Book Review: "Economic Facts and Fallacies" by Sowell
“Economic Facts and Fallacies” by Thomas Sowell came out in 2008, but like many of Thomas Sowell’s other books on economics, it remains a classic. What are the strengths and weaknesses of this book? How does it compare to his other major works?
The Strengths of “Economic Facts and Fallacies”
One of the beauties of Thomas Sowell’s writing style as well as his speaking is that he simplifies concepts that take others a page into a sentence, or at most, a paragraph.
Thomas Sowell draws on sources far beyond one study or another to create a comprehensive basis for his refutation of major economic fallacies. For example, instead of just looking at the negative impact of rent control in New York City and San Francisco, he also looks at the problems it caused in Egypt. His critique of the idea that minimum wage helps the poor (when it actually increases unemployment) pulls from examples from Europe to the United States. He also uses data from as far back as 1900 to demonstrate long term trends to back up his arguments, not just the latest survey that may be biased by today’s politics.
Instead of simply critiquing fallacies like the minimum wage, rent control and other unproductive or counter-productive policies, he explains why these fallacies exist. For example, we look at the shiny new buildings of the “redevelopment”, ignoring the impact on the poor individuals forced to move somewhere else and the fact that the wealth attracted to the redeveloped area came from somewhere else. Because the poor who were simply redistributed and many of the older businesses are simply destroyed, we don’t see the harm done, only the “good”. It is similar to the headline stories of someone whose income went up after the local minimum wage increased, but there are almost stories of those who lost their jobs so businesses could still stay open or the women harmed by childcare costs going up along with the minimum wage. He talks about how “smart growth” that limits housing supply and restricts new construction inevitably leads to an “affordable housing crisis” unless the area is becoming depopulated.
He also describes the root fallacies that sociologists, other economists and political theorists have that cause them to promote ideas that repeatedly fail when implemented in the real world. For example, he describes the chess pieces fallacy, the belief that you can simply keep making major changes until a policy “works”, whereas social engineers negate the cost of these constant changes and the tendency in people to stop investing and creating out of fear of losing it all.
This book was written as the student loan “crisis” manifested, later coming to a head in the 2016 election. He outlines how and why colleges are able to inflate costs for students while demanding (and often receiving) more money from taxpayers, regardless of quality of graduates.
Economist Thomas Sowell’s book gives universalist examples others ignore to challenge fallacies, such as the fact that black Northern soldiers did better on IQ tests in the Civil War era than southern whites, so blacks in the U.S. weren’t less intelligent on average than whites, and the root cause for lower IQ scores by both races was Southern culture. Mr. Sowell’s columns routinely provided information to explain issues attributed to racism that are actually due to differences among groups like average age (which correlates to income) and marriage rates (affects crime and poverty rates). This book gives you an entire unbiased chapter on these issues.
The Weaknesses of “Economic Facts and Fallacies”
When a book uses data over a century to back its claims, there are few complaints you can make. The book is due for an update of the references to data sets that end around 2000 to 2008.
This book is a fraction of the length of Thomas Sowell’s hallmark work “Basic Economics”. While someone could gain the equivalent of an economics degree by reading “Basic Economics”, “Economic Facts and Fallacies” can be seen as a correction and/or counterpoint to many of the commonly held misconceptions that those who have learned about business elsewhere or picked up ideas from popular culture that simply are not true. Therefore, you can read this book after “Basic Economics”, before it or separately from it but not in place of it.
Thomas Sowell’s logical and detailed analysis of fallacies about race and economics, like the myth that blacks’ high unemployment and crime is due to discrimination instead of the breakdown of the black family since 1960, has led to this black Ivy League economist being called racist. Unfortunately today, it is only possible for a black man to discuss how poverty rates were falling faster before Civil Rights legislation and affirmative action than after with minimal name-calling.
He is less often called sexist for describing the real world data on women’s tendency to work fewer hours, travel less and make other choices that contribute to the “wage gap”. He also brings up cases like the decline in women’s proportion of college faculty being lower in the 1960s than in the 1930s, including at women’s colleges, so you cannot attribute the decline to sexism. It is actually tied to women’s average age of marriage.
His chapter “Third World Facts and Fallacies” touches on how geography affects cultures, peoples and their outcomes. “Guns, Germs and Steel” is a good in depth book on this topic.
For a better understanding on how property rights and other cultural differences led to the success of Europe and its colonies over the rest of the world, I suggest watching the TED talk “The 6 killer apps of prosperity” by Niall Ferguson.
I give Thomas Sowell’s “Economic Facts and Fallacies” five stars as an eye-opening and educational resource. It isn’t a short primer of his masterpiece “Basic Economics” but instead addresses and explains why many major economic fallacies exist and why they are wrong, in plain language and easily accessible examples.