Book: Economic Facts and Fallacies by Thomas Sowell

Excellent book that debunks common economic mistakes

Thomas Sowell
Economic Facts and Fallacies
Basic Books, 2008
ISBN-13: 978-0-465-00349-5
ISBN-10: 0-465-00349-4
221 pages

Thomas Sowell's Economic Facts and Fallacies is a terrific book. If I had my way, anyone who wanted to be a politician would be required to prove that they had read and understood it.

The book is highly readable and should be very informative to almost anyone. To readers like me who enjoy seeing stuffy and pessimistic conventional wisdom debunked, it will be a particular delight.

What Mr Sowell does in most of the book is to bring up a statistic that's widely quoted by politicians or people in the news media when they want to prove that something must be done about some social problem or else some "fact" at the intersection of economics and politics that "everyone knows". He then shows that what people know or claim to know is at least deeply flawed if not plain wrong.

As for Mr Sowell's views, he makes a fair number of statement such as:

    Among the many preconceptions that cannot be subjected
    to any empirical tests because they are so subjective, is the
    notion that third-party observers know better what is good
    for people than those people know themselves. This
    implicit assumption pervades discussions of urban and
    suburban housing, mass transit versus automobiles, and
    the imposition of international aid agencies' pet theories on
    Third World countries. The most that can be done in these
    cases is to (1) make that implicit assumption explicit, (2)
    demand proof of their superior knowledge, and (3) point out
    how many disasters in countries around the world have
    followed in the wake of programs and policies based on
    that assumption. (p. 220)

Those statements mark Mr Sowell as a laissez-faire or libertarian (or maybe Austrian School) sort of economist. I find those views pretty congenial and that may or may not have affected my inability to find flaws in his arguments. In any case, I found his arguments very persuasive.

What sort of fallacies does Mr Sowell debunk? Between an initial chapter on the power of fallacies and a final chapter of parting thoughts, there are chapters, "Urban Facts and Fallacies", "Male-Female Facts and Fallacies", "Academic Facts and Fallacies", "Income Facts and Fallacies", "Racial Facts and Fallacies", and "Third World Facts and Fallacies".

To give an example, Mr Sowell points out that people who discuss rich and poor people generally use income figures to distinguish between them. But there are many people whose income in a given year may be low but who aren't poor, such as spouses of affluent people who feel no need to work or investors who are having an off year. Following people over time also suggests that income figures at a given moment don't give a very complete picture. He points out that thee-quarters of Americans whose incomes were in the bottom 20 percent in 1975 were in the top 40 percent at some point during the next 16 years. Equally, income figures don't include transfers to people of low income or taxes on those of high income. He says, "Nor are these random discrepancies. Almost invariably, such widely publicized statistics overstate poverty and understate standards of living" (p. 148).

And in regard to inequality among nations, he says:

    For example, the growth of international free trade has been
    said to increase inequality among nations because the
    23-to-one ration between the twenty richest and twenty
    poorest nations in 1960 rose to a 36-to-one ration in 2000.
    But the nations constituting the 20 richest and 20 poorest
    were different in 1960 and 2000. Comparing the same
    twenty richest and twenty poorest nation of 1960 over those
    decades showed that the ratio between the richest and
    poorest declined to less than ten-to-one.
    (p. 218, emphasis in original)

Mr Sowell finds no shortage of situations in which a naive use of statistics seems to show one thing while a more thorough and patient analysis shows something quite different. Mr Sowell's prose is occasionally slightly repetitive, but that's a trivial complaint about a book that is worth any reader's time.

The book is typeset a little oddly. Either italics are always given the additional emphasis of boldface or the book's typeface had an oddly heavy italic. And the em-dash is consistently set with space after it, but not before it.

Posted: Wed - June 11, 2008 at 05:54 PM   Main   Category: