Basic Economics

I have made several references to this book, so it seems worthwhile to devote a post to it. I downloaded Thomas Sowell's Basic Economics: A Citizen's Guide to the Economy from Audible.com as part of a 3-for-2 special. A bit ambitious of me to go for a book on economics, but I was well rewarded.

Here's the summary:

A price-coordinated economy takes advantage of distributed knowledge to most efficiently allocate scarce resources to meet the desires of consumers.

Along the way, Sowell fleshes out a lot of details and give examples about how rent control leads to housing shortages and food price controls lead to overproduction and starvation (at the same time!). Throughout, he keeps coming back to the idea that knowledge is king and only free price fluctuations (i.e. a free market) can make use of knowledge quickly enough to be useful.

Another recurring theme is that the intent and effect of government intervention are not the same. A favorite line is that there are not enough economists for politicians to worry about when election time comes, so they can make policy without regard for actual effects understood by the specialists.

Missing from the book is a full treatment of so-called "externalities," which cannot be accounted for by price. What is the value of beauty, clean air, or human goodness? Attempts to fit such things into a price-coordinated economy will always be awkward and forced, but that does not negate their value.

I posted on Twitter at one point that Basic Economics should be required reading for anyone wanting to express an opinion about anything. That may have been a little strong, but not by much. The book reveals the logic behind economies, not matter how they are structured, and opens our eyes to how decisions today may affect the future. Words and meaning are two different things; Sowell tries to get past the first and into the second. He (or we) may not succeed all the time, but the effort is worth it.