The Invisible Heart, An Economic Romance


“In popular culture, business is always portrayed
as monstrous because that’s what sells.  People like
feeling victimized so that they can hate their oppressor.
But monsters don’t often succeed in business.
The sweeter competitor offering good service
and low prices is a better bet.
There’s an invisible heart at the core of the marketplace,
serving the customer and doing it joyously.”

“After all,” continued Sam,
“under capitalism, man oppresses man.
But under socialism,”-here Sam paused-
“it’s the other way around.”

In The Invisible Heart: An Economic Romance romance takes back seat while economics drives.  Laura Silver, an English Literature teacher is in turn intrigued, repelled, astonished, and ultimately wooed by Sam Gordon, a free-market libertarian who teaches at the same school. 

George Will calls this book “Delightfully didactic.”   It is 100% didactic (instructive) but is clearly delightful.  If economics has intimidated you, this is a book to read.  The book was fun, engaging and winsome.   

“Welcome to the wonderful world of economics.
Everything precious in life has a cost.”

Economics at Ground Level

from Thomas Sowell’s Basic Economics:

From the standpoint of society as a whole, the “cost” of anything is the value it has in alternative uses.

That cost is reflected in the market when the price that one individual is willing to pay becomes a cost that others are forced to pay, in order to get a share of the same scarce resource or the products made from it. … The real cost of building a bridge are the other things that could have been built with that same labor and material.  This is also true at the level of a given individual, even when no money is involved. The cost of watching a television sitcom or soap opera is the value of the other things that could have been done with that same time.

Ouch.  Substitute Sudoku for sitcom and you’ve nailed me, Thomas Sowell.

Economics, Again

Notice the bookmark?

Much of my learning is driven by fear.  I think, “If I don’t learn this now, I’m afraid I never will.” 

So, although the conditions are unfavorable, now is the moment to squeeze my eyes shut, pinch my nostrils together and jump off the diving board into the pool of economics. I gathered relevant books which have sat unread for too many years. I’m reading by rotation: a chapter of Hazlitt, a chapter of Maybury, a chapter of Kirk and a chapter of Sowell (subtitled A Citizen’s Guide to the Economy; I especially like this one), and then repeating the rotation.  The primary text is Hazlitt’s Economics in One Lesson.

The Curse of Machinery  The title is misleading.  Hazlitt believes machinery is a downright blessing and refutes the fallacy that “machines on net balance create unemployment” with undisguised derision for technophobes.  I was very uncomfortable with this chapter.  I wanted to take the esteemed Mr. Hazlitt by the hand back to the first page of this book where he says, “the good economist looks also at the longer and indirect consequences.”  Neil Postman demonstrates the indirect consequences of technology in Technopoly, subtitled The Surrender of Culture to Technology.  Postman asserts that technology gives and takes aways; new technologies have done great things, but they have also undone great things.  Fascinating reading, but that’s another post.

Spread-the-Work Schemes  The maddening inefficiency of labor laws, driven by union demands for the exclusive right to perform certain jobs, lowers production and raises costs.

Disbanding Troops and Bureaucrats   Hazlitt again reminds us to look at both sides now.  In theory – cough cough – when soldiers are sent home, taxes go down and citizens have more money to spend in the market.

The Fetish of Full Employment  It is easy to keep all citizens employed with make-work jobs if efficiency and cost are not considered.  Do we really want full employment?  Hazlitt is hammering a first principle of economics: maximized production is the objective.  His phrase “part of the population supported in idleness by undisguised relief” arrested me. 

Can we take a break for a minute?  All this “production” talk is making me crazy.  There is more to life than “maximized production”!  Maybe I’m confusing economics and life.  Albert Camus said, “The society based on production is only productive, not creative.”  I just wanted to breath a deep breath, sip some tea, and imagine the sound of waves caressing the shore.  There.  Break’s over.

Who’s Protected by Tariffs?    Hazlitt calls tariffs “artificial obstacles to trade and transportation”, noting the war language used, e.g. an invasion of foreign products, in arguments against free trade. 

The Drive for Exports  Key sentence: “Collectively considered, the real reason a country needs exports is to pay for its imports.”  Here’s another great one: “A nation cannot grow rich by giving goods away.” Topic like export subsidies and foreign economic aid are too complex for my pea brain.  If we loan money, why do we not expect it to be repaid?  Why do we keep loaning it? 

Hazlitt argues for using the same principles in foreign trade that we would in domestic trade.

Here is my question:  Isn’t what is good for the individual (economically) good for the nation?  By that I mean, if spending less than you earn is sound policy for one family, isn’t it sound policy for our country? Is that too simplistic, too artless a view?  I’m glad for the impetus to work through these questions, but I must confess that this is making my son’s algebra lesson on rational expressions enticing!    

Economics á la Hazlitt

Cindy is hosting a book group for folks who are interested in learning more about economics.  We’re reading through Economics in One Lesson by Henry Hazlitt, a short book available to read online.  Dana found this t-shirt with the key quote of the book. 

What a delicious time to read this little book! Presidential elections, tax season – it’s the perfect context! 

I’m going to do a little Economics for Dummies version.  Here’s my distillation of this week’s reading. 

~ Think beyond today, beyond next month, beyond next year.

~ Consider the invisible blanks (my word, not his): what doesn’t or can’t happen because of a particular economic decision.

~ need ≠ demand

~ Demand = need + purchasing power

~ Everything must be paid for.  My mom used to say, “Nothing is free in this world, except salvation.”

~ Inflation = a vicious form of taxation

~ All credit (as in credit card, store credit, credit line) = debt 

We ought to change the way we speak, giving names which are more accurate: debt card, debt line, etc. 

The Broken Window chapter was especially interesting to me: a gust of wind blew out a 10′ x 6′ window at the pharmacy where I work.  I read the chapter with my own broken window in mind.

I learned something:

~ dipsomaniac: insatiable craving for alcoholic beverages

~ Claude Frédéric Bastiat (1801-1850)  an French economist whose major contribution was the admonition to take into account “the full picture”.    Oh, what a find!  My journal is filling up with quotes from this man! 

Government is the great fiction through which everybody endeavors to live at the expense of everybody else.

His Candlemaker’s Petition is a hoot!  In this satire the candlemaker’s petition for trade protection from the unfair competition of the sun.  You can listen to it here.

~ Norris Dam  referenced by Hazlitt as an example of a government project

This interview with Henry Hazlitt was helpful. He was an autodidact!

“Anyway, I picked up my economics, not by taking any course in it, but by reading economics books.”  

Interviewer:   But wasn’t Keynes a very brilliant man?

Hazlitt:   A very brilliant man, indeed, a very brilliant writer, a very witty writer. But being a brilliant writer was confused with being a brilliant economist.  He wasn’t. We should never confuse wit with profundity.