Economics of Illusion

L. Albert Hahn was one of the most highly regarded economists and bankers in Germany before World War II, but he was unknown in the United States until this translation of The Economics of Illusion appeared in 1949. He immigrated to the United States in 1940. This book is his frontal attack on the Keynesian system, which he calls “the economics of illusion.” Hahn shows how government spending creates a false prosperity, and never more than in wartime.

He explodes many of Keynes’s fallacies — and with great precision too, because, it turns out, Hahn himself once advanced these same fallacies before he saw their errors. So he writes with the passion of a convert. Ludwig von Mises thought very highly of Hahn’s work, and none other than Henry Hazlitt has written the introduction to this classic anti-Keynesian text.

The beautiful thing about Hahn’s book is how liberating it is. Keynesian economics was refuted before it began? Yes indeed. This one point stands the whole history of ideas of the 20th century on its head. The widely held view, then and now, is that Keynes’s economics were the “new economics”; nothing like this theory had ever been advanced and he was a singular mind in the history of ideas. But Hahn actually shows that he did nothing but regurgitate old fallacies and apply new terminological razzle-dazzle to them.

Why waste time on old fallacies? They will come back again and again, forever. It’s not a productive use of time to obsess on them. You can see them and their errors before they ever happen.