by Reviews of Economics in Two Lessons are starting to come in. Here’s one, favorable but not rapturous from Diane Coyle. Another, from David Gordon at the Mises Institute is, not surprisingly, more negative. The main (though not the only) complaint is that I treat Hazlitt as a One Lesson neoclassical economist. More precisely, in relation to opportunity cost “[Quiggin] applies the concept as it is used in neoclassical economics, but Hazlitt was an Austrian and does not use the concept in this way.” In particular, Gordon complains that I invoke “neoclassical equilibrium” a concept rejected by Austrians. I have a couple of responses to this. First, for the topics Hazlitt discusses, and those in my treatment of Lesson 1, there’s no obvious difference between the Austrian
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Reviews of Economics in Two Lessons are starting to come in. Here’s one, favorable but not rapturous from Diane Coyle. Another, from David Gordon at the Mises Institute is, not surprisingly, more negative.
The main (though not the only) complaint is that I treat Hazlitt as a One Lesson neoclassical economist. More precisely, in relation to opportunity cost “[Quiggin] applies the concept as it is used in neoclassical economics, but Hazlitt was an Austrian and does not use the concept in this way.” In particular, Gordon complains that I invoke “neoclassical equilibrium” a concept rejected by Austrians.
I have a couple of responses to this.
First, for the topics Hazlitt discusses, and those in my treatment of Lesson 1, there’s no obvious difference between the Austrian and neoclassical views. Both rely on the idea that market prices reflect opportunity cost, and that failure to recognise this leads to mistaken government interventions.
Here’s a piece quoted by Gordon as representative of Hazlitt’s approach
“Yet it ought to be clear that a minimum wage law is, at best, a limited weapon for combating the evil of low wages, and that the possible good to be achieved by such a law can exceed the possible harm only in proportion as its aims are modest. The more ambitious such a law is, the larger the number of workers it attempts to cover, and the more it attempts to raise their wages, the more likely are its harmful effects to exceed its good effects.”
There’s nothing here, as far as I can see that couldn’t have been written by an orthodox neoclassical economist like, say, Milton Friedman.
In terms of the history of economic thought, I don’t think Gordon is right in his characterization of Hazlitt as rejecting neoclassical economics. Here’s a long piece written in the early 1970s in defence of capitalism (which was then at a low point in terms of public confidence. Hazlitt observes that
“When production is in equilibrium there tends to be approximately the same profit margin, relative costs and risks considered, in the production of each of the thousands of different commodities and services.
and proceeds to give a thoroughly neoclassical discussion of how equilibrium is reached. Later he endorses JB Clark’s marginal productivity ethics, a position too neoclassical even for many in the Chicago school. He uses “entrepreneur” as a synonym for “capitalist”, and doesn’t even give nod to Austrian ideas about creative destruction and the like.
Doubtless, you could find quotes from Hazlitt that are more Austrian in their flavor. He wasn’t an economic theorist, primarily concerned with consistency, but a journalist and advocate, making arguments for free markets, and drawing on a variety of sources to do so.
I’ve done my best to be fair to Hazlitt, and point out where he was right as well as where he was wrong. Despite that, the Mises Institute tweet linking to Gordon’s review described my book as a “hit piece”. I hope readers, including those who agree with Hazlitt more than me, will make up their own minds about this.
Separately, I had a run-in with some Mises fans on Twitter over my passing observation that, while not themselves fascists, Mises and Hayek allied themselves with fascists (Dollfuss and Pinochet respectively) against social democrats. The discussion was an exercise in talking past one another – the Mises fans quoted passage after passage in which Mises criticised fascists, while I quoted passages where he said that, nevertheless, they were a force for good in the 1920s and 1930s.