Lessons from 1946

I'll start a new series next week, quoting short passages from Henry Hazlitt's Economics in One Lesson—a simple book that shows how modern economics so often relies on one simple fallacy. Here's a message pertinent to today's economy:

There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: "In the long run we are all dead." And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.

But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economics of yesterday urged us to ignore.

Credit card debt, ARM mortgages, negative savings rate—it's no surprise that John "instant gratification" Keynes has an audience in our society today. And just as we're paying for the follies of the New Deal and the Great Society, our kids will pay for this social experiment, no matter what happy-sounding name they apply to it. In the long run, we're all dead, it's true... but dead also will be the economy and society we leave for posterity if we don't get our heads out of the sand.