Monday, June 27, 2011

Book Review - Basic Economics

I consider Mr. Thomas Sowell to be my economics professor.

It's that simple.

Basic Economics is no small book, and it might appear to be frightening judging by the size.

It's not.

It's basic. In case you couldn't guess by the title.

And it is very much worth your read.

The Worldview

The Good

This book is basically an exploration of God's Laws as made manifest in economics- just the way that He designed His creation to work.

The Bad

If Mr. Sowell recognizes this, he doesn't point it out. It's written sans the fear of God- which is the foundation of wisdom.

I don't know what Mr. Sowell's religious convictions are.

But I know what my religious convictions are.

And so, reading through this book, coming from my fear-of-God perspective, I am able to, or at least desire to see all of the knowledge contained herein through the lens of- if it's true it's true because that's how God made it.

That's the big thing- this book doesn't acknowledge that what is is because God made it so.

There are other minor things that I am not "for", like women being in the "work force" and so on, which are taken for granted here, but that isn't my big issue with the book's worldview.

The Art

The Good

While I'm sure there were a few mistakes (I think I even caught a problem in one of the mathematical equations! Oh yes! *feels important*), it's a book by a human. Overall, it was very polished, readable, well-organized, attractively designed, and user-friendly. Mr. Sowell pours forth a wealth of examples to illustrate his points, and while I'll readily admit that there were still a few points that took me multiple reads to get, or even that I just downright didn't get, overall it is definitely an economics textbook for the common man. It also isn't concerned with pushing an agenda, and seemed to me to give a very balanced and honest (which equals a pretty conservative...) view of economics.

Ultimately, I want a Biblical view of economics- and as that's not what Mr. Sowell set out to give me, it's my job to filter this book through The Bible.

But for what he set out to do, he did very well.

The Bad

None worth mentioning.

The Content

Was downright excellent. Like I have said, it lacks a Biblical foundation, but when we bring the foundation along we can recognize that Mr. Sowell has built a really nice house to place thereon.

He covered so much so well, and there were so many "AH! I get it now!" moments.

The book discusses exploitation, monopolies, international trade, price controls, and so many other very practical topics.

For example, I now have a more practical understanding of something that I would have objected to Biblically all along- rent control. When the state steps in and tells private businessmen how much they may charge for rent, I already object to this because Scripture doesn't give that jurisdiction to the state.

But after reading Basic Economics I can also play it out for you- rent control comes in, so the incentive for landlords to care for their property goes down. The demand for rental properties goes up because, for example, a single young man, who in a free market would stay with his parents instead of paying $1,000 a month, now rents a flat for $500 a month. So there is less housing available. At the same time, it becomes less profitable to build housing for the poor, so scarce resources that would have been allocated to making more middle-class housing now are used to make upper-class housing which is exempt from the rent control.

So the policy that was supposed to provide cheap housing for the poor actually increases demand, decreases quality and supply, and everyone is worse off for it- landlords, renters, and the society as a whole.

Scripture is sufficient. We could have known it was wrong all along. But a book like this gives a wealth of knowledge that lets us see God's Word played out practically.

Some excerpts:
  • "As we have seen in earlier chapters, earning a rate of return on investment that is greater than what is required to compensate people for their risks and contributions to output is virtually guaranteed to attract other people who wish to share in this bounty be either investing in existing firms or setting up their own new firms. This in turn virtually guarantees that the above-average rate of return will be driven back down by the increased competition caused by expanded investment and production by either existing or new firms. Only where there is some way to prevent this new competition can the above-average earnings on investment persist."
  • "While government regulations may be defended by those who create them by referring to the benefits which such regulations provide, the economically relevant question is whether such benefits are worth the more than $840 billion in aggregate costs that they impose. In the marketplace, whoever creates $840 billion in costs would have to be sure to create more than $840 billion in benefits that customers will pay for. Otherwise that producer would risk bankruptcy. In the government, there are seldom any incentives or constraints to force such comparisons."

I would very highly recommend this book.

Buy your copy on Amazon here

I'd also recommend getting a good shot of practical wisdom from Mr. Sowell on YouTube.


Aubrey Hansen said...

Sounds like a very helpful read! Great review.

Nechet Hudelson said...

Great review! I really like Mr. Sowell, the Brain in the Box

Anonymous said...

Excellent review my dear! (as always!) :)

~ Moriah Renata Hudelson

Rebekah said...

Not to sound like I'm just an echo but... a very good review! :)

To the KING be all the glory!