Book Review by Don Newman

Thomas Sowell has written a Tour de Force that should be read by all thinking persons, and maybe even by those who aren‘t, it might enlighten them on how to become such. His book “Basic Economics - A Citizen‘s Guide to the Economy” is extraordinarily well written, even by Sowell’s lofty standards. What is so remarkable about this book is that it takes the obscure and often misunderstood subject of economics and makes it accessible to nearly everyone.

Economics is a mystery to most people. Fact is, the vast majority of Americans are woefully uneducated on the subject. This is a shame because, at heart, it is one of the most important and central aspects effecting their lives. The jobs they choose, that are even available, the money they earn, the amount they earn, the way it is spent, what is available to spend it on, even the manner in which they choose to spend it, are all influenced and, at times determined, by the laws of economics.

In the beginning of the book Sowell gives us the classic definition as stated by British economist Lionel Robbins, “Economics is the study of the use of scarce resources which have alternative uses.” Since nothing exists in infinite supply, everything is scarce to some degree. He then goes on to demonstrate how, as this principle unfolds in the marketplace, it directs those “scarce resources” to their most efficient use. Or not, depending upon whether the market is allowed to operate freely, or not.

Chapter by chapter the author examines the crucial elements of economics. Prices, price controls, industry and commerce, the role of profits and losses, big business and government, productivity and pay, controlled labor markets, investment and speculation, risks and insurance, banking systems, international trade and transfers of wealth are all closely analyzed in the light of economics.

What makes this book so outstanding is the clarity and simplicity by which Sowell expounds up these differing aspects. This is no dry treatise that typically mars such works but a fascinating story and journey through the function of the marketplace; under both free market, free enterprise conditions and also when unions, businesses and governments seek to artificially influence, restrict, regulate or interfere with the same.

Making the case that the marketplace operates best when being left as free as possible, he leads the reader to this conclusion through the weight of his arguments and not through lecturing. Issue by issue, aspect by aspect, element by element Sowell makes the comparison between the startling efficiency of free markets versus all the various schemes that seek to defeat it, or improve upon it, and the damage that inevitably results from such efforts.

The book wraps up by exploring, and refuting, some common economic fallacies. A thread the runs through the book is the different incentives that are created by market conditions as individuals try to make decisions in the face of scarce resources, or the alternative incentives created as unions, governments, businesses and others try to circumvent the marketplace. To quote Sowell:

“While critics of various programs often point out ’unintended consequences’ that did more harm than good, many of these consequences were predictable from the outset if people had looked at the incentives created, rather than the goals proclaimed.”

Economic fallacies are created by focusing on the goals intended while disregarding the incentives created when implementing such programs. In the final analysis those incentives will eventually override whatever the intended goal. This is why planned and controlled economies all struggle and eventually collapse. Thus Sowell’s book not only contains a thorough education on the subject of economics but a warning as well.