Economics in One Lesson

If you haven't read Economics in One Lesson by Henry Hazlitt, then you shouldn't be running for any government office.

This book begins by stating "Economics is haunted by more fallacies than any other field of study known to man." And he explains, quite thoroughly, all the fallacies one encounters in dealing with government, politics, and economics.

One chapter really stands out in the timelessness of it's advice (the book was written in 1946), and that is the chapter called "Credit Diverts Production". Here is an excerpt of Section 2:

"The proposal for government loans to private individuals or projects, in brief, sees B and forgets A. It sees the people into whose hands the capital is put; it forgets those who would otherwise have had it. It sees the project to which capital is granted: it forgets the projects from which capital is thereby withheld. It sees the immediate benefit to one group; it overlooks the losses to other groups, and the net less to the community as a whole.
The case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget that what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans that otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to "buy" houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase national production buy encourage malinvestment." (added bold-emphasis is mine).

Hm, that sound at all familiar?

If I were a teacher, no matter what I taught, I'd probably make my students read this book.