Henry Hazlitt, an American liberal economist (1894-1993), often considered one of the most underrated intellectuals of the 20th century, is best known for his book “Economics in One Lesson” (1946). Before his ventures into writing about free markets, he worked as a journalist on Wall Street, served as the literary editor for “The Nation” magazine, and succeeded H.L. Mencken as the editor of “The American Mercury” magazine.
His first published work was a fascinating booklet titled “The Way to Will Power” in 1922, written when he was only 28 years old. While Hazlitt never mentioned this book later in his career, many speculate that he may have found it too immature or unrefined. However, personally, I find this book to be exceptional.
This book aimed to apply the knowledge he gained as a financial journalist to personal decision-making. His insights, upon reflection, seem straightforward, yet most people fail to recognize them both in the past and present.
In the realm of finance and economics, the key to success lies in aligning long-term goals with present decisions. Having a forward-thinking mentality is crucial. Hazlitt pointed out that the current price of a commodity in the market already reflects all known factors and expectations for the future. For example, the price of silver today may be as high as $80, not just based on current market conditions, but also due to people’s belief in its potential future uses, potential shortages, or increased demand.
Price issues often puzzle people. If there were plans to permanently close a beach next year, property values in the coastal area wouldn’t decline next year but would do so immediately. This is because markets inherently have foresight. This is also why price systems often outperform central planners. Price systems benefit from the collective wisdom of millions of buyers and sellers, while government officials can only grasp what falls within their purview.
Hazlitt wondered if we could make our personal lives as wise as rational thought. He gave an example: a person desires to lose weight, build muscle, and improve their health. However, they consistently choose to indulge with friends night after night. Each morning, the regret sets in, prompting a renewed determination to lead a healthier lifestyle.
For some reason, their aspirations remain unfulfilled. While craving health, the problem lies in the fact that physical well-being seemingly can’t be an immediate substitute for drinking and revelry. Every night, the person must choose between going to bed early to enjoy a moment of peace or opting to party with friends. They desire both health and happiness but consistently choose happiness over health at every turn, thus failing to achieve their long-term goals.
In economics, this is equivalent to someone ambitiously wanting to amass a significant personal savings, earning interest, dividends, and increasing asset value. However, their daily consumption decisions not only deplete their savings but also add on more debt. Despite wanting to be financially responsible, they choose what appears to be the most cost-effective in the present.
Hazlitt believed that having a fulfilling and meaningful life hinges on the insight he gained from economics: aligning today’s decisions with the lifestyle and goals one envisions for the future. In other words, he emphasized not only having a long-term vision but also seriously considering the impact of every decision made today on the future.
Is this concept simple? Perhaps, but it’s often overlooked, especially during holidays. Surrounded by delicious food and wine, various temptations lead us to indulge, relishing in the freedom to laze around, enjoying late mornings. With short daylight hours and cold weather, the last thing we want to do is go outside, stay healthy, abstain from alcohol, or prepare for the future.
This approximates the general state people find themselves in as this period comes to an end. Yet, this is why we make New Year resolutions. These resolutions mirror our disdain for our lack of self-discipline in recent weeks and our resolve to change. Once we commit to reading more, exercising, quitting drinking, we feel much better, as if setting a goal is already half the battle won.
However, merely having a goal is insufficient for success unless the present choices perfectly align with long-term desires. Maintaining determination doesn’t just involve imagining a better future; it also necessitates giving up immediate desires to achieve the goals you yearn for ultimately.
The core of Hazlitt’s insight lies in the matching of “time preference”: your current actions must reflect the person you aspire to be in the future. This particularly proves challenging in the realm of diet. Poor eating habits can become addictive, and after a binge session, swearing off dieting seems like a sound idea. However, this notion usually wears off by the next morning as an empty stomach often changes your mind.
Hazlitt’s 1922 writings led to the widespread use of “willpower” in popular culture. We must all say ‘no’ to the easy choices to eventually achieve the higher goals that require accumulated time. The trade-offs between consumption and investment serve as the best analogy in economics: any society lacking the discipline to delay consumption cannot achieve genuine prosperity.
German sociologist Max Weber (1864-1920) speculated that the incredible prosperity of the Western world in the 19th century was nurtured by the Protestant emphasis on discipline and savings. Accumulated savings fuelled massive capital for investment and territorial expansion. As wealth continued pouring in, it began challenging the core values that initially fostered affluence. When money seemed inexhaustibly abundant, thrift was cast aside. Simple living and prudent material management were marginalized.
In the current financial environment, all major corporations and even most small businesses have learned to leverage as much as possible. As long as the profit potential of an entity surpasses borrowing costs, taking on debt appears to be the right choice. This, of course, is entirely due to fiat money and the Federal Reserve system; without them, the entire debt empire would have collapsed long ago.
Our central banking institutions and profligate legislative bodies have thus undermined the foundation of long-term prosperity in this manner.
This pattern has a more covert side. When Hazlitt penned his magnum opus in 1922, money was still based on gold and silver, with staggering high-interest rates; hard work and saving would yield substantial returns. The workings of government and finance were aligned with our personal lifestyles. In other words, the world’s economic system back then seemed reasonable.
Today, the rationality of financial and governmental operations isn’t as clear. Living like major corporations and legislative bodies leads us to prioritize the immediate, squandering every penny, indulging in alcohol, and passing on the consequences of our flawed decisions to others in the future.
Hazlitt’s perspective underscores the importance of focusing on the future, rather than indulging in past trauma as advocated by contemporary society. This is a fatal mistake. Using past trauma as an excuse will always stifle future achievements.
Would the concept of willpower, which only entered everyday vernacular in the early 20th century, now be regarded as unpopular and surprising? It so happens that today, a national newspaper featured an article criticizing willpower. The author suggests discarding willpower, considering its role as “overrated,” and instead adopting what she refers to as “situational agency.”
From my understanding, her point is that it’s better to adjust lifestyles and arrange to completely avoid temptations rather than struggle against them. This might be the essence of losing weight with Ozempic: instead of turning down pastries and a third serving, just take a pill to directly alter your preferences!
I remain skeptical about whether drugs can overcome the core issues Hazlitt highlighted. In fact, this seems more like an excuse to pretend that the problem doesn’t exist at all. People seem to perpetual believe that some artificial means will eliminate the need for self-discipline entirely.
Hazlitt’s central point reiterates that we underestimate the power of will. Determining to quit smoking, truly determined, will be successful. The same goes for quitting alcohol, overeating, and laziness. The difference between now and a better future lies solely in a shift in mindset.
We all make New Year resolutions, yet most ultimately falter. Once we reflect on the reasons behind this, we can better adjust our present lifestyles to align with the life we envision for the future. This is the core issue humanity has faced since ancient times, not something that can be effortlessly resolved by money, drugs, or the assurance of “this time will be different.”
This translation was based on the original Chinese news article discussing the ideas of Henry Hazlitt, an American economist, and his views on economics, willpower, and personal decision-making.