Thomas Sowell’s Basic Economics

Basic EconomicsI have distinct memories of being nine or ten years old and flipping through my parents’ newspapers, absorbing what I saw without really understanding anything. This was a glimpse into the world of adults, and part of me felt certain that one day I would take a serious interest in these articles and what they had to say. And then I would reach the stock pages, column upon column of endless numbers and abbreviations I could make no sense of, and whatever interest had been building up in me abruptly died. Children are much more sensible than adults, and have better things to concern themselves with than the NASDAQ. Time eventually played its trick on me, though, and I found myself in the adult world against my will, having to earn money and pay taxes, and suddenly my economic ignorance became a pressing concern. “We cannot opt out of economic issues and decisions,” Thomas Sowell informs us in the Preface to his Basic Economics, “Our only options are to be informed, uninformed, or misinformed, when making our choices.” Choosing to be informed, and having developed a high regard for Sowell from prior readings, I picked up Basic Economics expecting a slow, difficult read; instead I burned through its nearly 700 pages in less than a week.

The book is divided into expected topics: prices, wages, government intervention, economic myths and histories, but the underlying theme, of the inevitable conflict between government and economics, is one I’d like to discuss here. One of Sowell’s most oft-quoted lines is that “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics,” by which he means that politicians, concerned first and foremost with their own elections, can make lavish promises for the immediate future, secure in the knowledge that any debts accrued from their largesse – and the attendant problems these debts create – can be deferred until long after their term in office has ended. My home province of Quebec suffers from ruinous public debt, a bloated bureaucracy, crumbling infrastructure and shrinking private sector, and yet the public protests are “anti-austerity” – and always there are politicians eager to play into these delusions.

A market economy, Sowell argues, makes adjustments in prices more quickly and more efficiently than any central planning committee can hope to do, and yet politicians cannot effectively campaign on the promise of non-intervention, so endless schemes are concocted (often, it should be noted, out of genuine good will) to save jobs, lower rents or increase wages. One of the book’s lengthiest discussions is on rent control, the supposed champion of the poor, instituted to protect renters from the tyranny of greedy landlords. And yet, Sowell points out, quoting data from the New York Times, the effect has been instead to create housing shortages, as more and more real estate is converted either to very upscale condominiums or commercial real estate, neither of which are subject to imposed rents. Worse still, in housing shortages, landlords are given more power, as they are not forced to compete vigorously for tenants, with the result that many neglect even basic building maintenance, secure in the knowledge that their tenants have no other options for housing.

The book is strengthened by constant comparisons to the Soviet Union, with anecdotes and data supplied by Soviet economists Nikolai Shmelev and Vladimir Popov, who were tasked with evaluating the Soviet economy and coming to some explanation for its massive inefficiency. The same rules governing economics in a market economy apply equally in a socialist economy, Sowell argues, and so to understand the success of America’s economy is to understand the failure of the Soviet Union’s, and vice versa. These economic laws are elucidated over nearly 700 pages, backed by clear examples and telling data, and though this book is certainly “basic” in its content, it is nonetheless hugely instructive.