8. Letter on Henry Hazlitt and Keynes

8. Letter on Henry Hazlitt and Keynes

July 18, 1959

Dr. Ivan R. Bierly

William Volker Fund

Dear Ivan:

In a forthcoming review of Henry Hazlitt’s The Failure of the “New Economics” in National Review, I write that this is the best book on economics to be published since Mises’s Human Action, ten years ago. I do not think this an exaggeration. Exempting reprinted books, such as Mises’s Theory of Money and Credit or the Böhm-Bawerk volumes, what book can compete with this one? (Mises’s Theory and History and Hayek’s Counter-Revolution of Science are more philosophical or epistemological than straight economics.) Abbott’s Quality and Competition, Bauer’s two books on underdeveloped countries (that does not include Bauer and Yamey’s book) all are impressive, but they cannot come close to Hazlitt for the accolade.

Frankly, I didn’t realize that Henry had it in him. I always knew that he was an excellent journalist, and that he faithfully applied Misesian principles to his journalistic work, a difficult task in itself. And I knew that his Great Idea [Time Will Run Back] was a highly underrated work, and because cast in novel form, didn’t get the recognition that its acute discussion of economic principles deserved. Still, I did not realize that Henry would be so fine on the highest scholarly levels, as he has here shown himself to be. This is, in short, an excellent work, at long last providing us with a minute, bit-by-bit, and yet also overall critique and demolition of the Keynesian heresy. There is no hesitation here, no namby-pamby ritualism about how “Keynes, despite his many errors, really contributed a great deal, etc.” Keynes contributed only mischief, fallacy, and obfuscation, and Hazlitt is courageous enough to call a spade a spade.

This was a grueling but vitally important job, this cleansing of the Augean stables, and Hazlitt deserves the highest commendation for the job he has done. There are few other economists who really could have done it, for to do it requires thorough grounding and thorough knowledge in Misesian principles, and this Hazlitt has and uses. No Chicago economist, for example, could have done this job adequately, sharing, as the Chicagoans do, many of the Keynesian errors and lacking the “Austrian” insights.

I went through this book with great and particular care, with the General Theory at my elbow, looking for flaws, but could find none. Oh, there were various places where I would have preferred further elaborations or differences in emphases, but this is true of any reader about any book. Hazlitt differs from the Misesian pure time-preference theory of interest to some extent, although by the end of his discussion he has ingeniously worked around to agreeing pretty much with Mises there, and he tends to dilute Austrianism with Walrasian concepts, but these were so inconsequential in this book that we can definitely say that there are no important errors in the work. In contrast, there are a great many virtues overall, and also minute critiques of the various aspects of the Keynesian system and of its political implications, a dissection of the fallacies of mathematical economics, etc.

Some may say (and I understand that Buchanan said something like this in his review) that an analysis of Keynesianism is not important nowadays. It is true that Keynesianism is not seemingly a hot issue today, although even here Hazlitt shows how Keynesianism is at the root of the current national income and “economics of growth” analyses. But, on the other hand, the real reason why Keynesianism is not a hot issue is because it has been so thoroughly accepted, especially by the so-called “conservative” side in the political debate. It is unquestioned by any prominent conservative or business magazine: let the first sign of depression appear on the horizon, and the sure way to cure it is to have government deficit spending and inflation. Nobody believes in a balanced budget during depressed times anymore. This is the measure of the mass and intellectual acceptance of Keynesianism. And, as a matter of fact, the Chicago economists like Buchanan have the very neo-Keynesian virus in them. So let it never be said that Henry’s book is not important or timely. It should be read by every economist or everyone interested in fundamental economic problems. It is worthy of National Book Foundation or any other form of distribution.

I worked 20 hours on this book—a rather long time relative to others, but, as I say, I wanted to exercise particular care with this one.

All the best.