A book with a simplistic and one-sided interpretation, but a great favorite for those who want their confirmation bias stroked is:
Economics in One Lesson, Henry Hazlitt  [External Reviews]
Other people like this book, but probably because it takes one point of view, a point of view that corresponds closely to employers.

Discussion:

Economics in One Lesson, by Henry Hazlitt, was highly recommended to me by a professor of economics. Hazlitt seems, on the whole, to make useful arguments against some economic practices. However, he assumes that the owners of firms will pay their workers a fair wage rather than just enough to keep a homeless person from starving. He also assumes that those who run these firms will necessarily reinvest their earnings rather than behaving like a giant dragon brooding on its pile of gold and jewels.

Hazlitt seems not to entertain any question about what restraints on capitalism a community might put on enterprises when someone requests permission from a community to build a factory or other major capital-intensive project on its territory. Is it permissible, from the standpoint of the community, to take advantage of an over-supply of workers and cut wages to the bone? Is it acceptable to deplete the human and other resources of the community and take the factory owner's earning away from the community?

In service of his ideas Hazlitt seems to invoke a hidden principle of economics, the zero-sum game. He says that money that goes one place, e.g. to taxes used to support the unemployed and who knows what other unworthy projects, cannot be used in another place, e.g., to build another factory, earn more money, and pay more workers wages. But money that does not go into the firm's coffers and is not paid out as unavoidable taxes could be used to provide improvements in the medical care of workers and their family members, to provide improved educational opportunities, etc. While there are clearly frills that would add nothing to the productivity of workers, a factory clinic where workers could be seen for over-the-counter medications for headaches and colds, antimicrobials and bandages for minor wounds, etc. could pay both employer and employee good dividends.

It might be true that some businesses could not survive if forced to pay their workers a living wage, but perhaps they do not deserve to survive. Since there is a demand for their products, perhaps a business with better practices would move in and be successful. Perhaps one of the real reasons for paying workers marginal wages is that their employer employs a strategy that goes all the way back to the ant but not to the grasshopper: putting aside large reserves for one's own future maintenance.

Models, by their very nature, never incorporate all features of the real systems being investigated. Nevertheless, a simple model of an economy that is isolated to a single community ought to include all the major factors that would have an impact on the members of that community.




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