The Henry Hazlitt Memorial Lecture, sponsored by Hunter Lewis. Recorded at the Mises Institute on March 22, 2019. Includes an introduction by Joseph T. Salerno. The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian School, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Mises Institute at its campus in Auburn, Alabama, and is directed by Joseph Salerno, professor of economics at Pace University and academic vice president of the Mises Institute. Lecture Text: In 1946, a book named Economics in One Lesson was written by a man who did not think it would have a great impact beyond the economic fallacies of his day. That amazing man was Henry Hazlitt. Now over one million copies have been sold and it remains in print. It is a personal honor to lecture about Hazlitt: He is one of my favorite writers on economics, political economy, and ethics. Economics in One Lesson, which was based in part on Bastiat’s essay, “What Is Seen and What Is Not Seen,” debunks the most prominent economic fallacies of the past and the present, summing up economics as long-term versus ephemeral thinking. He wrote more than twenty books and was the principal editorial writer on finance and economics for The New York Times for twelve years and a columnist for Newsweek for twenty years. More importantly, his writing was thoughtful, incisive, and influential, and he played a significant role in supporting, introducing, and explaining the ideas of Mises and also Hayek. He is a stellar example of the impact one person can have on our society. My mentor, Dr. Bill Peterson (a student and colleague of Mises) and his wife Mary were good friends of Hazlitt, so although I never met Henry, I did receive first-hand knowledge of his life and work from the Petersons. I am thankful to Laura Bennett Peterson, Bill and Mary Peterson’s daughter, for assisting me with this lecture. Laura grew up knowing Hazlitt and she has been exceptionally helpful with her knowledge and insights about him. Dr. Peterson was very complimentary of Hazlitt’s writing and personal courage, especially when he opposed the Bretton Woods agreement. Hazlitt knew Bretton Woods would cause inflation. The New York Times had no interest in criticizing this agreement, and that sent Hazlitt looking for a new job. Hulsmann indicates in Mises: The Last Knight of Liberalism that Hazlitt may have been one of Mises’ first close American friends. In 1940, Hazlitt received a call from “Mises speaking,” and he described the encounter as if “John Stuart Mill were speaking.” This was the beginning of a long-term friendship between Hazlitt and Mises. By explaining economic theory, Hazlitt enabled many entrepreneurs to think clearly and correctly. Most of the time the world promotes compliance with existing ideas and punishes critical thinking and new ideas. This was Germany’s mentality in the early 20th century, Mises was treated miserably because of what he thought; this is common today. Profound thinkers are rarely appreciated and often scorned. Today we are witnessing this in our universities, which were created for thinkers but now suppress original thoughts. This talk focuses on three of Hazlitt’s central concerns: His book, The Foundations of Morality, established a high standard of morality. Current events demonstrate a widespread lack of morality in our society.His book, Thinking as a Science, elevates thinking to a new level. Today everyone is “thinking outside of the box.” The problem is, most people are not thinking most of the time.His book, Economics in One Lesson, introduces us to classical-liberal thinking, which is foreign to most Americans He wisely pointed out, along with Mises, that economics “is a description, explanation, or analysis of the determinants, consequences, and implications of human action and human choice.” Hazlitt’s economic thinking is thus grounded on human behavior. The recent gyrations of the stock market, based on fears of tariffs or higher interest rates, illustrate how markets react in real time to the effects of current policies. Hazlitt was a giant in financial journalism, as noted in Jim Grant’s Hazlitt lecture. But Hazlitt was also a public intellectual with unique insights on morality, thinking, and political economy. We will begin with Hazlitt’s understanding of morality as embodying long-term thinking, his foundational theme. This is his most powerful message. Morality For Hazlitt, “morality is essentially, not the subordination of the ‘individual’ to ‘society’ but the subordination of immediate objectives to long-term ones.” Hazlitt realized that the long-term interests of the individual would serve the long-term interests of society. The long-term interests of the individual depend on social cooperation, as Hazlitt points out: “Social cooperation is the foremost means by which the majority of us attain most of our ends.” (The Foundations of Morality, 13) CAS stresses cooperation as the primary way we can progress as a company. It can be challenging and requires humility. We witness the parade of lobbyists seeking government favors: lobbyists from GM, the U.S. steel industry and Tesla, to name just a few. I might add our universities to this list, since the federal government helps to fund their excessive spending. These companies and institutions are rent seekers and tariff promoters. German and Asian automakers, which also manufacture in America, received no bailouts and don't want tariffs. In fact, BMW exports 75 percent of the SUVs it makes in South Carolina. Hazlitt reminds us to let the market decide, as “dying industries absorb labor and capital that should be released for growing industries.” Hazlitt believed that bailouts and tariffs are short-term solutions to long-term industry problems. Hazlitt’s concept of morality can be summed up in two of his own sentences: “The conduct we call moral is the conduct we consider likely to lead to the most satisfactory situation in the long run.” And “immoral action is nearly always short-sighted action.” These important principles are lost on our society today. The challenge for entrepreneurs: We must focus on the long term in spite of tremendous pressure to think only over the short term. Markets are very competitive, and sometimes promote short-term thinking and solutions. But we know, short-term decisions can be very costly in the long run. It is imperative to teacher our students about Hazlitt. Many domestic steel manufacturers raised prices over this past year even higher than the steel tariffs. It did not work, Users take notice and take action. In the long term our domestic steel industry will be harmed by tariffs. This is human action in the marketplace. We are witnessing a parade of successful entrepreneurs, as well as leaders in all walks of life, fall from grace because they lacked morality. These individuals may have brilliant ideas, but they lost sight of the long term and failed to learn Hazlitt’s most important lesson on morality: High integrity is required for the sustainability of an enterprise over the long term. Our society promotes and praises loud and unethical leaders such as Elizabeth Holmes, Elon Musk, but companies and investors suffer. Companies suffer because of these unethical individuals in charge: think of VW, Lehman Brothers, Tesla, and now Boeing. Conversely, Warren Buffet is not an Austrian Economist but he is an excellent investor, capital allocator has an exceptional reputation for honesty and became rich in the long run. Companies and Investors flock to him. The market requires moral leaders because the market cannot function without integrity. In addition to morality, Hazlitt makes the need for freedom very clear: This freedom applies to entrepreneurs: In order to have the freedom to succeed, we must have the freedom to fail. For Hazlitt, capitalism allows for freedom, It does not hinder freedom: Modern capitalism is not an inevitable or inescapable system but one that has been chosen by Americans. It is a system of freedom. In America, some 300 million people produce 24 percent of the world’s goods. America leads the world in innovation, which is the essence of American exceptionalism. Too Many countries undermine freedom and the results are clear. The EU has slow growth and high unemployment. In Venezuela, freedom is denied to the point of starvation. There is concern that the free market creates inequities and failures. But Hazlitt points out that “a free-market system tends to give to every social group, and to every individual within each group, the value of what it or he has contributed to production.” Hazlitt sums it up perfectly. Socialists refuse to understand free markets. They fail to see that production is based on incentives, not coercion. Some politicians live off the fat of the land but hate producers, freedom and success. It would be entertaining to read what Hazlitt might write about the lunacy of the Green New Deal and massive government debt. Successful businesses must have a strong record of morality and must think long term to survive in a competitive marketplace. The CEO of Boeing would probably affirm this statement, at least right now. Unfortunately, Boeing’s marketing group convinced the FAA the 737 Max was the same as the old reliable 737. This wasn’t true. Even many pilots were not aware of the complexity of the new MCAS software. The FAA did not understand the new Boeing technology, so why are they regulating. The 737 Max’s software relied on a single sensor, which failed. Some important safety features were sold as “options,” not standard equipment. Those options weren’t chosen by Lion Air or Ethiopian Air, but you can count on them being standard in the future. Internal concerns f
