaries, if not only for my own benefit.
Doing the entire reading schedule by chapter would actually force some hefty reading requirements on people. Let's just take it one week at a time, and I'll keep re-editing the OP to include the relevant dates. I don't want to push people past what they're comfortable with.
So..
Week 1 (4/17-4/23): Read from page 1-42; Chapter 1-3
NonAntiAnarchist:Don't hold me to it [...]
Too late! It has been done. Sounds like a plan.
...
I've read the relevant chapters and I'm ready for discussion when anyone else is.
Some helpful sources that Hazlitt refers to:
Anderson, Economics and the Public Welfare http://mises.org/Books/economics_public_welfare_anderson.pdf - see in particular pp. 390-393 which is the beginning of the section on Keynes.
Mises, 'Lord Keynes and Say's Law' in Planning for Freedom pp. 95-100 - http://library.mises.org/books/Ludwig%20von%20Mises/Planning%20for%20Freedom%20and%20Twelve%20other%20Essays%20and%20Addresses.pdf
Before discussing the actual content I just have to say, Hazlitt is a beast. He writes with conviction, authority, and a sharp sense of humor. He puts complex matters into plain english and I think I laughed over a half dozen times reading just the first fifty pages. For an economics text, that's something.
1. In his section on Say's Law, he admits that the validity of the law is conditional to (from?/on?) equilibrium. He then later states that equillibrium is a useful fiction in the economist's drawer of devices. Does this not then invalidate Say's Law?
2. How can savings equal investment and correctly be defined as the difference between total proceeds and proceeds devoted to consumption? Does this not assume a total lack of cash holdings? It seems almost right, as in most of the time people put what they don't spend in the bank, but he doesn't seem to have qualms with that (yet).
3. On page 65 I wish he would condescend to flesh out his argument more instead of dismissing Keynes' labor-unit concept on the grounds of being Marxian. Nonetheless, it is nonsense to add together quantities of different things and expect the sum to be a useful representative. I think that's the core of his argument against Keynes' labor unit shtick, but there are also a number of bizarre and complicated constructions Keynes uses so there could be more.
4.
Propensity to Consume: "The psychology of the community is such that when the aggregate real income is increased aggregate consumption is increased, but not by so much as income"
Yikes. Let pre-increase aggregate real income be R1, post-increase R2, pre-increase consumption C1, post C2. He's essentially saying that C2 won't equal or exceed R2 - R1, correct? As Hazlitt says, so what? This concept allows for an increase, decrease, or non-change in the proportion of spending to saving. And why the word psychology?
5. Keynes' Macroeconomic entities Z, N, and D have no use as representatives of market phenomena. This part was a real eye-opener.
The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger
Still in reading through. Probably comment on tuesday or tomorrow.
1. He writes that...
The doctrine that supply creates its own demand, in other words, is based on the assumption that a proper equilibrium exists among the different kinds of production, and among prices of different products and services. And it of course assumes proper relationships between prices and costs, between prices and wage-rates. It assumes the existence of competition and free and fluid markets by which these proportions, price relations, and other equilibria will be brought about.
The basic idea of Say's Law is that the way I get the purchasing power to buy something is by first producing something useful to others, say a chair, which I can then trade for what I want, say a cheese sandwhich. My purchasing power [=demand] came about because I made something others need [=created supply].
Obviously, there are a lot of what ifs involved here. What if I insist on a million dollars in exchange for my primitive chair, which nobody is willing to pay? What if other people are making far superior chairs to mine, so that nobody wants mine? What if I make a million chairs, but only ten thousand people want chairs? What if the govt makes a law that anyone who buys my chairs gets a punch in the face? In all those cases, my creation of supply will not give me any purchasing power [=ability to demand] in return. In fact, in some cases I may glut the market with chairs, and/or I may have to stop making chairs [=unemployment].
The state of affairs which will actually give me purchasing power from the chair I created is what he calls equlibrium. He notes that even in a situation of disequilibrium, an unhampered free market will swiftly create equilibrium for me. If I insist on too high a price, I will quickly learn to lower it. If I make bad chairs that don't sell, I will seek another line of work. If I made too many chairs, I will also look for something else to do. In a free market, there would be no laws about punches in the face, and/or I would be able pretty easily to get some other job. In short, there is a fast acting correction mechanism that will take care of me, mainly my desire to actually make money, and a free market that lets me do so.
Be that as it may, the essential insight of Say remains, that purchasing power comes from production. This insight is what Keynes hated, because it contradicts everything he writes in his book.
When he says later in Chapter 4 that equilibrium doesn't really exist, what he means is that there is always somebody who goofs up to some extent, always someone who made too many chairs or charges too high a price for them. AE claims, for example, that high unemployment is a result of labor charging too high a price for its services, either from foolishness or because some law mandates it. But again, this does not contradict Say's Law, which assumes a free market and the final state of affairs for our chairmaker, which is quickly reached in a free market.
2. I think Hazlitt alludes to your objection when he writes that...
We cannot say that this use of these terms, or that these definitions, are wrong. ,,,But while, to repeat, no usage or definition of words can be arbitrarily dismissed as “wrong,” we may properly ask some questions of it. Is it in accordance with common usage? Or does it depart so much from common usage as to cause confusion—in the mind of the reader, or of the user himself? Does it help, or hinder, study of the problems involved? Is it precise, or vague? And finally, is it used or applied consistently?
You are pointing out that the definiton causes cionfusion because it departs from common usage.
3. His dismissal is that it's Marxian, and that therefore Bohm-Bawerk's rebuttal applies to Keynes exactly as it applied to Marx. He then quotes B-B's rebuttal. What's missing?
The core of his argument is that it is ridiculous to consider one hour of labor of a surgeon who makes $80 an hour to be 'the same thing" as 8 hours of labor of a burger flipper making ten bucks an hour. The money is the same, 80 dollars, but the labor is not. But Keynes, in some context Hazlitt doesn't elaborate on, considers them the same.
4. "He's essentially saying that C2 won't equal or exceed R2 - R1, correct?" Yes.
"As Hazlitt says, so what?" Keynes will argue that this is what causes recessions.
"And why the word psychology?" There are two answers to this. One is what Hazlitt wrote, that Keynes is subtly insulting the people who don't spend every last increase in income, because he is a big believer in spending. Another is that he is saying that it is not an economic force that makes people not spend all their increased income, but an emotional force. As such, it is inevitable, because people are ruled by their emotions. And so the recession resulting from the lack of spending is also inevitable.
5. I learned a lot about supply and demand curves from it, as well.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
Smiling Dave: 1. He writes that... The doctrine that supply creates its own demand, in other words, is based on the assumption that a proper equilibrium exists among the different kinds of production, and among prices of different products and services. And it of course assumes proper relationships between prices and costs, between prices and wage-rates. It assumes the existence of competition and free and fluid markets by which these proportions, price relations, and other equilibria will be brought about. The basic idea of Say's Law is that the way I get the purchasing power to buy something is by first producing something useful to others, say a chair, which I can then trade for what I want, say a cheese sandwhich. My purchasing power [=demand] came about because I made something others need [=created supply]. Obviously, there are a lot of what ifs involved here. What if I insist on a million dollars in exchange for my primitive chair, which nobody is willing to pay? What if other people are making far superior chairs to mine, so that nobody wants mine? What if I make a million chairs, but only ten thousand people want chairs? What if the govt makes a law that anyone who buys my chairs gets a punch in the face? In all those cases, my creation of supply will not give me any purchasing power [=ability to demand] in return. In fact, in some cases I may glut the market with chairs, and/or I may have to stop making chairs [=unemployment]. The state of affairs which will actually give me purchasing power from the chair I created is what he calls equlibrium. He notes that even in a situation of disequilibrium, an unhampered free market will swiftly create equilibrium for me. If I insist on too high a price, I will quickly learn to lower it. If I make bad chairs that don't sell, I will seek another line of work. If I made too many chairs, I will also look for something else to do. In a free market, there would be no laws about punches in the face, and/or I would be able pretty easily to get some other job. In short, there is a fast acting correction mechanism that will take care of me, mainly my desire to actually make money, and a free market that lets me do so. Be that as it may, the essential insight of Say remains, that purchasing power comes from production. This insight is what Keynes hated, because it contradicts everything he writes in his book. When he says later in Chapter 4 that equilibrium doesn't really exist, what he means is that there is always somebody who goofs up to some extent, always someone who made too many chairs or charges too high a price for them. AE claims, for example, that high unemployment is a result of labor charging too high a price for its services, either from foolishness or because some law mandates it. But again, this does not contradict Say's Law, which assumes a free market and the final state of affairs for our chairmaker, which is quickly reached in a free market.
Ok, I think Hazlitt is playing a tad loose here. When he talks about proper equilibrium what he really means is the proper relationships between prices and costs and most importantly fluid markets right? The equilibrium he puts forth isn't synonymous with Mises' evenly rotating economy, it is not the final stage of prices in all industries, but a state of affairs in which there is no impediment to prices shifting towards final prices. And also equilibrium doesn't exist for more reasons than that: consider weather patterns, technological improvement, and political shifts. Does the chairmaker reach that final state of affairs? In attempting to reach that state he, in principle, bids the prices of those factors most pertinent to his own chain of production, thus changing market data and changing the final price anew.
4. "He's essentially saying that C2 won't equal or exceed R2 - R1, correct?" Yes. "As Hazlitt says, so what?" Keynes will argue that this is what causes recessions. "And why the word psychology?" There are two answers to this. One is what Hazlitt wrote, that Keynes is subtly insulting the people who don't spend every last increase in income, because he is a big believer in spending. Another is that he is saying that it is not an economic force that makes people not spend all their increased income, but an emotional force. As such, it is inevitable, because people are ruled by their emotions. And so the recession resulting from the lack of spending is also inevitable.
It really is insane, that such a flimsy theory, that of the ol' 'animal spirits', devoid of price explanations, is so popularly believed.
I think you are right about the word equilibrium being used a tad differently. And also that other factors create disequilibrium.
I'll post the next reading section within the hour, guys.
Edit:
- Week 2 Reading: (4/23/- 4/30): Read from page 42-93 (Chapter 4-8)