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The Public Intellectual as Economist: The Case of Henry Hazlitt (1894-1993) Peter Boettke

Mr. Henry Hazlitt is the only competent critic of the arts that I have ever heard of who was at the same time a competent economist, of practical as well as theoretical training, and he is one of the few economists in human history who could really write. -- H. L. Mencken (1933, 123-124) I. Introduction

Henry Hazlitt began his career as a journalist at The Wall Street Journal while still a teenager, and it was there that his interest in economics grew as he embarked on a path of self-study as a matter of practical necessity for job success. He read Philip Wicksteeds The Common-Sense of Political Economy, which he found at the Flatbush, Brooklyn branch of the New York Public Library, and the book was, as Hazlitt described a revelation to him. Hazlitt, in fact borrowing liberally from John Keatss On First Looking Into Chapmans Homer, characterized his good fortune in stumbling upon The Common-Sense as: Much have I traveled in the realms of gold, etc. Yet never did I breathe its pure serene. Till I heard Wicksteed speak out loud and bold.1 Subsequently, Hazlitt would pursue a lifetime of economic study and economic journalism, and held positions at The New York Evening Mail, The New

University Professor of Economics & Philosophy at George Mason University, and BB&T Professor for the Study of Capitalism at the Mercatus Center. Paper prepared for HOPE conference on The Economist as Public Intellectual. Current version is a conference draft not to be quoted without permission of the author. I have benefitted from the research assistance of Matthew Boettke and Liya Palagashvilli, and the comments and criticisms of Bruce Caldwell, Tyler Cowen, Chris Coyne, David Hebert, Peter Leeson, Peter Lipsey, David Levy, and Nick Snow. The usual caveat applies. 1 Hazlitt, 80th Birthday Talk, November 27, 1974, The Henry Hazlitt Archives, Universidad Francisco Marroquin. DOC5603.pdf.

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Electronic copy available at: http://ssrn.com/abstract=2030464

York Sun, The Nation, The American Mercury, The New York Times, and Newsweek. In addition to his journalistic work writing signed and unsigned economic editorials, Hazlitt was an author of books ranging from literary criticism to social philosophy, with multiple volumes in economics, political economy, and public policy inbetween. Hazlitt even wrote an economic novel, Time Will Run Back that attempted to illustrate the failures of central planning. His Economics in One Lesson (1946) is perhaps his best known work, but his critical work on Keynes, as well as his work on ethics, garnered professional attention with reviews in The American Economic Review, Journal of Political Economy, Economic Journal, and Ethics. Even when the general thrust of the review was negative, the critic would more often than not begrudgingly acknowledge Hazlitts unusual strengths in exposition and even analysis. Typically, we think of economists as becoming public intellectuals to complement their scientific careers; I want to flip that around and consider the case of a public intellectual who through his years of close study of economic problems as a journalist and his own independent study of economic theory and philosophy, sought to contribute to the scientific body of knowledge. The quintessential examples of the first category of economists would be Milton Friedman and John Kenneth Galbraith, with contemporary examples ranging from Paul Krugman to Steve Levitt. But journalists who strive to make contributions to economic theory are a rarity Frederic Bastiat among the classics and Hazlitt among the moderns.2

Walter Lippmann, a contemporary of Hazlitts, is an obvious example, though his work was more at the edge of political theory, political science, and public policy. However, his work e.g., The Good Society (1937), was reviewed in the top economics journals. Relevant for my project is the fact that

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Electronic copy available at: http://ssrn.com/abstract=2030464

On the contemporary scene, I would list Sylvia Nasar, David Warsh, and Tim Harford, though it is important to remember that Nasars A Beautiful Mind and Warshs Knowledge and the Wealth of Nations are primarily reporting on the contributions of others in the science rather than offering their interpretation of economic theory let alone attempting to offer an original contribution to economic understanding.3 Hazlitt argued that even if originality is denied to him as an economist, he should be seen as defending the orthodox teachings of economics from Adam Smith onward against the New Economics that threaten to overturn the classics. Re-establishing old truths can often be as necessary, Hazlitt insisted, as discovering new ones.4 As we will see, Hazlitt also maintained an active correspondence with leading economists throughout the 20th century, and developed a very close personal relationship with several leading economic thinkers.5 He actively promoted the

ideas of certain economists in the world of ideas with timely reviews and behind the scenes discussions with publishers. He was an original and active member of the Mont Pelerin Society throughout his working life.

Lippmann in The Good Society sought to blend the Mises and Hayek critique of collectivism with the lessons from Keynes that a modern economy can be regulated without the threat of dictatorship. Hazlitt, as we will see, was as persuaded by the Mises/Hayek critique as Lippmann, but was not convinced of the argument (or wisdom) from Keynes. 3 However, it is important to note that Nasars recent work, The Grand Pursuit (2011) is an effort at original interpretation in the history of modern economic thought, and Warshs The Idea of Economic Complexity (1984) was an effort at presenting a cutting edge idea within economics at the time. 4 See Hazlitts unpublished autobiography, My Life and Conclusions, p. 44, Henry Hazlitt Archives, DOC24289.pdf. 5 In his archives there are letters from not only Mises and Hayek, and other representatives of the Austrian School of Economics, but also Lionel Robbins, Frank Knight, Milton Friedman, and even Paul Samuelson.

The paper will proceed as follows. Section II will discuss the definition I will use in this paper to distinguish between a public intellectual and a professional economist. Section III will discuss Hazlitts career as an economic journalist, with a special emphasis on the pivotal period immediately following WWII, and in particular the disagreements over Bretton Woods, when he switches from the New York Times to Newsweek and Economics in One Lesson is published and ascends the New York Times best sellers list. Section IV focuses on the battle of economic ideas analytically, methodologically, and ideologically that Hazlitt saw himself as waging throughout the 20th century. Section V will discuss how Hazlitt came to see this battle culminate in the western democracies in the debate over the New Economics. Section VI will attempt to explain the connection that Hazlitt saw between his economics and his social philosophy, and discuss the reception of what Hazlitt himself often (though not always) saw as his most important work. Section VII will conclude.

II.

What Is A Public Intellectual in Economics?

Before I can explain how a public intellectual attempted to make contributions as a professional economist, it will be useful to define terms. Of course, we must admit that there is a certain arbitrariness to the distinction between public intellectual and economic scientist.6 First, even the most pristine of scholars want to communicate

Richard Posner (see, e.g., 2002) defines a public intellectual as someone who uses general ideas from history, philosophy, and the social sciences to address contemporary issues in the popular media. As Posner points out until the 20th century university life actually constituted a very small segment of the intellectual life of a society, so most of the great names in social philosophy and social science were public intellectuals, but with the rise of the university in the 20 th century we did see the

their results clearly to interested readers even if their priority is first and foremost to persuade their scientific peers. When Deirdre McCloskey writes Bourgeois

Dignity (2010) is she a public intellectual, or an economist, historian, and social philosopher? She is, I would contend, all of these things. To put this another way, in our capacity as scholars/scientists who are writing up our results, the more profound we believe our results to be in a discipline like economics the wider the readership we want from our peers, to our students, to our neighboring disciplinary colleagues, to decision makers in the public sector, to the interested layman, etc. This is not just a consequence of the policy relevance of economic discourse, even the hard sciences and mathematics have a very extensive popular literature surrounding them. So the long and the short of it is that we cannot define a public intellectual solely by the effort to write to a wider audience than simply professional peers, though of course that is an important component of what makes someone a public intellectual. Second, I would argue that the expansion of college and university education over the past century has blurred the distinction between scholar/scientist and public intellectual.7 There are many university and college faculty who rarely
rise of academic specialization in the sciences of man and the policy relevant disciplines. Thus, we also had the rise of the academic public intellectual, and Posners study is an assessment of the decline of the level of argument that is exhibited by this class of public intellectual. While bemoaning this decline, Posner both tries to identify the systemic incentive effects that produce it within the current organization of intellectual activities and explains why the antics of academic public intellectuals is not that serious of a problem due to the fact that nobody takes them all that seriously anyway. The antics serve two other purposes --- entertainment and edification for the ideologically aligned. Still Posner argues for more accountability of academic for their public statements, and more disclosure of potential conflicts of interest in the funding of their public activities. 7 When Russell Jacoby published The Last Intellectuals (1987) he was upset that the academy had crowded out the freelance public intellectual. But it is unclear to me that he came to grips with the full implications of the shifting reality of the extent of higher education in the US and the role that the large lecture hall came to serve in shaping the ideas and attitudes of generations of students.

publish, yet they teach undergraduates from large section introductory courses to advanced senior seminars where they try to make economic ideas come alive to non-professionals. Was Paul Samuelson a public intellectual when he wrote his textbook, Economics, but only an economic scientist when he wrote Foundations? Samuelson for a generation or more influenced not only the way the novice student learned economics, but the way aspiring researchers in economics learned their craft. Keyness General Theory transformed the way economists thought about their discipline, but it also guided policy makers educated to think about economic analysis along Keynesian lines, and framed the journalistic accounts of the ebb and flow of economic good times and bad times for more than a half of a century (and continues to this day). Was Keynes being a public intellectual when he wrote The General Theory? Is Greg Mankiw today when he writes a best selling textbook and operates a blog discussing basic economic ideas? How about the college professor at a large state university, say Ohio State, teaching principles of economics to hundreds of students a year, and thousands throughout his career? The successful professor these days engages in a bit of edutainment and thus is not just dryly presenting the technical material --- they spice up the presentation with vivid examples, policy relevant discussion, and even perhaps debate the limits of economic analysis (or lack of limits) to address the most pressing questions of the day.

Third, the rise of the new media in the last decade has further blurred the line between the scholar/scientist and public intellectual.8 Is blogging an act of public intellectual engagement, or an interdisciplinary scholarly service, or a disciplinary teaching complement? Economic blogs have done quite well in the world of the new media, and in many ways the real-time discussion at the intersection of theory and policy has moved to the blogosphere rather than in journals, e.g., Paul Krugman, Brad DeLong, Mark Thoma, Tyler Cowen, Scott Sumner, John Cochrane, Greg Mankiw, and Gary Becker and Richard Posner. When your blog is directed at other scholars/scientists in your discipline, is it an act of public intellectual or another avenue of scholarly/scientific communication? So while I admit the difficulty in providing a clear delineation between the economist as scholar/scientist and the economist as public intellectual, for the purposes of this paper I want to suggest we make the distinction based on intended audience for the work, and the primary source of employment as being tied to activity associated with the intended audience. If an individual is writing primarily for other professional scholars/scientists and students of the respective disciplines, then that person will not be characterized by me as a public intellectual. If, on the other hand, the individual directs their work primarily to individuals who are not considered professionals in that discipline, then they are a public intellectual. Similarly, if a person is employed primarily to communicate with scientific peers and students of that discipline, they are not engaged in public intellectual employment, but in scholarly/scientific employment. But if, they are employed to
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This is the position laid out by Daniel Drezner in various forms, see, e.g., Blogs, Public Intellectuals and the Academy, Foreign Policy (May 13, 2008) and the links provided.

communicate to non-professionals, then they are public intellectuals. In the way that I have characterized those who work in think tanks (e.g., Brookings, AEI, or Cato) would be public intellectuals, while those who work in research organizations (e.g., NBER, Sage, Santa Fe Institute, Institute for Advanced Study) are not. 9 For my purposes, university faculty are not considered public intellectuals, but professional economists. Public intellectuals in economics live off their ability to write or speak to a wide audience about economic issues. This is their primary employment and thus their primary responsibility is to make economic arguments to non-professional economists. They write free of scientific jargon, they do not make extensive use of mathematical formulas, nor employ sophisticated statistical tests not because they are necessarily incapable, but because those tools of reasoning are often impediments to understanding for the wider audience with which they seek to communicate. So while they may be aided in their thought process by the most sophisticated tools utilized in the current practice, it is not their primary purpose to communicate with their intended audience via those tools of reasoning. In the way I am defining the terms, it is easy to see how a professional economist can leave his ivory tower and attempt to turn abstract economic theory into entertaining prose, or summarize empirical results in interesting and relevant ways to expand their audience reach. Especially after the phenomenal success of

To make this claim concrete, there is a difference in the tone and character of the work of Charles Murray (AEI) and Thomas Sowell (Hoover), though both have legitimate claims to influence both inside and outside of social scientific community, and the work of Albert Hirschman or Jonathan Israel (both of IAS), though both again have legitimate claims to influence beyond their professional specializations in economics, political science and history.

Freakonomics, an entire generation of economists has become keen on making this transition from ivory tower academic economist to well-known public intellectual. But the case of Henry Hazlitt runs in the opposite direction. As we will see, with Hazlitt we have the case of a young man, who as he rose through the journalistic ranks embarked upon a life-long self-education in the fine points of economic theory. His first major influence in economics was Philip

Wicksteeds Common-Sense of Political Economy. He would sharpen his economic understanding in the 1920s and 1930s as he attempted to report on the economic turbulence of the age. And when he thought economic theory was being derailed by the New Economics, and the policy debates were failing to heed the classic lessons of orthodox economics, Hazlitt sought to help straighten economics out and save it from what he considered loose thinking that resulted from loose language. His efforts were not dismissed as the ravings of an outsider, for at the time Hazlitt is writing from the vantage point of being the leading economic journalist of his era, and the author of publishing phenomenon, Economics in One Lesson.10 As I

mentioned in my introduction, not only did his books sell well and were received in the popular press, but Hazlitts books were reviewed and discussed in the leading scientific periodicals in economics, such as American Economic Review, Journal of Political Economy, and Economic Journal. So, with Hazlitt we have the rare case, I contend, of the public intellectual, who boldly crossed over and attempted to influence the professional discourse not only with respect to public policy, but at the
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Economics in One Lesson rose to #6 on the New York Times non-fiction best seller list until the publisher ran out of the original print run and had to restock the book. It eventually sold 700,000 copies for the original publisher. With subsequent editions, the estimates are in the multi-millions, and there are 12 foreign language editions as well.

level of basic and advanced analytics and also with respect to the broader social philosophy toward which economic theory can, and must, contribute.

III.

Economic Journalism

At the age of 17, Henry Hazlitt decided to become a professional philosopher. He had already come under the influence of Herbert Spencer, and read everything he could get his hands on from Spencer. He had befriended a group of teenagers who would while on weekly hikes debate serious subjects. Among that group was Lewis Mumford, himself to become a leading public intellectual in the 20th century.11 Though Hazlitt in My Life and Conclusions notes that several others in the group went on to become well-known radicals though he doesnt mention their names. Unfortunately, Hazlitts family financial situation grew precarious and rather than head off to Harvard, he attended the College of the City of New York (City College). Hazlitt had to support not only himself, but his mother as well, and so he could afford to attend City College full time only 1 year, and then part of a 2nd year as an evening student while working during the day. He eventually quit attending classes as he was too exhausted after work to get much benefit from the lectures. But not before taking a class with Morris Cohen, whose Reason and Nature, Hazlitt would review very favorably for The Nation, when he was the literary editor for that publication between 1930-33. At the time Hazlitt quit attending City College, his only skills were those that qualified him for a job as an office boy. He proceeded to take a series of jobs
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Mumford was the architectural critic for The New Yorker for 30 years, and is perhaps best remembered for his work as a philosopher of technology.

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working as an office boy for the going rate of $5 a week to help support himself and his mother. He would work a few days, get fired because he didnt know what he was doing, but then get hired by another office where he tried to avoid making the same mistakes. Though he was fired often, Hazlitt claims he was never out of work for more than a day or two. Eventually, he learned from being on the job and he could stay on longer than a few days. These lessons learned at the bottom of the economic ladder were important to Hazlitt as he attempted to climb out of his and his familys financialy precarious situation.12 He noticed that secretaries made $15 a week, so he attended a local secretarial school in Brooklyn to acquire some skill with short-hand and typing. Even though his skills were not particularly good, he was able to find secretarial work first at $10 per week, and then at $12 per week. During this time Hazlitt kept reading and engaging serious works in philosophy and psychology. It was at this time that he happened to also read a series of articles in The Saturday Evening Post on The Newspaper Game (April-May 1912). This series of articles gave Hazlitt the idea that perhaps becoming a reporter would serve as a good occupation until he could become a philosopher. In 1913, he took a secretarial job at The Wall Street Journal, where he worked until 1916. He transitioned from secretarial work to a reporter assigned to cover a small number of firms. In one of his first assignments, Hazlitt reports, he made an egregious error out of ignorance of economic and financial terminology. The discovery of the error
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And latter in his work on the economics of unemployment, Hazlitt would stress the importance of the non-restrictive labor market for unskilled workers to learn from on the job training. This is, of course, a point often stressed in the work of Thomas Sowell (e.g., Markets and Minorities (1981)) and Walter Williams (e.g., The State Against Blacks (1982), but also see the work of William Julius Wilson, When Work Disappears (1997) for the importance of a vibrant and fluid labor market for the urban poor.

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and his fear of losing his job gave him the impetus to study the economics and financial literature in more depth. He had realized how ignorant he was, and how costly that ignorance could be in terms of his livelihood as an economic/financial reporter. This quest to learn economics led him to embark on intense reading of economic works, correspondence with leading economists, and close friendships with economists. As mentioned already, it was during this time that he came to read Wicksteeds The Common-Sense of Political Economy, and he also developed a strong relationship with Benjamin Anderson, author of Social Value (1911) and The Value of Money (1917), who in 1918 left his teaching position at Harvard to move to the National Bank of Commerce, and eventually to Chase National Bank.13 Hazlitt was uniquely equipped to engage in serious self-education as an economist. When he joined the staff at The Wall Street Journal at the age of 19, he already had written a book manuscript, Thinking as a Science. He had submitted the manuscript to several publishers, but had gotten a string of rejections. However, his friend Lewis Mumford gave him a shot of encouragement when he wrote asking Hazlitt whatever became of his book, since Mumford had just read a book on thinking that wasnt nearly as good as Hazlitts. Rather than tell his good friend about his string of rejections, Hazlitt sent the manuscript off to E. P. Dutton & Company, and wrote back to Mumford explaining that the book was under consideration at Dutton. To his surprise, Dutton accepted the book. Hazlitt fearful
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Anderson is responsible for alerting Hazlitt to the work of Ludwig von Mises. Andersons study of the financial history of the US was published as Economics and the Public Welfare in 1949. Anderson worked at Chase from 1920-1939, when he returned to academia as a Professor of Economics at UCLA.

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that his youthful appearance would lead them to reconsider originally put off the meeting with publishers, but eventually went and signed a contract and became an author. Thinking as a Science was published in 1916, and runs 251 pages, and reflects not only great erudition, but a clarity of thought and style that is characteristic of Hazlitts writing throughout his career. Though this is not the place to discuss the full content of this work, Hazlitt did an amazing job of articulating not only how to think, but how to really read so that your reading can aid your thinking. By 1916, Henry Hazlitt was a published author and building up a reputation as an insightful reporter. He moved from The Wall Street Journal to the New York Evening Post, where he was responsible for the column Wall Street Paragraphs. As US involvement in WWI increased in intensity, Hazlitt felt that it became more and more embarrassing to not enroll for military service. His main reason for not signing up was his need to support his mother financially. But after the passage of the conscription act, he signed up rather than be conscripted. He signed up for the Army Air Corp because the monthly pay offered to recruits was $100 per month, which would be enough to provide for his mother. Hazlitt was sent to training in Texas.14 In addition to his basic training, Hazlitt also was selected to attend the US School of Military Aeronautics at Princeton University, where he finished 3rd in a class of 40. Hazlitt was also promoted to student

battalion sergeant-major. On November 11, 1918 Armistice Day Hazlitt was still in Texas. He was, however, considering a military career and working towards a

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The Army Air Corp did not pay him the $100 per month, but instead the standard going rate which was $30 per month. So his financial situation was rather difficult. He assigned $25 per month to his mother, and he lived on $3.00 per month spending money.

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commission. The New York Evening Post sent him a telegram a few days after Armistice Day that informed him that they would offer him his job of writing the column Wall Street Paragraphs back, but that he had to let them know within the week. He thought about it, and accepted the offer and went back to New York to resume his career as an economic journalist. Soon after resuming work at the New York Evening Post, Hazlitt left to take a job writing a monthly financial and economic letter for the Mechanics and Metals National Bank of New York. Hazlitt for the next decade would move between

various writing and editing jobs with newspapers. In 1921, he moved to the New York Evening Mail to write a stock market column.15 From 1924-29, he worked for the New York Sun, where his reputation as a literary critic rose, and eventually Nation hired Hazlitt to work as the literary editor from 1930-33. At The Nation, Hazlitt wrote on economics and literary criticism, but his staunch anti-New Deal perspective was a source of contention with the rest of the staff. In 1933, Hazlitt left The Nation, but not before he had debated Louis Fischer in print over the meaning of the Great Depression.16 Rather than the inevitable collapse of the capitalist system as Fischer contended, Hazlitt argued that the Great Depression was a consequence of the necessary adjustment to a post-war time economy aggravated by a series of policy mistakes by the government.
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His study of the vagaries of financial markets and the difficulties with offering definitive forecasts produced in Hazlitt a lifetime of disdain for the idea that economists are supposed to be able to predict the economic future. Of course, some of them sometimes guess right for some specific time; but predicting the business future is not the business of economists. Too many factors must be known, and no one can know them. The business of economists, Hazlitt continued: Is to explain the workings of the market, and the mistakes of the legislators and other politicians. Adam Smith set the pattern in The Wealth of Nations, when he pointed out the error of protective tariffs. The Henry Hazlitt Archives, My Life and Conclusions, p. 36. 16 See Crises are not so simple, The Nation (May 24, 1933).

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Hazlitt was asked by H. L. Mencken to take over as editor of the American Mercury, which Hazlitt did until he joined the New York Times in 1934 as an editorialist and book reviewer for the Sunday book review section. Hazlitt would stay at the New York Times from 1934 until 1946, when he moved to Newseek, where he wrote the Business Tides column until 1966.17 It is his career at The New York Times and Newsweek that will, for our purposes, be the focal point of explaining Hazlitts role as the public intellectual as an economist. As Milazzo writes: Hazlitt matters, because over the course of the twentieth century he became the most important economic and business journalist in the country, the most influential and mainstream purveyor and popularizer of the Austrian School of free market economics, and, prior to the ascendance of monetarists and supply-siders, the most prominent, articulate, and persistent critic of prevailing Keynesian doctrine. (2011, xxviii) From the 1930s through the 1960s, Hazlitt was the main spokesman for the free market to a mass audience. He did not have the same flamboyant personality as his more well-known multi-media stars within the American conservative movement: William F. Buckley, Ayn Rand, and Milton Friedman. As Murray Rothbard wrote in a 1987 tribute to Hazlitt, before I had heard of von Mises I knew about Henry Hazlitt. When I was first getting interested in free-market economics, during and just after World War II, Henry was all over the place in Newsweek, on radio and later television --- lucid, sound, brilliant, and decisive, carrying the free-market message. And he was the only

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Hazlitts columns for Newsweek have been collected into a single volume, Business Tides (2011), it runs over 800pp in column format. The introduction to that volume by Paul Charles Milazzo (2011) is highly recommend and will be referred to repeatedly.

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one.18

Hazlitts impact was not just on those like Rothbard that would later

champion free market ideas, but also a young Paul Samuelson wrote to Hazlitt on September 15, 1966 to explain how as a student at the University of Chicago in the 1930s, he was assigned an article by Hazlitt on the nature of economic argument. Samuelson states: A writer never knows what his impacts have been. I can say that one of the reasons I decided to go into economics was reading your article.19

IV.

The Battle of Economic Ideas

Hazlitts time at The Nation included reviews of philosophical works, literary and artistic criticism, and a series of critical examinations of economic policy and economic doctrine.20 He was afforded the opportunity to range freely through the arts and humanities, as well as contemporary affairs. But when he spoke about economic issues, he often focused on questions of monetary policy and inflation, the problems associated with efforts at social control by the government, and the need for new constitutional restrictions on the abuse of the executive branch. The

experience prepared him well for the battle of ideas that he would be engaged in for the next 50 years of his life.

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See The Free Market (December 1987), 3. Available online at: http://mises.org/journals/fm/fm1287.pdf. 19 Letter from Paul Samuelson to Henry Hazlitt September 15, 1966, The Hazlitt Archives, DOC 18725_3.pdf. Hazlitt responded on December 15, 1966, As you know, I venture to differ with you on some propositions in economics, and in my book, The Failure of the New Economics, I may have expressed my differences with less than complete politeness. Nevertheless, I am enormously flattered to learn that something I wrote long ago influenced you and particularly that my article was one of the reasons that you decided to go into economics. Hazlitt Archives, DOC 18727_3.pdf. 20 Hazlitts reviews and columns can be accessed in the From the Archives section at The Nation (www.thenation.com).

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When he moved to The New York Times, his focus was sharpened on economics and political economy in his capacity as the primary economic journalist and editor.21 But in his capacity as reviewer for the Sunday Book Review section, his wide-ranging interests in philosophy, politics, and the arts continued to be reflected.22 Hazlitt played an important role in introducing the US audience to the writings of the Austrian School of Economics, and in particular Ludwig von Mises and F. A. Hayek. Hazlitt became aware of Misess writings through his reading and subsequent friendship with Benjamin Anderson. He also understood that Wicksteed was an alternative to works that derived from Alfred Marshall, and also reflected the non-Ricardian branch of British economics. In short, Wicksteed was a British

Austrian, as was Lionel Robbins, with whom Hazlitt would maintain a long correspondence.23

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It is, of course, important to remember that Hazlitt was responsible for economic content at the New York Times and the US economy at the time was ensnared in the Great Depression, and the policy debates surrounding the appropriate response to the dire situation. In his capacity as an economic reporter, Hazlitt gave a fair hearing to both sides of the debate even when it starts to become evident which side Hazlitt finds more persuasive. An excellent example of this can be seen in Hazlitt, The Road to Recovery: Spending or Saving, New York Times (January 6, 1935), XX1. In this article he presents the case for the use of government expenditure through public works to address the problem of unemployment, and he presents that case for crowding out of private investment by public spending, and the importance of fiscal prudence and the role played by the private sector in economic recovery. However, even in this article weighing the arguments of the spenders and the savers, the reader can see how Hazlitt is already directly engaging the economic arguments of Keynes, linking the Keynesian arguments to political manipulation, and relying on classical doctrine of the self-correcting capacity of the market, and the principles of prudent public finance to guide his analysis of what would be the right path to economic recovery of the US. 22 See, e.g., Hazlitts in-depth review of Paretos The Mind and Society, Paretos Picture of Society, New York Times (May 26, 1935), BR1. Hazlitt finds many flaws in both the style and substance of the book, but he does acknowledge its great strength in providing a unified methodology for the social sciences. As Hazlitt puts it, Pareto had the great advantage over other sociologists on two fronts first, his background was in mathematics and science and thus he learned how to reason scientifically, and second, his first field in social sciences was economics, which is the most developed branch of the social sciences. In short, the normal pitfalls that await the loose thinking sociologists are avoided by Pareto. 23 In The Hazlitt Archives, there are letters between Hazlitt and Robbins that begin in 1934 and run through 1981. The correspondence includes rather routine discussions to discussions of Robbinss

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The two reviews I have in mind that played a critical role in introducing the Austrian School of Economics to a wider US audience, were Hazlitts reviews of Misess Socialism24 and Hayeks The Road to Serfdom.25 It is important to stress that Hazlitt did not see the Austrian School as exotic, but rather as the continuation of the great tradition of classical economics though improved by the developments in value theory made in the late 19th and early 20th century. Hazlitt made a distinction in his work that parallels a distinction I have recently been making between mainline and mainstream economics.26 Orthodox economics from Smith and Hume onward taught certain core principles about how a free economy operates and the perversities that result from too much government intervention into the economy, and the truth content of that doctrine was not challenged by the intellectual critiques offered by historians, philosophers, politicians, and intellectuals.27 These criticisms of orthodox economics, according to Hazlitt, were

The Great Depression and An Essay on the Nature and Significance of Economic Science, and Hazlitts various book reviews and his critique of government policies. 24 See Hazlitt, A Revised Attack on Socialism, New York Times (January 9, 1938), BR20. Hazlitt argues that no open-minded reader can fail to be impressed the closeness of the authors reasoning, the rigor of his logic, the power and unity of his thought. The book examines socialism from every possible angle, and Mises does so with such power, brilliance and completeness that Socialism must rank as the most devastating analysis of socialism yet penned. Mises has written an economic classic in our time. 25 See Hazlitt, An Economists View of Planning, New York Times (September 24, 1944), BR1. Hazlitt states in the first sentence of the review that Hayek has written one of the most important books of our generation. Based on this front page of the Sunday Book Review section of the New York Times and with urging from Hazlitt, The Road to Serfdom was produced in condensed form by Readers Digest and the book became the publishing sensation in the US that it did. 26 See Boettke, Living Economics: Yesterday, Today and Tomorrow (2012). 27 However, lest the reader believe that Hazlitt only directed his critique at those who advocated an expanding role of the state in economic affairs, it is instructive to read his review of Albert Jay Nocks Our Enemy the State, where Hazlitt argues that Nocks analysis is marred by inconsistencies and contradictions. Hazlitt, Mr. Nock Cries a Pox on the State, New York Times (October 20, 1935), BR3. Hazlitt understood the Bastiat dictum that the worst thing that can happen to a good cause is not to be artfully criticized, but to be ineptly defended.

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based on economic fallacies.28 This is also evident in his earlier review essay on Lionel Robbinss Economic Planning and International Order, where Hazlitt says that Robbins uses the tools of classical economic analysis like a fine surgeon; he moves from to step to step with a relentless logic; and he writes with lucid and compact prose. Hazlitt concludes that the critics of orthodox classical economic doctrine the planners --- will have a very difficult time answering Robbinss argument.29 The historical backdrop of the Great Depression and then WWII are important to understand Hazlitts career at the New York Times. The orthodoxy of classical political economy and the understanding of liberalism as connected to individualism was being discredited throughout this time period with Hazlitt recognizing to various degrees this fact. It seems obvious that there was a leftward drift by members of the intelligentsia, but Hazlitt seems to hold that orthodox economic doctrine and professional economists were united in opposing socialism and interventionism. In short, in the debate between the spenders and the

savers, he saw the argumentative burden as falling on the spenders who wanted to deviate from centuries of the conventional wisdom in public finance. His

responsibility as an economic thinker was to remind his readers of the teachings of

28

One target of Hazlitts was Stuart Chase who is often credited with the phrase New Deal that came to be identified with FDRs policies during the Great Depression. In one review of a book by Chase, Hazlitt states that Mr. Chases logic wobbles, but his sentences march. See Hazlitt, The Governments Role in Business, New York Times (September 22, 1935), BR3. Chase was strongly influenced by Henry George, Thorstein Veblen and the Fabians, and his background training was in both economics and engineering. His long political/intellectual influence ran from FDR to Lyndon Johnsons Great Society program. The sort of economics of abundance that Chase represented, and his call that to fix the problem of poverty amidst plenty required government activism and indeed government control over the economy, was in direct opposition to the lessons that Hazlitt thought economic doctrine had established. 29 Hazlitt, Economic Planning as a Panacea, New York Times (August 1, 1937), 82.

19

classical economics, the logical rigor of basic economics, and the fallacies underlying attempts to disregard orthodox economics. The extent to which the intellectual ground has shifted under Hazlitt would become evident during his reporting over the Bretton Woods agreement in July 1944. WWII was not yet over, but the major industrial nations sought to provide international agencies to manage and provide economic security to the global financial market. Forty-four nations were represented at the meetings, and John Maynard Keynes clearly emerged as the intellectual leader. The Bretton Woods agreement established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). decisions were made at these meetings. His editorials for the New York Times had reflected his opposition to what was being agreed to, which Hazlitt argued was nothing short of institutionalized inflation. When the agreement was signed, however, Hazlitt was told by Arthur Sulzberger, editor of the New York Times that: Now, look, Henry, weve let you write your editorials condemning the decisions of the delegates to Bretton Woods as they were announced. But now that the agreement about the form of organization and common monetary policy had been adopted, I dont see how The Times can any longer oppose it. It is up to us to go along. Hazlitt said he couldnt bring himself to write such an editorial as he thought the Bretton System would produce immense harm.30 To Hazlitt, all the wrong

30

See Hazlitt, My Life and Conclusions, p. 40. Also see Tucker (1999, 173-174). There are some discrepancies between Hazlitts autobiographical account and other interviews he gave. His opposition to Bretton Woods did not lead to his firing at the New York Times as he points out in

20

With the breakdown of the Bretton Woods agreement and the subsequent stagflation of the 1970s, Hazlitts editorials were collected into a volume From Bretton Woods to World Inflation: A Study of Causes and Consequences (1984). But for our purpose, the precise content of Hazlitts argument is not as important as what the episode taught Hazlitt about the shifting intellectual landscape.31 He had been critical of Keyness economics throughout the 1930s, but now he realized how widespread Keyness influence had in fact grown in policy circles and the general intellectual climate of opinion. Exposing what he considered Keynesian fallacies became a primary purpose in his economic writings.32 The New York Times had agreed to give Hazlitt alternate days off in 1945 so he could write Economics in One Lesson. The book became a publishing sensation at the time, as mentioned it rose to #6 on the New York Times best seller list for nonfiction at which time the publisher had run out of stock, and had to restock the volumes which stalled the books momentum. Nevertheless, the book sold over
earlier interviews he gave, but it did increase the intellectual tensions he felt between himself and the general editorial staff at the paper. He moved to Newsweek in 1946, and primarily to move from the anonymity of unsigned editorials multiple times a week to being responsible for 1 signed column a week. See Milazzo (2011, xxviii). 31 Though it is interesting to note that in 1984, Milton Friedman wrote to Henry Hazlitt to congratulate him on a letter to the editor Hazlitt published in the Wall Street Journal on Bretton Woods. As Friedman says in the letter, As you know, you and I differ somewhat about both the desirability and the feasibility of a real gold standard under current circumstances but I certainly agree fully with your analysis of Bretton Woods. (emphasis added) Letter from Milton Friedman to Henry Hazlitt, dated August 10, 1984, see The Henry Hazlitt Archives, DOC12523_3.pdf. 32 Hazlitt was also more drawn into the larger movement of the reclaiming of true liberalism, which resulted in his involvement with the Mont Pelerin Society, the Foundation for Economic Education, and is reflected in works such as his The Free Mans Library (1956). His argument in the introduction to that work echoes many of the arguments one can read-back into his various book reviews from The Nation forward about the shifting meanings of liberalism and individualism. What now threatened western democratic states was not totalitarian philosophies but an intellectual drift that failed to appreciate the connection between personal and economic liberties. Writers and thinkers believe that they can defend unequivocally the freedom of thought and speech, but not economic liberties. And Hazlitt sought to demonstrate to his brethren in the intelligentsia that Liberty is a whole, and to deny economic liberty is finally to destroy all liberty.

21

700,000 copies in its original edition, and multiple millions when subsequent editions are accounted for, including translations. Hazlitt saw his task as simply providing a readable exposition of unblushingly classical, traditional and orthodox economics. In developing his approach, Hazlitt is explicit that he is engaged in a modernization, extension and generalization of the approach found in Bastiats What is Seen, What is Unseen essay. In addition, Hazlitt tells us he is drawing on the presentation of economic theory found in Philip Wicksteed and Ludwig von Mises. This combination of the classic teachings of Bastiat, Mises and Wicksteed were to be marshaled against the fallacious doctrines of Marx, Veblen, Major Douglas, Keynes and any number of numerous contemporary writers who repeated the fallacious ideas of these thinkers. Economics, more than any other scientific discipline, suffered from having to be ever vigilant against the propagation of error. All intellectual endeavors of man are subject to imperfection, and thus in constant need of revision and improvement. Economics is no different. But persistent error haunts economic reasoning not only due to the intellectual shortcomings of men. The problem of the special pleading of interest groups in economic affairs means that the inherent intellectual limitations of man are multiplied a thousand times over in the discipline of economics as opposed to physics, mathematics or medicine. Interest groups rely on fallacies to agitate for policies that benefit them at the expense of others. Though Hazlitt doesnt provide a full-blown public choice analysis of economic policy making in a democratic system, his analysis of the persistence of error in economics is very consistent with the logic of concentrated benefits and

22

dispersed costs. Rather than the theory of public choice (which would only emerge in mature form in the 1960s and 1970s), Hazlitt argued that the problem that haunts economics is that there is a persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. (1946, 15-16) Just as Bastiat insisted that bad economics only looks at what is seen, while good economics sees not only what is seen, but also what is unseen, Hazlitt insists that the distinction between good and bad economics turns on being able to look at the secondary effects of any action or policy. The bad economist only sees the immediate consequences of a policy, while the good economist also considers the long term and indirect effects. Hazlitt warned that in the field of public economics (economic policy), this elementary truth had been ignored due to the circumstances of the Great Depression and WWII, and were provided intellectual justification by the New economics of Keynes and the Keynesians. The classical counsel of savings and prudence in decision-making has given way to government spending and credit creation. Fiscal restraint and monetary responsibility are abandoned in the New Economics, according to Hazlitt, and a preoccupation with short-run effects trumps all in policy deliberations. This fallacy is repeated in nearly every conversation that touches on economic affairs, the error of a thousand political speeches, the central sophism of the new economics, is to concentrate on the short-run effects of policies on special groups and to ignore or belittle the long-run effects on the community as a whole. (1946, 17) Rather than economic principles derived

23

through careful logical analysis, we have economic policies forged within the cauldron of political expediency. Emotional economics, Hazlitt tells us, has given birth to theories that calm examination cannot justify. (1946, 143) Economics in One Lesson takes the basic idea of direct and indirect effects and provides numerous applications from price controls, to restrictions on trade, to public spending, to taxation, to labor markets, to inflation, and to international trade. In each instance, Hazlitt believes he is reaffirming the basic teachings of classical or orthodox economics, and countering the fallacies that have so often plagued economic policy debates. In his review of Hazlitts book in the American Economic Review, Princeton economist Archibald McIsaac states that: Mr. Hazlitt has thrown down a vigorous, skillful, and provocative challenge to sophisticated formulations of theory and policy, and it must be conceded that all too often the forest has been neglected as a consequence of preoccupation with the trees. (1947, 226) McIsaac, however, argues that Hazlitts analysis does not apply to either an economy trapped in a less than full employment equilibrium nor a wartime economy. Moreover, McIsaac argues that Hazlitt provides no argument whatsoever that a free market economy will be able to address either mass unemployment or the extreme shortages of a wartime economy with any degree of efficiency. Of course, he grants that many of the policies that Hazlitt is criticizing are peacetime policies of government control, and in that Hazlitt is correct. But in the emergency times of depression and war, Hazlitts common-sense economics must give way to more nuanced economics. Nevertheless, even the sophisticated economist can learn

24

a thing or two from reading Hazlitts smoothly written, swiftly moving and persuasive addition to the economics literature. (1947, 228) In 1946, Hazlitt would move from the New York Times to Newsweek, where for the next 20 years he basically wrote a weekly column entitled Business Tides applying the lesson to every contemporary economic policy issue of the day. As

Milazzo writes, with his Business Tides column: Hazlitt condemned state intervention in the market, championed free trade, questioned underconsumption as a catalyst for recession, celebrated entrepreneurial creativity, and viewed inflation, rather than unemployment, as first among economic evils. He also

emphasized how the spontaneous order of the price system conveyed vast quantities of information among countless market actors, allocating scarce capital, labor and resources far more efficiently than top-down planning mechanisms ever could. (2011, xxx) The topic of inflationary policies and the negative consequences of inflation constituted more than a third of his Newsweek columns.33 And given the weight he put on inflation, the main target of his animus was Keynesian economics. It is important to remember that Hazlitts concern with Keynesian economics as one of the greatest intellectual scandals of our age. Frank Knight (1951) argued
33

This preoccupation with the costs of inflation also explains why Hazlitt engaged in a battle with Milton Friedman over the quantity theory of money throughout their relationship. Hazlitt learned his critique of the mechanical interpretation of the quantity theory of money from Benjamin Anderson, and that critique was reinforced by the writings of Ludwig von Mises. (see Blanchette 2005) By examining the ragged (rather than smooth) process of adjustment by which a change in the supply of money will work its way through the economy via relative price changes and thus cause distortions along the way that eventually require correction, the non-mechanical interpretation of the quantity theory was able to both demonstrate the fundamental problem with monetary cranks as well as explore deeply the costs of inflation that result from the non-neutrality of money. Friedman, on the other hand, by insisting on the mechanical interpretation of the quantity theory minimizes the costs of inflation and insists on the fundamental neutrality of money. Hazlitt describes the trip overseas to the first Mont Pelerin Meeting where every night he and Friedman would debate monetary policy and inflation, never in an angry way, but in a very intense manner, to the great disinterest of all the other economist around the table.

25

that during his career that orthodox economics had come to be viewed with increasing disdain by younger economists and those impatient with economic analysis, and that the critics had sought to replace economic principles with almost anything other than economic reasoning. And he described the New economics as the most fallacious and pernicious doctrine in terms of practical economic and political consequences being espoused by the critics of economic principles, and that it derived directly from the writings of Keynes who had succeed in carrying economic thinking well back to the dark age. (1951, 3) Knights address is an appeal for reaffirmation of the principles intellectually and the role they should play in a democratic society. The suppression of principle and the ascendency of

methods of social control that often follows from economics conceived as a policy engineering science is not only unethical it is a contradiction in a society of free people. (1951, 15) I invoke Knight on this issue only to demonstrate that Hazlitts positions -- both that he stood in the long tradition of orthodox teachings, and that the New Economics of Keynes required sustained efforts at criticism to salvage that orthodoxy from fallacious assault --- was not exclusively his position, but shared by quite a number of prominent economists. Indeed, the classical theory of economics and its modified version in the early neoclassical economists was under attack and being eclipsed by the New economics of Keynes. As was written in the AER review of Hazlitts Economics in One Lesson, the non-common sense economists had for a few decades been working hard to develop the economics for the unemployment equilibrium economy and the economics of extreme scarcity that is associated with wartime economy, and in those non-traditional circumstances the

26

common-sense economics of the classics had to give way. What had emerged during the post-WWII period was the insistence that the modern industrial world was forever in the non-traditional circumstances required for classical principles of economic thinking to hold. Hazlitt begged to differ, and he waged his battle of economic ideas wherever and whenever he could, which included not only his weekly column, but in numerous books including an effort to provide the first line by line refutation of Keyness The General Theory of Employment, Interest and Money.34

V.

Against the New Economics

During the 1950s the Keynesian hegemony of the economics profession was entrenched. But the influence of Keynesianism was not limited to the professional journals, textbooks and classrooms. The Keynesian hegemony permeated the

intellectual culture in general. After Keyness death in April 1946, various tributes pointed out the world-wide influence that his work had enjoyed among academic specialists, intellectuals, politicians and the general public. Keyness importance as an economist in the 20th century was compared with that of Adam Smith in the 18th century and Karl Marx in the 19th century. Smith had provided a devastating criticism of the mercantilist system, Marx a thorough analysis and critique of the capitalist order, and Keynes had put an end to the argument for laissez-faire.
34

This even included an effort in the early 1960s to establish a new graduate school for economic education the American School of Economics that involved the efforts of not only Hazlitt, and Hans Sennholz (who was my undergraduate teacher of economics at Grove City College and a Mises PhD student at NYU), but Mises, Hayek, Rothbard, and several other prominent classical liberal thinkers in the social sciences and humanities. The discussions lasted 3 years, but the school never materialized. See the Hazlitt Archives under the heading American School of Economics.

27

Keyness work demanded critical examination. Hazlitt was not only a wellread (though self-educated) economist, he was by professional training also a literary critic he had even published The Anatomy of Criticism (1933) which is an exercise in trying to steer a course between pure objectivism and relativism in analysis. Hazlitts work on thinking, reading and argument (Thinking as a Science) had given him a perspective on how one seriously approaches works of literary value. This is what he attempts to do with respect to The General Theory and Keynesian economics more broadly in his The Failure of the New Economics (1959), and then bolstered by a reference volume containing the best of the specialist literature on the problems with Keynesianism, The Critics of Keynesian Economics (1960). In these works, Hazlitt sought to make an original contribution to In the history of

economics be reasserting classical principles of economics.

thought, Hazlitt wrote, great new contributions have often been made as a sort of by-product of what were originally intended to be merely refutations. (1959, 5) His exercise in detailed refutation of Keynes, Hazlitt argues, is not merely negative. The results of his study should not be seen as only proving the main contentions of Keynesians wrong. For in dealing with the Keynesian fallacies we are obliged not only to scrutinize very closely his own arguments, but the classical or orthodox doctrines that he was denying. And in doing this, we shall often find that some of these orthodox doctrines have been only dimly understood, even by many of their proponents. In other cases we shall find errors or gaps in the usual statement of some of the orthodox doctrines themselves. (Hazlitt 1959, 7)

28

In making this intellectual move, Hazlitt clears the way for his presentation of the particular brand of orthodox economics he believes provides the most coherent challenge to the New economics of Keynes and the Keynesians --- the economic analysis of the manipulation of money and credit found in Mises and Hayek, and all that implied about capital and interest theory, price theory and the market process, and deficit finance and principles of public finance. Hazlitts orthodox economics involved a core body of thought from Smith, Say, Ricardo and Mill, refined and developed by Menger, Bohm-Bawerk, Wicksteed, Mises and Hayek, but also recognizing the contributions of early 20th century neoclassical writers such as Frank Knight and Jacob Viner. Hazlitts criticisms of Keynes can be summarized as follows: (1) the book is not particularly logical and is full of inconsistencies on its own terms; (2) Keynes repeats many of the core fallacies that economic theory has combatted for centuries, including the denial of the core insight of economic theory about the basic functioning of the price system to coordinate economic affairs through relative price adjustments; (3) Keyness analysis is at too aggregate a level of analysis to be able to examine effectively the adjustments that are constantly required within the market not just basic supply and demand analysis of the labor market, but also the relationship between savings and investment, and the role of interest rates in guiding the allocation of capital within the economy35; (4) Keyness economics is a prime example of bad economics in that it is preoccupied with short-run effects,
35

As Hazlitt (1959, 280) explains, Keyness lump, aggregate thinking will not permit him to study how equilibrium in employment can be attained through small, gradual and piecemeal adjustments within the market system. Hazlitts economics is the microeconomics of relative price adjustments, not macroeconomics that was to dominate the profession after Keynes.

29

and consciously ignores the long-run and indirect effects of the policies pursued --special case economics is not good unless grounded in the general case, and, in fact, special case economics not grounded in the general case will inevitably misdiagnosis the problems of the extraordinary situation that gave rise to the supposed need for an economics of the special case; (5) as a matter of practical public policy, Keynesian economics resulted in politically popular but economically unsound policies of government control over investment, budget deficits and inflation.36 The mystery to Hazlitt is how Keyness analysis could have ever been accepted by so many when upon careful scrutiny it is revealed to be such a flawed work. He conjectures that the reason for this is (a) Keynes provides a new

justification for what politicians and special-pleading interest groups always desire; (b) Keynes rose to prominence early as a man of literary genius, and thus already appealed to the literary intelligentsia, and they judged his contributions to a specialist discipline of economics by literary qualities of grace and wit which rank higher than rigorous reasoning or a thorough and accurate knowledge of the subject matter; (c) since Keynes had pronounced with grace and wit the failure of the classical approach, and warned both about the extreme struggle that he himself had experienced trying to overturn the habitual modes of thought, and that the reaction of those still trapped in those habits of thought (which will oscillate between
36

An interesting point in Hazlitts discussion of Keyness policy advice to reduce unemployment by adjustment of the real wage through inflation due to the rigidities of direct wage cuts, is that he anticipates the argument about rational expectations and the game-theoretic presentation that was often used in the 1970s and early 1980s to explain the core idea in terms of union leaders and central bank policy. As he says, quoting Viner, Keynesian policy would result in a constant race between the printing press and the union leaders negotiating wages for their members. (see Hazlitt, ed., 1960, 9)

30

disbelief in the novelty and denial of the originality), the fact that The General Theory often lacks Keyness characteristic grace and wit to speak nothing of clarity of presentation must mean that it is the profound work of a genius. It could not possibly be that Keynes was confused and wrong-headed, it must be that the new age requires new thought. Keynes masterfully mixed unintelligible and obscure arguments with very bold and clearly stated triumphant conclusions. Countering the fashionable Keynesian heresy was Hazlitts intent and it did not surprise him in the least that by the late 1950s, his brand of orthodox economics was increasingly becoming out of step, though he claims he didnt understand at the time just how out of step he had become either within the economics profession or in the intellectual culture in general. As the reviews of Hazlitts The Failure of the New Economics and the companion volume The Critics of Keynesian Economics came in from professional journals, it became more evident how orthodox economists could ignore the Keynesian heresies only at the risk of themselves being ignored, or challenge them only at the risk of losing status.37 Economics, to Hazlitt, was losing its way as a scientific discipline.

37

The relative stature of Hazlitt as someone worthy of attention is reflected by the fact that Abba Lerner (1960) reviewed The Failure of the New Economics in the Review of Economics & Statistics, but the fact that Hazlitt had become so out of step is also revealed in the content of the review. Lerner points out that he had in earlier work acknowledged that Hazlitts Economics in One Lesson was among the best critical works against certain economic fallacies, though that was because Hazlitt was writing with respect to an economy already at full employment. He had hoped that Hazlitt would one day write a book that focused on economies in depression, which Lerner said would be economics in a second lesson. Unfortunately, Lerner states about The Failure of the New Economics that Hazlitt doesnt write the second lesson because he never learned it. Since Hazlitt never learned the second lesson, he is completely oblivious to the possibility of the third lesson, which is that when the institutional structure is such that Keynesian policies cannot guarantee full employment, government has to play an even more active role.

31

Joseph McKeenas (1960, 190) AER review of The Failure, concludes that Although Hazlitt clears up many minor points in the General Theory, his analysis of the major ones is completely unsatisfactory. In short, those who agree with Hazlitt's preconceptions will find many excuses for their views; those seeking enlightenment must look elsewhere. Dudley Dillards review of The Critics (also in the AER) states the criticism of Hazlitt and orthodox economics more forcefully: The political temper of modern democratic societies renders Hazlitt's position un-realistic in the sense that it calls for a more or less complete return to the never-never land of nineteenth-century laissez faire. Henry Hazlitt reminds one of the Japanese soldier who was found on an isolated Pacific isle a decade or more after the end of the second world war, unwilling to accept the fact that the war was long since over, and lost. Courage and perseverance in the face of opposition are qualities not to be taken lightly, but there is also merit in knowing that the war is over and in what century one is living. (Dillard 1961, 424-425) Keep in mind that Dillards review is of a collection of readings that include not only the writings of Mises, Hayek, and Hazlitt, but the works of Say, Mill, Viner, and Knight. There were critics of Keynes ancient as well as modern but they were ignored as relics of an earlier era, and era wedded to those habitual modes of thought which had led us to a situation of mass unemployment in the 1930s and saw no solution to the problem. But what if those habitual modes of thought reflected the core of the scientific teachings of the discipline of economics, and as such provided not only the explanation for the problem of unemployment and its solution in a way that enabled democratic societies to avoid their own worst excesses?

32

The rule by technically trained experts to use the public budget to ensure full employment revealed both a pretense of knowledge and a failure to understand the logic of democracy in deficit according to Hazlitt.38 We have already seen that Knight picked up on this theme and argued that viewing the economist as a savior that holds a special place within a democratic society is not only immoral, but a contradiction. As Hazlitt points out, the Keynesian economist/macroeconomic

manager must believe that there exists a class of people (perhaps economists very much resembling Lord Keynes) who are completely informed, rational, balanced, wise, who have means of knowing at all times exactly how much investment is needed and in exactly what amounts it should be allocated to exactly which industries and projects, and that these managers are above corruption and above any interest in the outcome of the next election. (Hazlitt 1959, 324) Postulating that Keynesian policies would be carried out in such a manner and by such trained professionals equipped with technical expertise was of course to solve the problem of the public administration of economic policy by hypothesis. And in so doing it assumed away both the knowledge problems associated with the economic planning that were identified by Mises and Hayek, and the interest group problem of political manipulation for private interest as opposed to public interest reasons. Neither mans hubris nor his opportunism are addressed, but instead the economist is expected to proffer advice as if it was directed to a benevolent despot.
38

I am consciously alluding to the title of Hayeks Nobel Prize lecture The Pretense of Knowledge which was directed at the Keynesian exercise of macroeconomic management, and to the title of the book by James Buchanan and Richard Wagner, Democracy in Deficit, which explores the political legacy of Lord Keynes with respect to the budgetary policy. Hazlitt was already looking to see how the institutional structure of governance could be revised to guard against opportunist behavior in his work A New Constitution Now (1942), a point that was picked up in the review of that book by Kerwin (1943) that was published in the American Political Science Review.

33

Challenging this idea would unite many of those involved in the Keynesian counter-revolution that took place in the economics profession in the 1970s and 1980s. In retrospect, we can read back into Hazlitts The Failure of the New

Economics many of those subsequent developments from microfoundations, to expectations, to rules versus discretion, to political economy. His novel theory novel that is if you dont read the classics emerged as he said it would through his critique. Whereas Keynes had been able to tap into the greatest resentment of capitalism (inequality and the idle rich) and merge it with the greatest fear of capitalism (mass unemployment and insecurity) to forge a paradigm of managed capitalism that would minimize resentment and eliminate fear, Hazlitt offered a picture of the long-run folly of managed capitalism in terms of fiscal sustainability and the collapse of the monetary system through inflation. Both were ultimately making predictions about the economic possibilities of their grandchildren, and we are still debating who had the more accurate prediction within the economics profession as well as among public intellectuals.

VI.

The Ethics of the Liberal Order

Hazlitt would continue his intellectual crusade against inflation and the growing involvement of government in the economy. The full employment act, the Great Society programs, the War on Poverty, the advent of wage and price controls, restrictions on free trade, and stagflation would all occupy his mind and pen through the 1960s, 70s and 80s. If the Dudley Dillards of the world wanted Hazlitt

34

to admit defeat, he never gave them that pleasure. Though Hazlitt was not content to fight his battle solely in the realm of economic policy and commentary. As we turn to Hazlitts next effort to move beyond his role as a public intellectual, it will perhaps be useful to remember that Hazlitt originally sought to pursue a career as a professional philosopher, and indeed he published his first book dealing with the nature of thinking in 1916. Hazlitt throughout his career at The Nation as well as The New York Times, maintained an active interest in philosophical treatises. Besides the review of Pareto for The Times that I mentioned earlier, during his time as a literary advisor at The Nation, Hazlitt reviewed works by Bertrand Russell, John Dewey, and his old professor at City College, Morris Cohen. This commitment to reviewing and providing commentary on the main social philosophic works of the time continued at the New York Times, as evidenced by his book reviews in the Sunday paper. Over the years, Hazlitt became friends with all the leading classical liberal and libertarian thinkers, including what he termed in one publication the intelligent conservatives.39 Milton Friedman in a letter dated June 10, 1969

concerning a review Hazlitt had written of Friedmans book told him that There are not very many people whose judgment I value as I do yours.40 And Ludwig von Mises described Hazlitt as one of the outstanding economists of our age. And, on

39

In his introduction to The Free Mans Library, Hazlitt argues that: The intelligent conservative, in brief, is today the true defender of liberty. And he explains: It was always possible to reconcile intelligent conservatism with real liberalism. There is no conflict between wishing to conserve and hold the precious gains that have been achieved in the past, which is the aim of the true conservative, and wishing to carry those achievements even further, which is the aim of the true liberal. 40 See Hazlitt Archives, DOC82_3.pdf.

35

the occasion of Hazlitts 70th birthday celebration, Mises referred to Hazlitt as the economic conscience of our nation and compared him favorably with Edwin Cannan and Frederic Bastiat. Hayek said that he knew of no better modern source to learn the basic truths of economic science than the writings of Hazlitt. Hazlitt, however, was not only friends with these economists, he was a close student of their works and that of other social scientists, including history, politics, and jurisprudence, and as already mentioned philosophy and literary and artistic criticism. Liberalism, Socialism, and especially Human Action, as well as The Road to Serfdom, The Constitution of Liberty, and Capitalism and Freedom were works that informed his perspective. But it is also important to remember that as a teenager, Hazlitt was a devoted student of the works of Herbert Spencer, and also read the Scottish moral philosophers in-depth, especially David Hume. Hazlitt combined all this reading and study into his reflections on The Foundations of Morality (1964). In Thinking as a Science, Hazlitt had already pointed out that No science is more provocative of thought than ethics. (1916, 217) The question of good or bad acts -- of just or unjust conduct -- is the most subtle and elusive one that we can try to answer. So Hazlitt after a life-time of learning, returned to the philosophical question that vexed him as a youth. Not just the art of thinking seriously, but thinking seriously about questions that are worth thinking seriously about.41

41

This was the subject of the next to last chapter of Thinking as a Science, and given his subsequent history it is somewhat shocking to look at the questions he considered worthy of contemplation. Among the various questions Hazlitt considers worth asking include what is the effect of State intervention on the laws of supply and demand?; what is the best policy: free trade, revenue tariff, or protective tariff?; what would be an equitable and sound currency system? --- these are listed

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The Foundations of Morality sought to summarize and update the argument of the British Utilitarians, beginning with Hume and Smith and continuing with Bentham, Mill and Sidwick. But it is Humes insistence on the utility of acting in accordance with general rules that provides the basis of Hazlitts analysis. And, it is the work of Mises on social cooperation what Mises termed the Law of Association that provided the more contemporary argument for the position that Hazlitt was to develop and juxtapose with modern ethical theory. One of the core problems with ethical theory is that no two people will find happiness or ultimate purpose in precisely the same way. We cannot resolve this problem by appeal to a deity anymore than we can rely on our moral intuitions. But Hazlitt argues that an answer can be found by focusing on social cooperation under the division of labor. For each of us, he argues, social cooperation is the great means of attaining nearly all our ends. For each of us social cooperation is of course not the ultimate end but a means. It has the great advantage that no unanimity with regard to value judgments is required to make it work. But it is a means so central, so universal, so indispensable to the realization of practically all our other ends, that there is little harm in regarding it as an end-in-itself, and even in treating it as if it were the goal of ethics. (1964, 36) The division of labor is the greatest example of social cooperation, and massively improves the productive capacity of each of us. For our purposes, what

along with questions about the nature of the mind, nature versus nurture, the legal and ethical status of private property, the status of religious belief, the nature of truth in general, and the appropriate relationship between the citizen and the State. Hazlitt poses the question of social ethics as follows: Should conduct be judged by its tendency to produce individual well-being, or should it be judged by its tendency to produce the well-being of all humanity, or of all sentient beings? (1916, 217)

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matters for Hazlitt is what general rules are we to live by, that will enable us to live better together so we can realize the benefits from social cooperation. Those

general rules are embedded in the private property system. All production, all civilization, rests on recognition of and respect for property rights. (Hazlitt 1964, 303) Free enterprise, competition, the division of labor, and wealth creation are not separate institutions, but all grounded in private property rights and mutually reinforce one another. Without private property, the gains from social cooperation would go unrealized. The free enterprise system, Hazlitt points out, can exist only within a framework of law and order and morality. In other words, the free

enterprise system presupposes the acceptance of moral rules of just conduct. But the workings of the free market, the vibrancy of competition, the productivity gains from the division of labor, and the generalized benefits from social cooperation also serve to preserve and promote that morality. Thus, social cooperation, Hazlitt argues, is the essence of morality. (1964, 359) Sometimes in classroom discussions of the welfare economic implications of certain economic arguments I tell the students that they need to think of absolute economics as absolute ethics. In other words, I want them to think through what they would say if economic theory was the only determining factor in deriving an ethical judgment. This really isnt that far of a stretch from what has been argued by economist for centuries, though I am in this exercise neither raising the limits to economic analysis nor the problems that are unresolved in economic theory. But the power of the economic way of thinking led even Philip Wicksteed, the Unitarian theologian and literary critic as well as economist, to write: A man can be neither a

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saint, nor a lover, nor a poet, unless he has comparatively recently had something to eat. (1910, 154) There is a reality constraint that an economic system must produce a certain level of material wealth otherwise the interactions between individuals will devolve into a struggle for biological survival. But as has repeatedly been emphasized of late by theorists of human sociability, nature is indeed red in tooth and claw and mankind is not uniquely equipped to survive in isolation against nature. By cooperating, however, humans have not only survived but flourished. Through the evolution of rules of just conduct, and judicious establishment of various formal institutions of governance, human beings have been able to realize the gains from social cooperation. Ludwig von Mises perhaps summed up this basic position best when he argued that within the frame of social cooperation there can emerge between members of society feelings of sympathy and friendship and a sense of belonging together. These feelings are the source of mans most delightful and most sublime experiences. But, Mises argued, these feelings are not, as some have asserted, the agents that have brought about social relationships. They are fruits of social

cooperation, they thrive only within its frame. (Mises 1949, 144) It probably should be expected that this attempt to ground social ethics in basic economic reasoning would draw the ire of ethicists, but one harsh critic of Hazlitt was none other than fellow classical liberal economist, Frank Knight. Knight entitled his Ethics review essay on Hazlitts book, Abstract Economics as Absolute

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Ethics.42 Knight begins the essay bemoaning the failure of true liberals to correct the errors of contemporary thinkers who have successfully corrupted the meaning of the term liberal, and that when efforts are in fact made to salvage the classical liberal doctrine they have too often devolved into slogans and dogmatic statements that put the doctrine in the worst light. In essence, the failure of classical liberalism, Knight is arguing, is not a mystery at all to explain, all classical liberals would have to do to find the answer is to look in the mirror. And, despite the fact that Knight (1966, 143) says that Hazlitts work has good workmanship and much of the makings of a good treatise on socio-political ethics it ultimately exhibits the same faults as other efforts at restating the case for classical liberalism. In summary, Knight argues that: What Hazlitt has done is to take the vastly simplified postulates that are legitimate and necessary for the first stage of economic analysis-but which should never be taken as describing reality, and still less as normative-and treat them as universal ideals. (Knight 1966, 177) Knight raises some important points in his review --- concerns about the structure of governance, the importance of enforcement, the relationship between conscious design of the rules of governance and spontaneously evolved mores, and the rules that govern the discourse over the choice of rules that govern our social interactions. But I also think that a careful reading of Hazlitt would reveal that he

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Despite the critical nature of his review, for the purposes of the present paper it is important to emphasize: (1) that a thinker of the stature of Knight would seriously engage the ideas of an economic journalist writing on an topic removed from economics; (2) the length of the essay, which ran for 14 journal pages, 2 columns per page; and (3) the placement in a highly respected specialized outlet, Ethics. Knight would also address Hazlitts book in a critical examination of Hayeks The Constitution of Liberty, in the Journal of Political Economy (1967). In that discussion, Knight while still critical of Hazlitt does say the book presents strong, and largely sound, debating points in making the case for liberalism though Hazlitt is far too extreme for Knights tastes and sensibilities.

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too understands the points that Knight is making. Hazlitt neither makes a whatever is, is efficient argument, nor does he neglect to say repeatedly that laissez-faire requires a framework of law and order, and morality. In fact, as quoted above, Hazlitt is explicit on this.43 A more favorable reading of Hazlitts Foundations can be found in the work of Leland Yeager, and in particular Yeagers Ethics as Social Science: The Moral Philosophy of Social Cooperation (2001). As Yeager states in his preface, Hazlitts

The Foundations of Morality is the best single book on ethics that I know of. Yeager continues, It seems to me that Hazlitt has received nowhere near the credit that he deserves for his scholarly accomplishments, and for no better reason than that he lacked the usual academic credentials and platform. But Yeager concludes, Hazlitt was a profoundly educated man, but mostly self-educated. (2001, vii) In Ethics as Social Science, Yeager builds on the work of Hume, Smith, Mill, Mises, Hayek and Hazlitt, and provides a modern defense of rule or indirect utilitarianism in contrast to contractarianism, natural rights theory, and moral intuitionism. The social scientists concern with cooperation, Yeager concludes, including impersonal cooperation among vast numbers of mutually unknown persons, helps elucidates a broadly utilitarian approach to ethics and its application to political philosophy. This approach invokes fact and logic to appraise institutions,
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When Milton Friedman visited China in the 1980s he was asked what they should do to improve, and he said privatize, privatize, privatize. A few months before he passed away, he was asked if the experience in the former Soviet Union and East and Central Europe during the post-communist period had made him rethink that general advice to privatize, and he said yes, I would say today privatize, privatize, privatize provided there is a rule of law. It is also interesting to note that in Knight (1967) he acknowledges that Hazlitt is clear about the necessity of a framework of law and order for the liberal order to thrive, but he complains that Hazlitt leaves short the discussion of the substantive content of the law that is to constitute the necessary framework for the good society (and the mechanisms of enforcement that must be effective for its maintenance).

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policies, rules, character traits, and dispositions according to how well they serve peaceful cooperation among individuals pursuing their own diverse goals in life. (2001, 299) This is, in essence, the message that Hazlitt tried to articulate in 1964, and I would argue that it is the essence of contemporary work in political philosophy that seeks to provide non-ideal theories of justice and forge a renewed appreciation for the moral sciences as reflected in the educational and research program of philosophy, politics and economics (PPE). The dilemma that Knight (1967, 794-795) put before us, is not that the arguments that cut against Hazlitt (and the entire tradition of classical or orthodox economics) and claim that laissez faire must be overturned for government control and scientific planning are persuasive. According to Knight they are not. Knight, in fact, siding with the teachings of orthodox economics believes that such claims are nonsense, but he asserts that the defenders of market freedom have inadequately dealt with the dark side of human nature. Men are, and ought to be free, Knight understands, and that freedom within the economic realm means freedom of exchange. An exchange is an exchange is an exchange, Knight emphasized in many of his works, it is voluntary and mutually beneficial otherwise it would not have taken place. The principles of economics are applied common-sense derived from the facts of nature. Mankind exhibits two natural propensities --- (1) to truck, barter and exchange as Adam Smith taught us, and (2) to rape, pillage and plunder as Thomas Hobbes warned. Which propensity is realized in lived history is a function of the rules of the social game that are in operation in that particular time and place. If the

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rules encourage our social nature, then individuals will be able to realize the gains from social cooperation under the division of labor. If those rules encourage our anti-social nature, then those benefits from social cooperation will go unrealized. That the anti-social side of human nature must be taken into account in any serious and intelligent discussion of economic policy (Knight 1967, 795) is a point that Hazlitts The Foundations of Morality would agree on despite Knights objection that this problem is ignored. It is not ignored, and in fact, one could reasonably argue that it was precisely the core point of the book --- the necessity to discover, implement and establish mechanisms of enforcement for the rules that encourage social cooperation by curbing our predatory nature, and the shocking revelation that private property provides the institutional foundation for such a social order. Hazlitts discussion anticipates not only the work in political economy on governance and the institutional structure required to sustain a private property market economy, but also the evolution of the tacit norms and mores upon which the formal structure of the rules of governance rests, and without which the system cannot be sustained. For any modern social scientists working on questions of

development and institutional transformation this will sound all too familiar. I am not claiming that Hazlitt influenced the modern discussion of social capital, the bourgeois virtues, and the historical research on institutional evolution and the transition from personal to impersonal exchange. But the ideas that Hazlitt worked with are clearly reflected in that literature, and he was emphasizing these points when few other authors were in the disciplines of philosophy, politics and economics.

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VII.

Conclusion

Henry Hazlitt was a unique public intellectual, who strove to not only to enlighten the general public with his writings, speeches, and appearances on TV and radio, but sought to contribute to the specialized disciplines of economics and philosophy. From the publication of his first book in 1916 to 1984, when his final two books appeared fittingly From Bretton Woods to World Inflation and The Wisdom of the Stoics Hazlitt sought to write works that would garner approval from specialists while generating a wide readership among intelligent laymen. The evidence that I have tried to marshal to support my conjecture that Hazlitt occupied a unique position in mid-20th century intellectual life in the US as a public intellectual attempting to contribute to scientific economics consisted of not just pointing to his prominent position in the world of journalism both as a literary critic and more importantly as an economist but more importantly for our purposes to the attention his written work commanded in the specialized professional journals in economics and philosophy, as well as the active correspondence he engaged in throughout his life. The company Hazlitt kept was not just that of the New York intelligentsia, but included many of the leading minds in the social sciences during his lifetime. The only other case comparable to Hazlitt in the history of economics is perhaps Bastiat.44 Unfortunately, Hazlitt has suffered a similar fate. This should not

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As pointed out earlier, Walter Lippmann clearly occupied a similar place, but not in the field of economic theory, but more in political economy, political science, and political theory. But,

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be surprising since Hazlitt tied his own work so closely to that of Bastiat. In Joseph Schumpeters History of Economic Analysis (1954, 500), he writes that Bastiat has been given undue prominence and that his case is simply one the bather who enjoys himself in the shallows and goes beyond his depth and drowns. Schumpeter summarily dismisses Bastiat by stating: I do not hold that Bastiat was a bad theorist. I hold that he was no theorist. Schumpeters judgment of Bastiat is certainly subject to challenge, especially when you move away from the simplistic reading of Bastiat, and focus instead on the nascent opportunity cost reasoning, the invisible hand style argument, and the public choice analysis evident throughout his writings. Though Hazlitt has not been subject to such a harsh dismissal in a leading work on the history of modern economic thought, his fate has been worse which is to be ignored. Rather than an undue prominence as a result of relentless critics as Schumpeter maintains was Bastiats fate, Hazlitt has failed to inspire critics having been thought to have been so soundly defeated in his own day that he suffers undue neglect. But as I have suggested with both his critique of Keynes and his work on social ethics, the world of ideas has in many ways moved in Hazlitts direction since his passing in 1993.

Lippmanns work is still celebrated today among academics and public intellectuals, whereas Hazlitt has faded into obscurity.

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Hazlitt, H. and F. Hazlitt, ed., (1984) The Wisdom of the Stoics. Lantham, MD: University Press of America. Hazlitt, H. (2011) Business Tides: The Newsweek Era of Henry Hazlitt. Auburn, AL: Ludwig von Mises Institute. Kerwin, J. (1943) Review of A New Constitution Now, American Political Science Review, 37 (2) April, 334-336. Knight, F. (1951) The Role of Principles Economics and Politics, American Economic Review, 41 (1) March, 1-29. Knight, F. (1966) Abstract Economics as Absolute Ethics, Ethics, 76 (3) April, 163177. Knight, F. (1967) Laissez Faire: Pro and Con, Journal of Political Economy, 75 (6) December, 782-795. Lerner, A. (1960) Review of The Failure of the New Economics, Review of Economics & Statistics, 42 (2) May, 234-235. Lippmann, W. (1937) The Good Society. Boston, Mass.: Little, Brown and Company. McCloskey, D. (2010) Bourgeois Dignity. Chicago, IL: University of Chicago Press. McIsaac, A. (1947) Review of Economics in One Lesson, American Economic Review, 37 (3) June, 424-428. McKenna, J. (1960) Review of The Failure of the New Economics, American Economic Review, 50 (1) March, 188-190. Mencken, H. L. (1933) Mencken on Mencken. Baton Rouge, LA: Louisiana State University, 2010. Posner, R. (2002) Public Intellectuals: A Study in Decline. Cambridge, Mass.: Harvard University Press. Schumpeter, J. (1954) History of Economic Analysis. New York: Oxford University Press. Tucker, J. (1999) Henry Hazlitt: The Peoples Austrian, in Randall Holcombe, ed., 15 Great Austrian Economists. Auburn, AL: Ludwig von Mises Institute. Yeager, L. (2001) Ethics as Social Science. Cheltenham, UK: Edward Elgar.

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Wicksteed, P. (1910) The Common-Sense of Political Economy, 2 volumes. London, UK: Routledge, 1933.

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