Multiply the quantity of money n times, in short, and you must multiply the prices of goods n times. On-line books store on Z-Library | B–OK. American consumers are better provided with sweaters, and British consumers are better provided with motor cars and washing machines. Taussig’s Principles of Economics, though on older lines, will still be found clear, simple and sensible. It is, in fact, a flat capital levy, without exemptions, in which the poor man pays as high a percentage as the rich man. No one doubts this proposition when it is applied privately. His early heroes were Herbert Spencer and William James, and his first ambition was for an academic career in psychology and philosophy. Even the workers in the clothing trades, with a money-wage increase of 20 per cent, will be at a disadvantage compared with their previous position. That, they concede, would be unfair to consumers. He is seldom seen at the jewelers, the furriers or the night clubs, and he does not call the head waiters by their first names. It plants the seeds of fascism and communism. But not only will the government, if it pursues this course, find it necessary to extend price control more and more downwards, or “vertically”; it will find it no less necessary to extend price control “horizontally.” If we ration one commodity, and the public cannot get enough of it, though it still has excess purchasing power, it will turn to some substitute. Even many concerns that did an export business would be hurt on net balance. Henry Hazlitt Quotes 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. At the time of writing this, there are many schemes for “averting unemployment” by enacting a thirty-hour week. It is said to be just downright silly. Other sections of the country, we should remember, are then comparatively poorer. It is true that as a result of the increased prices, sales of that industry’s products may fall off, so that volume of profits in the industry will be reduced; but employment and total payrolls in the industry are likely to be reduced by a corresponding amount. The argument that labor should receive enough to buy back the product is merely a special form of the general “purchasing power” argument. To see these uncreated things requires a kind of imagination that not many people have. Yet it is a misconception to think of the function or result of machines as primarily one of creating jobs. To make this possible, a proportional restriction of output is usually placed on each producer subject to the control. In brief, for a low wage you substitute unemployment. 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. The least efficient firms will be thrown out of business, and the least efficient workers will be thrown out of jobs. It means, therefore, a lowering of production which must reflect itself in a lower average living standard. It is because we have become increasingly wealthy as a nation that we have been able virtually to eliminate child labor, to remove the necessity of work for many of the aged and to make it unnecessary for millions of women to take jobs. Moreover, I totally agree with his subtitle the shortest and simplest way understand Basic Economics. Now if the X industry is really overcrowded as compared with other industries it will not need any coercive legislation to keep out new capital or new workers. Yet his answer was already contained in the formulation of the problem. They present more complicated issues, but their net results can be traced through the same kind of reasoning that we have just applied to tariff barriers. The whole argument of this book may be summed up in the statement that in 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. It reduces the costs of goods to consumers, and it increases the wages of the labor that uses the new machines because it increases the productive power of that labor. As a postscript to this chapter I should add that its argument is not directed against all tariffs, including duties collected mainly for revenue, or to keep alive industries needed for war; nor is it directed against all arguments for tariffs. If they cannot find sufficient return anywhere to compensate them for their risk, they will cease to invest at all. It was precisely the great merit of the classical economists that they looked for secondary consequences, that they were concerned with the effects of a given economic policy or development in the long run and on the whole community. That would be the same as having no price control at all. But the new employment does not depend on the elasticity of demand for the particular product involved. . On the one hand, as we have just seen, are those who imagine that the quantity of money could be increased by almost any amount without affecting prices. In considering a policy we ought not to concentrate only on its long-run results to the community as a whole. But when they build more houses they will have just that much less manpower and productive capacity left over for everything else. Because there is less for everybody, because there is less to go around, real wages and real incomes must decline either through a fall in their monetary amount or through higher living costs. Each can see as producer that price control is restricting production in his line. Otherwise the technophobes will assert (as they do in fact assert when you point out to them that the prophecies of their predecessors turned out to be absurd): “That may have been all very well in the past; but today conditions are fundamentally different; and now we simply cannot afford to develop any more labor-saving machinery.” Mrs. Eleanor Roosevelt, indeed, in a syndicated newspaper column of September 19, 1945, wrote: “We have reached a point today where labor-saving devices are good only when they do not throw the worker out of his job.”. The argument against artificially higher prices applies, of course, not only to farm products but to any other product, just as the reasons we have found for opposing tariff protection for one industry apply to any other. It confuses and deceives almost everyone, including even those who suffer by it. They have opposed the introduction or improvement of machinery. It is true, for example, that persons engaged exclusively or chiefly in export business might gain on net balance as a result of bad loans made abroad. If no effort is made to tamper with money rates through inflationary governmental policies, increased savings create their own demand by lowering interest rates in a natural manner. In spite of the overwhelming evidence that labor productivity is the fundamental determinant of wages, the conclusion is usually forgotten or derided by labor union leaders and by that large group of economic writers who seek a reputation as “liberals” by parroting them. 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