Wednesday, 17 October 2018

Basic Economics: A Common Sense Guide to the Economy, 5th Edition -- Thomas Sowell

Conservative black academic and economist Thomas Sowell, at 88, is a living legend. In my opinion, he should be sought after for comment and advice by every single publication and news program on every single economic, social and political issue facing any country. In my opinion, he gets the answer right virtually every time. A Marxist during his 20s, he reasoned his way out of that cockamamie phase, and ever since he has been forming and sharing his succinct, genius and profound ideas with the world.
 Based on his extensive and ivy league education and career – Harvard, Columbia, Cornell, UCLA Los Angeles, Stanford, Brandeis, University of Chicago -- you'd be forgiven for thinking he grew up privileged. You'd be wrong. Born fifth in a poor family in Gastonia, North Carolina, his father died even before his birth, to a mother who worked as a housemaid. He ended up being adopted and raised by a great aunt and her two adult daughters. According to Sowell, as described in his autobiography, A Personal Odyssey, and as stated in Wikipedia, "his childhood encounters with white people were so limited that he did not know that blond was a hair color." More than just a brainiac-in-training, Sowell -- the first in his family to advance beyond grade 6, and who was forced to temporarily drop out of school at age 17 due to family problems -- was ultimately drafted to serve in the Marines for two years during the Korean War. At one point in his young life, he tried out for the Brooklyn Dodgers.
   After enjoying numerous of his reflective, pithy and sagacious comments on the internet, I wanted to read one of his 54 books, which cover a wide array of topics, from Marxism, black rednecks and cosmic justice to affirmative action and late-talking children. Since he is first and foremost an economist -- he received his doctorate in 1968 from the University of Chicago, where he studied under George Stigler, an eventual winner of the Nobel Prize in economics -- I decided on Basic Economics: A Common Sense Guide to the Economy, 5th Edition.
   This was a perfect choice. For one thing, surprisingly -- and despite being 704 pages (though I read the Kindle version) on an inherently complicated topic – the book contains not a single graph throughout to confuse the reader. Though I took an economics course from an independently-minded pro-capitalist octogenarian in grade 13 – “communism and fascism are 100% identical” -- it wasn’t enough. I know little about the subject; I avoid reading economics articles in the news and I tune out whenever those know-it-all radio journalists start expounding about the economy and government economics policy. Sowell’s book, prepared in a writing style that can be generously described as desiccated, purports to fill in my many knowledge gaps on the subject. It pours forth its wisdom in increments, from easy definitions, to straightforward examples, to sound conclusions. Indeed, the examples are plentiful and international. He refers, economically speaking, to Russia, China, Mexico, Brazil, Africa, even Canada, to name a fraction of the places referred to in Basic Economics.
    "What is Economics?" asks the author, currently a senior fellow of the Hoover Institute of Stanford University, near the beginning of the book. Without getting too specific yet, he launches into a quote by his hero Stigler: "Whether one is a conservative or a radical, a protectionist or a free trader, a cosmopolitan or a nationalist, a churchman or a heathen, it is useful to know the causes and consequences of economic phenomena." In other words, economics affects us all, so we should know how and why. Before moving onto juicier subjects, Sowell defines and explains such terms and topics as price, scarcity, productivity, as well as the social science itself: “Economics is the study of the use of scarce resources which have alternate uses.”
    Personally, I find that definition a lot to chew on. Throughout my reading of the book, I kept coming back to the idea of “alternate uses.” Though he uses the two-word term quite often, he does not elucidate satisfactorily on it. In fact, he never seems to explain exactly what it means. Instead, he offers this: “If each resource had only one use, economics would be much simpler. But water can be used to produce ice or steam by itself or [in] innumerable mixtures and compounds in combination with other things.” He states the same points with respect to petroleum and iron ore. But what I still don’t understand is why. If, hypothetically, each of these substances had only one use, for example, to drink water, why couldn’t the distribution or sale of water be included in the science or definition of economics? Why is “alternate uses” fundamental to the definition? This question bothered me as I poured over every chapter of the book.
    But that was a small problem compared to the fascinating and general facts I learned. Indeed, Sowell’s ability to turn seemingly logical economic aphorisms into myths knows no bounds. For example, too often, the economic policies of governments have the precise opposite effect of what they are meant to have. Take for instance, minimum wage laws and rent controls. Regarding the former, “making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount,” thus making that worker unlikely to be hired or kept on. “Yet minimum wage laws are always discussed politically in terms of the benefits they confer on workers receiving those wages. Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of government-mandated minimum wage, because they either lose their jobs or fail to find jobs when they enter the labor force.” Sowell gives examples of this travesty in different places around the world.
    Regarding rent controls, it falls under this economic principle: the quantity of something demanded – including apartments for rent – “varies according to how high or low the price is…. Some people use the price-controlled goods or services more generously than usual because of the artificially lower prices and, as a result, other people find that less than usual remains available for them.” Under rent controls, Hollywood stars keep empty apartments in New York and San Francisco for off season use, thus lowering the number of places available for people who live in those cities. So, instead of creating affordable housing for low-income residents, rent control mostly creates no-housing for these needy people.
    If it isn’t already obvious, I’ll spell it out: Sowell is an outspoken advocate of minimal or no government interference in the economy. On a recent podcast he insists that the humungous bailouts after the 2008 mortgage disaster were wrongly applied. He writes in Basic Economics: “Even after it became a political axiom, following the Great Depression of the 1930s, that the government had to intervene when the economy turned down, that axiom was ignored by President Ronald Reagan when the stock market crashed in 1987…. Despite outraged media reaction to his failure to act, President Reagan let the economy recover on its own.” Sowell then quotes The Economist as saying this inaction led to 20 years of “steady growth and low inflation.”
    You may not remember every detail you learn in this book, but it will definitely raise your IQ and give you lots of information tidbits to throw out at parties to impress your friends.

As with most books on Lynne Like's, you can get this on


  1. I was going to read it but I lost Interest! Haha

  2. I also read a similar book about buying Low and selling High. I bought the book for $20 and I sold it for $5!

  3. Chisel, thank-you for your thoughtful comments. They mean so much!! You are way more than a pretty face and an amazing guitar player.