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Excessive assumptions in Hazlitt's reasoning?

tdodthomas
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2/21/2016 11:32:13 PM
Posted: 9 months ago
I'm reading Hazlitt's book, Economics in One Lesson. I love it so far (2/3 finished), but it seems that he makes many problematic assumptions. For instance:
""assuming that if one industry is allowed to fail, it's capital and labor force will be absorbed by another industry. How do we know this other industry exists? Who's to say the original industry's capital will not simply remain unused?
" the assumption that all consumers will spend the same proportion of the income. For example, he always states that taxes are pointless because they decrease the purchasing power of consumers. But how do we know that these consumers would have spent the taxed capital? Perhaps they would have just saved it?

I'm new to economics, so I apologize if I have said anything ignorant :)
Benshapiro
Posts: 3,966
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2/26/2016 7:00:55 PM
Posted: 9 months ago
At 2/21/2016 11:32:13 PM, tdodthomas wrote:
I'm reading Hazlitt's book, Economics in One Lesson. I love it so far (2/3 finished), but it seems that he makes many problematic assumptions. For instance:
""assuming that if one industry is allowed to fail, it's capital and labor force will be absorbed by another industry. How do we know this other industry exists? Who's to say the original industry's capital will not simply remain unused?
" the assumption that all consumers will spend the same proportion of the income. For example, he always states that taxes are pointless because they decrease the purchasing power of consumers. But how do we know that these consumers would have spent the taxed capital? Perhaps they would have just saved it?


I'm new to economics, so I apologize if I have said anything ignorant :)

That book is worth its weight in gold. Presumably idle capital and labor won't just sit there while there's market competition for that capital and labor. Savings (in a savings account) is actually investment and investment results in another form of spending (by businesses taking loans to borrow capital).