Book Review: The Failure of the "New Economics": An Analysis of the Keynesian Fallacies

Summary

In this video, Katrina, a book enthusiast, reviews 'The Failure of the New Economics' by Henry Hazlitt, which critiques John Maynard Keynes' economic theories. Katrina delves into how Hazlitt systematically debunks Keynes' ideas, highlighting the confusion between savings and investing, the concept of involuntary unemployment, and Keynes' advocacy for mercantilism. Throughout the review, she mixes in a cocktail recipe called 'Secret Satire,' humorously connecting it to the book's content. Katrina also questions whether Keynes' work was meant to be taken seriously or as satire, leaving viewers with thought-provoking insights.

Takeaways

• 📚 The host Katrina reviews books, giving synopses and personal opinions on them.
• 📉 Last week’s book praised Keynesian economics and suggested that FDR's deeper implementation of it could have ended the Great Depression by 1933.
• 📖 This week’s book, 'The Failure of the New Economics' by Henry Hazlitt, thoroughly debunks Keynesian economics.
• 🥃 The accompanying cocktail for the review is called 'Secret Satire,' made with bourbon, Italian aperitif wine (Campari), and simple syrup.
• 💡 Hazlitt critically analyzes Keynes' 'The General Theory of Employment, Interest, and Money,' highlighting its flaws and confusing logic.
• 💰 Hazlitt points out Keynes' contradictory views on savings and investment, clarifying that savings are essential for investment.
• 🔍 Hazlitt addresses the concept of unemployment, noting that Keynes introduces unnecessary complexity by creating a new category of 'involuntary unemployment.'
• 📜 Hazlitt's critique references several economists to support his arguments against Keynes' theories.
• 🕵️‍♂️ Hazlitt speculates that Keynes might have intended his work as satire, misunderstood by his followers.
• 🔄 The review suggests that Keynes advocated for a return to mercantilism, a pre-Adam Smith economic theory that led to many European wars.

Q & A

What is the purpose of the YouTube channel 'Loki's Library'?

'Loki's Library' is a YouTube channel where the host, Katrina, reads through various books from her library and provides a synopsis along with her personal opinions and analysis. The channel is aimed at helping viewers decide what books to read next.

What was the main theme of the book discussed in the previous week's episode?

The previous week's episode discussed a book about Keynesian economics, specifically focusing on the belief that if FDR had further embraced Keynesian socialism, the Great Depression would have ended sooner.

What book is being reviewed in the current episode?

In this episode, Katrina reviews 'The Failure of the 'New Economics': An Analysis of the Keynesian Fallacies' by Henry Hazlitt, which critiques and debunks Keynesian economic theories.

What is the main argument of Henry Hazlitt’s book, according to Katrina?

Hazlitt’s book argues that Keynesian economics contains numerous fallacies. Hazlitt goes chapter by chapter through Keynes' 'The General Theory of Employment, Interest and Money,' highlighting where Keynes went wrong, and how basic economic terms like savings and investing are misunderstood or misrepresented in Keynesian theory.

What are some of the misconceptions about savings and investing in Keynesian theory as per Hazlitt?

According to Hazlitt, Keynes simultaneously treats savings and investing as the same thing while also claiming that savings are bad and investing is good. Hazlitt points out that these terms have distinct meanings: savings is the surplus money left after expenses, while investing is the allocation of resources to generate returns. Keynesian theory blurs this distinction, leading to confusion.

What economic concept introduced by Keynes does Hazlitt refute in his book?

Hazlitt refutes the concept of 'involuntary unemployment' introduced by Keynes, arguing that all unemployment is either voluntary or involuntary. Hazlitt believes Keynes needlessly complicates the matter by suggesting a third category that doesn't exist.

What are some criticisms Hazlitt has about Keynes’ writing style?

Hazlitt criticizes Keynes for introducing unnecessary complexity and confusion into basic economic concepts. He includes large sections of Keynes' original text to show that Keynes’ work is often unclear, full of typos, and misleading, which makes it difficult to read and comprehend.

What does Katrina say about the historical accuracy of claims related to the Great Depression in the book?

Katrina points out that Hazlitt debunks the commonly held belief that the Great Depression started with the U.S. stock market crash. Hazlitt argues that the depression began earlier in Great Britain and that the condition of unemployment in the U.S. was prevalent long before the market crash.

What role does union behavior play in Hazlitt's analysis of the Great Depression?

Hazlitt criticizes both government wage freezes and union behavior during the Great Depression. He argues that wage freezes and unions' refusal to accept lower wages prolonged the economic downturn, worsening unemployment and inflation.

Why did Katrina choose the cocktail 'Secret Satire' for this episode?

Katrina named the cocktail 'Secret Satire' because Hazlitt suggests that Keynes might have written his theories as a satire, not to be taken literally. This idea is explored in Hazlitt’s book, where he questions whether Keynes was being serious or intentionally ironic in his economic proposals.