Dr. Thomas Sowell has just released his latest treasure -- it's title is "Basic Economics." Reading through the book reminded me of a 30-plus-year-old conversation I had with Professor Armen Alchian, one of my tenacious mentors during my graduate training at UCLA.
Alchian said that the true test of whether one understands his subject is whether he can explain it to someone who doesn't know a darn thing about it. Sowell wasn't Alchian's student, but "Basic Economics" demonstrates his ability to make economics understandable to a person who hasn't set foot into an economics class. It's a book rich with explanations and examples of everyday economic issues and problems without the jargon, graphs and equations.
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Sowell gives an excellent example of the benefit of market over government allocation of resources. The same labor and construction material needed to build a Protestant church could just as easily be used to build a Catholic church. As the Protestant congregation makes plans and goes about raising money, high construction prices might cause them to scale back some of its more elaborate plans. But they are unlikely to blame Catholics, even though the competition of Catholics for labor and construction material makes their prices higher than otherwise.
If, instead, the government were in the business of building churches and presenting them to different religious groups, Protestants and Catholics would be explicit rivals for this largess. Neither would have financial incentive to cut back on their plans to accommodate the other. Hostility might arise whereby Protestants would blame Catholics, and vice versa, for the necessity of having to scale back on building plans or not being able to have their church at all.
While our Constitution prohibits the government from building churches, the same principle can be applied to groups not based on religion but on ethnicity, sex, geographical regions or age brackets. Who complains about blacks being 80 percent of professional basketball players and 66 percent of professional football players? But suppose instead of competition, government, in the pursuit of "sports justice," decided who could and could not be on professional basketball and football teams. Hostility between blacks and whites, tall people and short people, and the young and the old would be guaranteed. The same principle applies to race or sex quotas in college admission and employment demanded by various government authorities.
Towards the end of "Basic Economics," Sowell takes on some of the most egregious economic fallacies. Those who favor government intervention in the economy often depict those who prefer free competition as Adam Smith's pro-business apologists. But Adam Smith, the 18th century father of free-market economics, was so scathingly critical of businessmen that it would be impossible to find a single favorable reference to them in his 900-page classic, "The Wealth of Nations."
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"Unmet needs" roll off the lips of politicians, journalists and academicians as if unmet needs were unusual and curable by one government program or another. Anyone who has driven in most big cities might feel there's an unmet need for more parking spaces. While it's technically feasible for a city to have parking spaces available anywhere, any time of the day, is it advisable to meet this unmet need? Doing so would mean fewer hospitals, fire stations and other buildings. The point Sowell constantly makes is that scarcity is mankind's perennial state of affairs. That being the case, in order to have more of one thing necessarily means having less of another. Tradeoffs become a fact of life.
"Basic Economics" is not only valuable for a general layperson audience; it would also benefit lawyers, politicians and, yes, economists, as well.