In Economics in One Lesson, Henry Hazlitt argues that the biggest mistake we make in economics is focusing only on what is seen, while ignoring the unseen consequences that are less conspicuous.
The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. —Henry Hazlitt
Here are some brilliant stories Hazlitt used to challenge the perspectives that mislead people into bad economic thinking. These stories are timeless, as they teach seemingly complex concepts with easily understood scenarios that hit just as hard today as in 1946, when the book was first published.
The Broken Window Fallacy
A boy breaks a Baker’s window. The crowd, trying to be positive, says, “Well, at least this is good for the glassmaker! He will earn money, and the economy will benefit”
Sounds reasonable until Hazlitt points out what is unseen: What would the baker have done with that money if he didn’t need to replace the window? He could have done a plethora of things, including getting a new pair of shoes or hiring someone for his bakery. The shopkeeper now has to spend money replacing the glass instead of buying something else to his benefit or investing in his business.
The community sees new activity, but does not see the lost opportunity. Destruction doesn't grow the economy. It just diverts resources from one thing to another, often from something productive to restoration.
Lesson: Just because money is being spent doesn't mean value is being created.
Spending in the Middle of Nowhere
Imagine the government announces a massive infrastructure project, like the airport to be built in Nasarawa state. Workers are hired. Cement is poured. Wages are paid. From the outside, it seems like a win as jobs are created and money is flowing.
But again, Hazlitt asks: what is unseen? Where did the money come from? Taxes. And what would that money have done if left in the hands of private individuals? Those same funds could have been used for education, healthcare, or businesses. In other words, wealth would have been created based on real need, not political optics.
Instead, the national wealth has gone into an airport that barely serves anyone. The visible, temporary (at least till the airport’s completion) jobs came at the expense of invisible ones. Jobs that would have emerged in response to genuine demand.
Lesson: Government spending is not magic it merely reallocates existing resources, often inefficiently.
The Widow’s Pension
This happens to be my favourite story. In Congress (National Assembly in Nigeria), a bill is proposed to grant money to the widow of a government worker. All the lawmakers agree. It Is compassionate, it is the right thing to do. They vote yes.
Then one congressman stands up to object saying, “If we really want to help, let each of us contribute personally from our salaries.” But he refuses to vote to forcibly take money from taxpayers to give to one individual, no matter how deserving.
Do you feel generous? Then spend your own money.
It’s a powerful reminder that the government has no money of its own, only the money it collects from others. When we vote to “help” someone or an institution with public funds, we are usually doing it with someone else’s money.
Lesson: Government generosity often comes at the involuntary expense of others.
Rent Control: A Well-Intentioned Mess
To help struggling tenants, the government imposes rent control. People are initially happy when rents drop and apartments become more affordable.
But landlords stop maintaining buildings, and housing stops being built. Over time, cities see housing shortages, damaged houses, and even black markets for apartments.
The intention was praiseworthy, but the result, a disaster.
This story would help you understand the collapse of the naira after the Central bank had been artificially controlling the exchange rate for years.
Lesson: You can’t make something more available by making it less profitable to supply. Artificially controlling prices often ends up hurting the very people it's meant to help.
The Minimum Wage Trap
Raising the minimum wage sounds like a great way to help workers. But Hazlitt urges us to look deeper.
Some businesses, especially small ones, can’t afford to pay the new wage. These businesses respond by reducing their staff who are usually the most vulnerable: young, low-skilled, or inexperienced workers. The very people the policy was supposed to help.
A job at N33,000 per month is certainly better than no job at N70,000 per month.
So while a few workers benefit, many are pushed out of the labour market entirely.
Lesson: Higher wages for all is not without consequences. Wage laws can’t create prosperity only productivity can.
The Government Loan That Robs Peter to Pay Paul
Suppose the government gives a special low-interest loan to a struggling factory. Good news for them, right?
It didn’t appear out of thin air. It was taken from somewhere. Possibly through taxes or government borrowing. That means someone else or a more efficient company, a startup, or a private lender now has less capital to work with.
We see the struggling company that was helped. We don’t see the innovative business that never launched because the capital was rerouted. Helping one borrower often means hurting another.
Lesson: Every government loan has a hidden cost. Capital is not infinite. If it’s given to one, it’s taken from another.
Conclusion
Hazlitt, with these simple stories, nudges us toward sound economic thinking, by asking what else is there. Very often we quickly make conclusions on an economic matter after perceiving the initial effects without reasoning throught the unseen consequences. Beyond the intention of policies, we should debate the overall effects.
In the coming weeks, I will be adapting each of these stories to the Nigerian contexts, such as foreign exchange policies, size of government, subsidy removal, etc.