In his classic work, Economics in One Lesson, New Deal-era economist Henry Hazlitt critiques modern liberal economic theory. His analysis is interesting and extremely relevant to the current debate surrounding our own economic crisis. Why do the liberal economists win the day? How do they succeed in convincing people that government intervention in the economy will work—despite so much evidence to the contrary?
Selfish interests contribute greatly to the liberal victory. Whatever industry or special interest group will immediately benefit from government intervention generally supports the intervention. And of course, there is an initial economic benefit to the special interest group. The problem is that we only see the immediate effects and we neglect to investigate what the long-term effects will be—on all groups. According to Hazlitt, “In this [the fallacy of overlooking secondary consequences] lies almost the whole difference between good economics and bad.”
One reason that we fail to examine secondary consequences is that we generally lack the ability to follow long, complicated, and boring chains of reasoning. Bad economists speak in half-truths and present their errors to the public better than the good economists present their truths. But, it’s not just that the public lacks a decent attention span and reasoning skills, Hazlitt thinks it boils down to a lack of imagination.