Trevor's Reviews > Basic Economics: A Citizen's Guide to the Economy

Basic Economics by Thomas Sowell
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Oct 05, 2008

did not like it
bookshelves: economics

You are, of course, familiar with the German word schadenfreude – the malicious joy one gets on hearing of the misfortune suffered by others. I can’t deny that there were times while listening to this book this week – a week in which the US decided to pour $700 billion into the black hole that is the ‘credit crunch’ – that this word popped unbidden to the front of my mind. Listening to the rants of a radical free market economist in the week that the world is forced to pay for the excesses of market capitalism does induce some schadenfreude – except that the joy at the harm is limited by the realisation that the harm caused by these bastards is going to be felt by me as much as by them.

I don’t think anyone could make the mistake of believing that this is a nuanced discussion of economics. Basically, this is a man on a mission who is in possession of ‘the truth’ and that truth is an absolute belief that anything, ANYTHING that gets in the way of the free operation of market forces is always and invariably bad, counter-productive and the cause of all of the harm in the world.

This book is presented as a citizen’s guide to the economy. Its major theme is that politicians have reasons to lie to you – but once you have a grounding in basic economic theory you will not be so easy to dupe.

We are told early in this book that Economics is a science and that economic methods are used in the same ways by Marxists as they are by free market radicals like the author. That this, in fact, is what this book is going to be about – the stuff all economists agree about. On that basis the strongest criticism of this book I can make is how little someone reading it comes away knowing anything about basic economics. You may get indoctrinated, but how much you are likely to learn is open for debate.

For example, one might think that after reading a book setting out to explain basic economics one would come away knowing how the share market works – I mean, beyond a bland assertion that shares are different from bonds in that the holder of a share in a company is a part owner of that company. If you want to know about the relationship between shares, futures, derivatives and foreign currency exchange rates or what short selling is or why it might be that banks not lending money to each other might require tax payers’ dollars to be poured down the toilet to seek to prop them up – this book is not for you.

If you want to know why decades of the US running up huge deficits and owing the rest of the world trillions of dollars is really not a problem – this is a great book. And I hope the rest of the world agrees with Sowell’s commonsense approach.

This book presents as absolute economic ‘facts’ a number of assertions that are, at best, the strongly held opinions of the author, at worst simply false. For example, one of Sowell’s favourite examples is the harm done to everyone by governments imposing rent controls. He asserts that these invariably lead to a shortage of housing and therefore to higher rents. His solution is to allow the market to fix these problems. If there is a shortage of housing then rents will rise. When rents rise more investors will rush (not walk) into the market to build new housing for those not able to afford housing, thereby rents will drop and everyone will be happy.

One of the examples Sowell gives is the housing crisis that afflicted Melbourne, Australia for 9 years following the end of World War Two in which not a single new building was built in Melbourne. This Sowell attributes solely to rent control laws in Melbourne making it unprofitable to build new buildings in Melbourne. At least, one assumes there must have been a crisis in Melbourne at the time as Melbourne is the capital city of Victoria and between 1945 and 1954 Victoria’s population increased by 250,000 people (or by one quarter). How did Melbourne cope with this crisis at a time of mass influx to the city not witnessed since the gold rush? Well, it all depends on what you call Melbourne. I’m assuming Sowell is talking about the City of Melbourne – what North American’s might call Down Town Melbourne.

It is actually true that virtually no new buildings were put up in Melbourne at this time – it is much harder to say why than Sowell glibly assumes, though. In Melbourne, The City’s History and Development Miles Lewis points out that there were a complex of reasons for so little building development occurring at this time in the golden mile – but none of these reasons are related to rent controls. In fact, I’ve yet to find any evidence Melbourne had rent controls at this time. Rather the huge growth in housing needed in suburban Melbourne to meet the influx of so many migrants from Europe after the war and the post-war rationing of building materials accounted for most of the reason no building works occurred in the central city.

The ‘shocking fact’ that is presented by Sowell as conclusive proof that free markets always provide better solutions than ‘socialist’ alternatives such as rent controls evaporates with just a little knowledge of the actual situation. Funny how that works. One does then wonder why he used the history of building development in Melbourne as his example in the first place. Surely it couldn’t be the problem this would cause most of his audience to check is supposed facts? No, surely not.

If Sowell’s economics is a science then it seems to be one that has more in common with Creation Science than Biology. That is, it seems to be wishful thinking designed to reinforce predetermined conclusions – rather than, say, the systemic testing of a hypothesis to expand human knowledge.

The favourite punching bag here is the Soviet Union and its misadventure with a socialist planned economy. What is remarkable in his description is that the Soviet Union lasted the 70 odd years it did. It seems its economy had nothing going for it. All it had were disincentives to production and absolutely no incentives.

Some theorists have spoken about the Soviet Union collapsing because it could not compete with the West not just economically, but in part due to having to complete in an arms race that forced it to redirect a huge proportion of its national productive economy towards this dead weight. Like I said, this book does not provide a nuanced discussion at all and so the sole reason for the collapse of the Soviet Union presented here is its lack of a free market.

Ironically, prior to reading this book I probably would have had more sympathy with the view that the Soviet Union could not compete because it lacked incentives to produce. I have less sympathy with that view now that I have finished this book. It is received wisdom that the major failing of the Soviet system was the lack of incentives to production offered, but the fact this is received wisdom does not make it true.

What struck me in this book was that the planned economy of the Soviet Union was always compared with the free market system of the West as if the free market was made up of mum and dad shop owners or little factory owners all of whom had an intimate and immediate knowledge of their local community. We are repeatedly told that a planned economy can’t work because the poor bureaucrat doing the planning can’t possibly know all of the issues that face everyone in every area of the economy. This is contrasted with the glories of capitalism, the decentralisation of knowledge, in which the local gas station knows when road works are going to reduce his ability to sell petrol (an actual example from this book) and so purchases less petrol until those road works are completed.

Except how does that explain Walmart? What sort of decentralised planning does Walmart allow? In answer to this he gives a remarkably bizarre example – Kentucky Fried Chicken – in which (apparently) local franchise holders in the 1950s kept the quality of their cooked chicken up to scratch because they were living in mortal fear of Colonel Sanders turning up at their restaurant and throwing out their less than finger-lickin’ good chicken and then cooking it all again himself. (This is another actual example given in the book). It beggars belief that these could be presented as arguments for the superiority of the free market – but the issue is much worse than this. Surely KFC and Walmart have the same problems in directing their grand empires as the Soviet Bureaucrats had in coordinating theirs. Naturally, there is no discussion of how private ownership over a certain size remains different from socialist ownership and how the disincentives for a Soviet worker are avoided by Walmart – just surreal examples of Colonel Sanders whipping everyone into shape that sound to me to be the sorts of stories one might have heard about the heroes of socialist labour.

I was greatly disappointed in this book – there are so many things I need to learn about economics and none of them were presented here in this overly ideological text. The bottom line? Don’t waste your time.
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message 1: by Marc (new)

Marc nice review, trevor. yes, it is once again proven that radical free-market rhetoric is nothing but front-running. Now the same people that complain about every little subsidy (not saying this is wrong or right)cry for the biggest bail-out in history. Talk about hypocrisy.

The author is right in one respect though, economics is a science and there is a reason you have to study it for years. I doubt that it can be made fully accessable by some 500 pages book written for dummies. If anything you will probably have to take the hard way and get some textbooks specialising more into one aspect of economics. Besides that economics is for the most part based on models and in that regard words can never be as accurate a language as mathematics, so without actually re-constructing and operating mathematically inside those models it is hard to grasp a true understanding.

For an in-deapth analysis on the breakdown of the soviet economy check out Janus Kornai: http://www.goodreads.com/book/show/20...

I actually had a class at university held by one of his associates from Hungary. He exploites a lot of weaknesses that are not so much mainstream-knowledge...


message 2: by Meen (last edited Oct 05, 2008 07:42AM) (new)

Meen Excellent review, Trevor!

My training is in sociology, so I am used to having to recognize the distinction between "hard science" and "soft science." Any science of human behavior is inevitably a soft science, though most free-market people seem to like to frame it as a hard one, as if the economy were something that existed beyond the humans who engage in it (Smith's invisible hand and all) and that, in fact, would do better if humans kept themselves out of it as much as possible. But economies are inevitably a human endeavor, on all sides of them, and therefore the most the "science" of economics can do is try to offer explanations (which will NEVER be sole explanations as humans exist in so many different realms--social, psychological, biological, etc.--which all, often illogically, influence their behaviors) and make predictions (which will inevitably be imprecise for the same reasons). Economics is no more a hard science than sociology or psychology is, maybe even less of one. It's inevitably taught outside of the Arts & Sciences colleges at universities, always over in the Business college as if it didn't need to bother with any of the human science explanations of the humans who engage in it. Bah!


message 3: by [deleted user] (new)

Maybe we are in the midst of a huge economic mess because too many people in charge have viewed economics as a hard science when it is actually a social science, and as such it absolutely has to consider human factors. Over the past several years, banks and mortgage lenders in the US got caught up in the frenzy to maximize short-term profits and dismissed their responsibility to manage mortgage risk. So much for the invisible hand.

This book sounds like another contribution from Thomas Sowell to what author Susan Jacoby describes as junk thought. Despite his lack of training or credible experience on the subject matter, Sowell has also published a book dismissing real diagnoses of developmental delays in some children. Instead, Sowell thinks they are really just late talkers. He goes on to insult parents by claiming that they want diagnoses of autism and other neurological disorders so they can get special services and government handouts for their children. It is clearly too easy nowadays for anyone to publish books on anything.


Trevor Marc - so much of what I want to understand lately would be easier with a much deeper understanding of maths than I have, but I'm just going to have to make do, I'm afraid.

Mindy - what surprised me was the absolute relativism of this guy's ideas. Having read Galbraith's The Affluent Society recently I know that most classical economists didn't think demand and supply were the only factors necessary in determining the value of a given product. There are objective reasons for things having the value they do - the cost of production being very important. This guy doesn't believe in any objective determination of price other than demand and supply. Very odd.

M - He doesn't mention autism here, but does say that because there are economic government incentives for poor mothers to have children with developmental problems 'some mothers' encourage their children to play up at school so as to ensure they get additional money from the government. This is presented as the mothers making a rational decision on the basis of an irrational government incentive. Naturally, like all of those single-mother welfare cheats who drive Rolls Royces all over the place, no other proof is needed here of the magnitude (or in fact reality) of the problem. The implication? All mothers with children that have developmental problems should be punished because he has heard of one that might be doing something wrong somewhere. And this stuff gets called economic rationalism...

Ginnie - I'm delighted you would think this worth passing on. Something I should have said in the review was how surprised I was with his clear dislike of 'democracy'. In his world most people are simply duped by clever politicians - but fortunately we have the free market to save us. Which makes it interesting to note his focus in this book. He barely discusses the stock market, I assume because finding out how that works might encourage people to talk about regulations. Rather his focus is entirely on how government regulation invariably leads to the opposite of what that regulation was meant to achieve in the first place.

Thank you all.


message 5: by Petra X (last edited Oct 05, 2008 02:56PM) (new)

Petra X What an excellent review, Trevor. The best I've read for a while. ***** to you! I have read some of the book but I decided not to take it home and finish it as I felt as you did and you have put it better than I ever could.

People aren't duped by wily politicians, its that no-one understands economics so they don't vote on economic ideas nor do they see grand economic plans as actually relevant to themselves they think things will go on the same way as they always have - a little worse or a little better. They vote for people, as someone on Fox who was obviously for McCain said, just like themselves, people they can identify with who hold the same values as they do and support their way of life. If people believe a rich man that says he is for a fairer economy even to the detriment of himself, his family, his compatriots and entire social circle then they will reap the rewards of eight years of that hot air.

Some people carved themselves out too big pieces of the pie in the financial market leaving too little for everyone else to share. So the answer is to get another pie as for true you can't let people starve. That should stave off the problems until that one gets eaten too. Since the stock market stands at the base of the modern market, I don't see how the author could cricise it, so its no wonder he didn't.

If you feel, as another commenter did on a review of political book recently, that I have no right to criticise and I don't understand the issues anyway because I am not an American, then just say and I will remove my comment. One public telling-off a whole screen long was quite enough!


message 6: by Meen (new)

Meen :) Petra, Trevor's not American either! :)


message 7: by Tyler (last edited Oct 05, 2008 05:10PM) (new)

Tyler What a good review, Trevor, that tackles an author whose invidious editorials imflame the right wing in the United States every day.

The change in the way our economy works and money flows here, over the past 30 years, gives those of us old enough to remember the past a feeling of having stepped through a looking glass. Not even a shred of pretense to fairness remains in the American economy, and the government, as was recently demonstrated, has become a kleptocracy whose members should be in prison, not running loose making law.

Few Americans are precisely aware of the extent of the danger to their economic security, in no small part because books like this fill their heads with lies. That, of course, is the purpose for which they are written and sold.

Thanks for telling readers just how wretched this screed is. Based on the author, I knew it wouldn't be anything good.





message 8: by Greyweather (last edited Feb 14, 2010 08:34AM) (new) - added it

Greyweather "Surely KFC and Walmart have the same problems in directing their grand empires as the Soviet Bureaucrats had in coordinating theirs."

I'm sorry, but are you saying that fast-food and retail chains are as complicated as the Soviet economy?

"Except how does that explain Walmart? What sort of decentralised planning does Walmart allow?"

Quite a lot actually. Each region has a regional director, each market has a market director, and each store has a store director.

"Over the past several years, banks and mortgage lenders in the US got caught up in the frenzy to maximize short-term profits and dismissed their responsibility to manage mortgage risk."

Of course they did. The Federal government gave them every reason to do exactly that. Walter E. Williams, professor of economics at George Mason University, puts it much more succinctly than I could, "In the absence of government interference, it is unlikely that a lender would extend a mortgage to a person with a poor credit history, making no down payment, and providing no verifiable employment history. But under the pressure of the government's Community Reinvestment Act and Fannie Mae and Freddie Mac buying up or guaranteeing such mortgages, a lender will."

"So much for the invisible hand."

Which invisible hand would that be? One of the nine federal cabinet departments (housing, transportation, healthcare, education, energy, mining, agriculture, labor, and commerce) that directly influence the US economy? Or is it one of the more than one hundred federal agencies and commissions (IRS, FRB, FDIC, SEC, CFTC, NLRB, FTC, etc) that regulate various aspects of the economy?

"The change in the way our economy works and money flows here, over the past 30 years, gives those of us old enough to remember the past a feeling of having stepped through a looking glass. Not even a shred of pretense to fairness remains in the American economy, and the government, as was recently demonstrated, has become a kleptocracy whose members should be in prison, not running loose making law."

This much I can agree with. As of the end of 2007 the Federal Register contained fully seventy-three thousand pages of detailed government regulations, an increase of more than ten thousand pages since 1978.


Trevor So, what the Soviet Union needed was local representatives?

After reading this book I read The New Industrial State - and although Walmart may have been an iffy example (although, I would still suggest one that requires centralised planning in much the same way as any multi-national corporation does) better examples would probably have been telecommunication companies or computer companies or car manufacturers in Galbraith's example - where their ability to succeed is clearly linked to their ability to centrally plan and have much of their research and development funded, supported or backed by direct state assistance.

The invisible hand of the free market is not just a myth when it comes to corporations, but the exact opposite of how an advanced capitalist economy does and can work. It is therefore very amusing that books such as this one, supposedly designed to introduce a reader to the basic advantages of capitalism, present such a bizarre perversion of what actually happens in a real and working advanced capitalist economy. As Galbraith points out, such economies would be unthinkable without massive government regulation, support, and technological investment from government.

I assume 10,000 pages more is a bad thing???


message 10: by Greyweather (last edited Mar 08, 2010 06:30PM) (new) - added it

Greyweather "So, what the Soviet Union needed was local representatives?"

It depends on what you mean by local representatives. If you mean local representatives of the state authority, no, that would be of no value. If you mean representatives of the local populous with authority derived from those they directly represented, then yes. Without centralization and consolidation of government power the Soviet Union would not have been able to murder 62 million of their own citizens. This lesson applies equally to Maoist China, Nazi Germany, and Cambodia under the Khmer Rouge.

"I would still suggest one that requires centralised planning in much the same way as any multi-national corporation does"

Centralized planning like the EU perhaps? Ask Portugal, Italy, Ireland, Greece and Spain how that's working for them.

"As Galbraith points out, such economies would be unthinkable without massive government regulation, support, and technological investment from government."

So The United States, throughout the 19th century (when it became the world's most productive economy), is 'unthinkable'?

"I assume 10,000 pages more is a bad thing???"

It is if you're an entrepreneur trying to start a business. Just think about it in the practical term of reading it. If I read it at the rate of 30 pages an hour, and I spent 40 hours a week reading it, it would take me over eight weeks just to read those new ten thousand pages. I have the choice of sacrificing either my productivity to understand it myself, or capital (if I have any to spare) that would have gone to my business to hire somebody who already read it. This is all over and above whatever impact the regulations themselves will have on my business. Simple disincentives for starting a business at all, and the government didn't even have to tax me. All of this is of course negligible to large cooperations, but small businesses can't absorb these kinds of cost the way big ones can.

In more general terms, government regulations prevent upward mobility, especially of the poor. Regulations always work against outsiders, latecomers, those with poor educations, low skills, or with few resources.


Trevor G was probably right to pick me up on examples of retail and fast food chains, although I still think the point stands, but he hasn't exactly explained how something like a computer could be made in his free market. Yes, he has nailed it if you want to live in 19th century US, without cars, planes, telecommunications or any of the other products our 21st century world has come to rely on and that all depend on something very much other than can be delivered by the 'blind hand' of the 'free market'. To see the nonsense of the arguments above simply try to build me a plane without centralised planning by business and massive government intervention in the economy. The free market religion only seems to work when people use examples of bizarre luxury goods that no central body would ever think to produce. It never uses for examples things like the ipad that require the full exertion of the forces of modern capitalism (with its creation of wants, insane investment to return lag times and huge state investiment in infrastructure and education) before they could be even imagined. The fact modern capitalism grew out of a kind of capitalism without rules is no proof that capitalism without rules is an effective way to organise society.


Jared Trevor,

You are absolutely an ideologue that cannot handle simple truths. The book is logically sound and stands on good principle.

Jared


Trevor Oh, that must be it then


message 14: by Aaron (new)

Aaron Take an Econ class.


Trevor Perhaps you will have more to say on this topic, Aaron, when you actually read the book. But thank you for your suggestion.


Jared No, he's right. I have both read the book and am taking an economics class. Most of the stuff we go over could be taken right out of the book, we have even talked about the negative effects of rent control.

You are not as smart as you think you are.


message 17: by Trevor (last edited Jan 31, 2011 04:13PM) (new) - rated it 1 star

Trevor You might like to read this, Jared - The Economics Anti-Textbook: A Critical Thinkers Guide to Microeconomics - much of what you are taught in economics class is an over-simplification of what actually happens in the economy, including what you have been taught on rent control, and not nearly as universally accepted by economists as you have been led to believe.

It always strikes me as odd how often these comments, particularly from the defenders of 'the grand economic theory', always seem to end with insults thrown against the intelligence of those who disagree. To follow in kind, it must be wonderful to be so certain of the truth as you seem to be, Jared. I wonder what would need to happen in the world to counter what you have learnt in your economics class? What it would take to make you question some of the certainties you have been taught? Obviously, the Global Financial Crisis hasn't been enough. What do you imagine it would take?


Jared The global financial crisis is chump change compared where the world was without free markets, are you going to deny that? How about the collapse and withering of centrally planned economies around the world? Or how have China and India brought millions of people out of poverty, is it by smart people like you controlling more of the economy? HECK NO, it's by freeing up the market. Free markets aren't perfect but they are way better than anything centrally planned. I would recommend another of Thomas Sowell's books to you - The Vision of the Anointed. Now I don't know for sure if you fall into that category but I would be surprised if you didn't.

I don't think that people in general are smart enough to have the ability to intervene in markets and always know the outcome, which could be worse than the original problem. So I wouldn't want to make those decisions that could effect millions of other's lives because I don't feel I or anyone else is that intelligent, do you?


Trevor Well, you see, planning actually does happen in our economy - all is not the simple blind-hand anarchy you seem to think it is. In a world where the richest three people own (and control, and this generally through planning) as much as the bottom 48 countries surely you would agree that a certain amount of planning is necessary? No? I struggle to see how anyone could argue otherwise.

Also, the concentration of ownership in our economy (which has been the main effect of the unbridled free market laws you seem to be advocating) has likewise meant an increase in planning and centralised control as it has increased monopoly control in the economy. Or perhaps you believe corporations (often with more capital and larger 'economies' than entire countries) are not centrally planned?

Or is it just elected governments that can't do planning? Is it just democracy that is the problem? So, that CEOs and MBAs can plan, but elected representatives can not?

Actually, I don't think planning was the main problem for Socialist economies - I think a shortage of incentives was a much bigger problem and much bigger reason for their ultimate failure - but do remember that we are talking here of 'ultimate' failure - this all took over 70 years to come to a conclusion, not a fortnight. However, this is something I know far too little about to make anything like an intelligent comment on - hence the sweeping nature of my distinction between planning and incentives. I'm more than happy to be shown that I'm wrong about incentives under socialism, but that's my best guess - ironically enough, one that Marx would have seen as the core issue too.

All the same, if central planning of our economy is such poison we are in much more trouble than I had previously imagined, as there is at least as much central planning going on under our 'free market' system as was ever going on under Stalin's five year plans.

But all of this was settled years ago by John Kenneth Galbraith in his The New Industrial State - I'm yet to be shown a convincing argument against the substance of that book. Don't worry, I don't expect you to ever read it, or any of the books I've mentioned. But if there was a convincing argument against Galbraith - remembering I have read Capitalism and Freedom: 40th Anniversary Edition and was left less than impressed - then I would be interested in seeing what it has to say. Having read one Sowell book has convinced me not to bother to read any more. Life is too short.

Another book you might read, but I expect won't, is http://www.goodreads.com/book/show/11.... Also a Nobel Prize winner in Economics, just like Milton Friedman, even if he does have rather different views.

I have to say that it seems very strange that anyone could say we live in an 'unplanned' economy. I take it that is what you are saying. That would seem to require a heroic wilful blindness before which I'm not sure if I should be impressed or frightened.


Jared Go read The Road to Serfdom: Text and Documents--The Definitive Edition, practically the entire book is about "planning" and the different kinds of planning that occur. If you want to know the difference between the planning in a free market and the planning you advocate this book will expound the difference. I recommend the entire book but chapters 4,5, and 6 even have the word planning in the chapter title. I'll read your review.


Trevor So, I get to read an entire book and you get to read 1000 words. No wonder you guys rule the world.


Jared Hey I've been reading your suggestion of The Conscience of a Liberal and it turns out that even Paul Krugman feels that rent controls can have considerable negative consequences. "By the late 1940s Friedman and his colleague George Stigler were already inveighing (with considerable justification) against the evils of rent control."

But I bet you'll still defend rent controls...


Jared On pg. 116 by the way.


Trevor Actually, I've never defended rent controls. If you read my review my criticism is not of his attack on rent controls - but on his assertion of a housing crisis in Melbourne following WW2 caused by rent controls. I am actually accusing him of lying and of using an example most of his readers would find it almost impossible to check. Like most of his ilk, he makes shit up and then sagely nods at how well it confirms his prejudices You'll find your gun lobby makes up shit about Melbourne now about our banning guns. No proof needed given we are so far away.

If rent control is so obviously bad why not use examples closer to home? There are many examples that are closer to home. Why pick Melbourne? The answer is all too obvious.

I've never been able to find any proof of such rent controls here, I live in Melbourne - and as I say in my review, there were one or two other reasons why there was a housing crisis in Melbourne following the war that would have caused a crisis with or without rent controls.

At some point in his book Klugman accuses Friedman of intellectual dishonesty around the cause of the great depression - something of far more import than Klugman's support for Friedman's opinion on rent controls in my world - although, obviously not in yours.


message 25: by Don Incognito (new)

Don Incognito Great...I'll definitely read this book.


message 26: by Anthony (new) - added it

Anthony The Soviet Union lasted as long as it did because of the slave labor Stalin created through putting citizens into forced labor camps. After the gains Stalin created from this ran out, the Soviet Union borrowed from the United States and other countries to keep itself going.


Trevor And now Communist China has lent trillions (why do I feel that needs a capital letter) to the US to keep it going. Funny how the world turns.


message 28: by Anthony (last edited Jul 29, 2011 12:47AM) (new) - added it

Anthony That is a good point, but given the fact I'm not making an argument for United States economics, I'm not entirely sure it addresses the statement I made. Also, its highly debatable as to whether or not China is "communist." From what I've read etc, they've more recently adopted more of a market economy than a communist one. Also, is America's economy truly a free market economy in the sense of how Ayn Rand or Murray Rothbard would call it? I would argue that it is not.

This is pretty typical of what I've read about the alleged communism in China: "I recently asked my Chinese friends how they thought Chairman Mao would react if he was suddenly brought back to life in the 21st century. “Not happy” and “Disappointed” were the most common answers that I received; I was not surprised by such responses. After all, it is difficult to find very many reasons to label China as communist these days. The ruling party in China still calls itself communist. The international media still likes to refer to China as a communist giant. But where is communism still manifested in China today? Where are the basic Communist values of sharing and equality evident in Chinese society now? They cannot be found. Quite simply, China is no longer a communist country.

If we are looking for evidence of communism in China, the first and most important place to look is at the economy. The economy in China is now decidedly capitalistic in nature. Average Chinese citizens can start their own businesses and put their income into private bank accounts. Chinese citizens can buy stocks in companies and enjoy the revenues or suffer the losses. As of just a few years ago, private property rights have been greatly enhanced in China, and Chinese people can now be more secure that their land will not be taken away from them. Let us not forget about the heavy international investment that has been permitted in China which has played a major role in fueling this developing and booming economy. As a result, there are very rich people and very poor people in China as well as an emerging middle class. Chinese citizens, who always carried a good sense for business but were restricted from entrepreneurship in the past have now been more free to take risks and build successful companies. Thus capitalism has transformed the Chinese economy and changed people’s lives forever.

Does the Chinese government still maintain strict control of the economy in China? Absolutely. Is there a free market in China in the true sense of the word? Of course not. But where is there truly a free market in the world? Does one exist? Can someone show me a country where the government is not heavily invovled in its nation’s economy? The CCP’s control on China’s economy may be unusually tight but it has been weakening very slowly over the past 30 years. "

http://www.teachabroadchina.com/china...


message 29: by Anthony (new) - added it

Anthony "Except how does that explain Walmart? What sort of decentralised planning does Walmart allow? In answer to this he gives a remarkably bizarre example – Kentucky Fried Chicken – in which (apparently) local franchise holders in the 1950s kept the quality of their cooked chicken up to scratch because they were living in mortal fear of Colonel Sanders turning up at their restaurant and throwing out their less than finger-lickin’ good chicken and then cooking it all again himself. (This is another actual example given in the book). It beggars belief that these could be presented as arguments for the superiority of the free market – but the issue is much worse than this. Surely KFC and Walmart have the same problems in directing their grand empires as the Soviet Bureaucrats had in coordinating theirs. Naturally, there is no discussion of how private ownership over a certain size remains different from socialist ownership and how the disincentives for a Soviet worker are avoided by Walmart – just surreal examples of Colonel Sanders whipping everyone into shape that sound to me to be the sorts of stories one might have heard about the heroes of socialist labour. "

I like this a lot, though one of the main differences is that in the Soviet Union you'd probably be shot for "sabotage" had the Bolsheviks run KFC.


Trevor Yes, it is hard to know what kind of economy China runs - but if it is free market then it is a particularly strange kind of free market economy.

And as amusing as you probably think your dig about being shot for sabotage in the Soviet Union is it does ring a little hollow when you look at what our wonderful free market corporations have been getting up to in the third world:

http://killercoke.org/
http://www.pbs.org/newshour/updates/a...

Do you really think the only options open to us are a choice between the radical free market and Soviet style socialism? Is that really it? Because I don't think the world can survive too much more of either of them and if those are the only choices left to us we might as well leave our future in the hands of the Tea Party.


message 31: by Sam (new) - added it

Sam I appreciate this review because it recognizes that economics (especially macro economics) permits largely divergent viewpoints in the face of the same evidence. I am enjoying the book as well. I disagree with much of what the reviewer stated, and some of what Sowell states. I also appreciate the shared links by the two arguing :o)


Trevor Anthony, I can't respond if you go back and extensively edit your previous posts. Post 29 has grown by a factor of ten since I responded to it. I didn't even know it had changed until post 32 mentioned your links. I will assume that you have done this in ignorance, but you would have to agree it is a fairly despicable thing to do - or perhaps you just see it an example of free market advantage in action?

No system has ever been applied in its pure form, but I can only hope that Ayn Rand's vision isn't really the final test of a truly free market - I'm sure there are still people saying if only socialism had been applied more fully and with greater purity of purpose everything would be just dandy.


message 33: by Brett (new) - added it

Brett Tompkins So, is there another book you would recommend that is more nuanced than this one?


Trevor The best book on economic theory - as an introduction to economics as ideology (as opposed to 'positive science') is

The Economics Anti-textbook:

http://www.goodreads.com/review/show/...

Probably the most interesting books on economics I've read are:

The New Industrial State:
http://www.goodreads.com/review/show/...

IOU: why everyone owes everyone else and no one can pay
http://www.goodreads.com/review/show/...

Freefall: America, Free Markets and the shrinking of the world economy:
http://www.goodreads.com/review/show/...

Conscience of a Liberal:
http://www.goodreads.com/review/show/...

But the most interesting refutation of the underlying assumption of neoliberalism (the idea we are all rational economic agents who always act in our own best interests) is

Predictably Irrational:

http://www.goodreads.com/review/show/...

I can't recommend this book too highly - one of the most interesting books I've ever read.

and for some of the same ideas but from a neoliberal perspective

Nudge:

http://www.goodreads.com/review/show/...

Sorry there are so many Brett - but this is a remarkably difficult subject that is all too often presented as something that can be explained away in one lesson:

http://www.goodreads.com/review/show/...


Trevor And that the underlying assumption of the neoliberal project - that equality is a bad thing - is nicely refuted by this:

http://www.ted.com/talks/richard_wilk...

not that facts have any relevance to this discussion, of course.


Jared Who said equality is a bad thing? Many of the laws used to try to create equality (as in absolute financial equality) is straight up plunder of the rich to give to the poor, and stealing is bad.... wouldn't you agree? Or is it good when the government steals but bad for everyone else? Would you argue that all wealth actually belongs to the government and however it decides to distribute it is just? I hope so, because then you would clearly show your naivete , and also your love and trust of a Big Brother government.

But equality in all senses is a good thing and I know of no one that would advocate inequality as you say that people. But even so your sense of equality would require a totalitarian government with all power to distribute wealth as it saw fit, and I don't know about you but I feel totalitarianism is bad...

Equality as interpreted as equality before the law is extremely desirable and is the equality spoken of in the Declaration of Independence.


Trevor "Who said equality is a bad thing?"

Well, your friends Friedman and Hayek both believe more equality is bad for economic development. Hayek went as far to say, ‘A society that wishes to get a maximum economic return from a limited expenditure on education should concentrate on the higher education of a comparatively small elite’ for example. The gross inequity of your education system where there is a three fold difference in levels of funding to schools depending on whether they service black or white children is a consequence of your governments of both parties following Hayek's advice.

"Many of the laws used to try to create equality (as in absolute financial equality) is straight up plunder of the rich to give to the poor, and stealing is bad.... wouldn't you agree? "

Actually, what we have witnessed over the last few years is the socialisation of corporate risk. The trillion odd tax-payer dollars your government handed over to the banks so they could continue to pay failed CEOs obscene 'retention' bonuses (not even they could bring themselves to call them 'performance' bonuses) is exactly the kind of inverse Robin Hood policies the world has come to expect.

Who is it again that is doing the stealing? With three decades of growing productivity and flatlining real wages in your country it is clear to any but the utterly ideologically blind who has been doing the stealing and who is being stolen from. But clearly you don't agree.

http://www.guardian.co.uk/news/databl...

"But even so your sense of equality would require a totalitarian government with all power to distribute wealth as it saw fit, and I don't know about you but I feel totalitarianism is bad.."

So, you are saying Japan is a totalitarian government? And Denmark too, right? Or am I making the mistaken assumption you have actually looked at the link?

"Equality as interpreted as equality before the law is extremely desirable and is the equality spoken of in the Declaration of Independence."

But equality is more than equity - and as we are seeing daily with the scandals in the British press, money trumps equality before the law too. The problem is that your negative view of freedom - freedom from government intervention, freedom from taxation - is intended to and clearly does make societies much more unequal. The path of your nation over the last four decades as a clear case in point. The link above shows the consequences of such policies in creating unequal societies such as yours in terms of higher imprisonment (your country having 25% of the world's prisoners ought not to be something to be proud of), shorter life expectancy, lower levels of societal trust, worse education results, higher infant mortality and obesity rates.

I don't believe all wealth belongs to the government - but I also don't believe all wealth belongs to those with the ability to buy elections so as to grab the lion's share, as is the case in your country. The world is witnessing the consequences of unregulated greed in your country. We are also witnessing the corporatised electoral system which has allowed this to occur unchecked.

Not that any of this matters, of course - the policies of unrestrained greed and social impoverishment you support will continue to be implemented and we will continue to watch our democratic rights be removed from us - with citizens being pepper sprayed in the face for sitting in mute protest. And then have people like you tell me I want totalitarianism. Welcome to 1984


Jared You're so weird, you claim that the government is corrupt and imposes inverse Robin Hood policies (the example you shared is absolutely valid and inexplicable, it is not the job for a government to socialize the losses of large corporations) yet you claim that we should empower the government with more power? You just seem so naive. Do you feel that a more powerful government would somehow be more just than a less powerful one? When has that ever happened?

You are so ignorant it's ridiculous. Your ONLY point is that economic inequality is bad, which I said is something I agree with, but I disagree with where it lies on a list of priorities. You seem to think it should be first (as that is all that you ever talk about). When I think that things such as liberty or freedom, and equality of all before the law is much more important than distributing money to whoever the government thinks is worthy.

I can't stand it when people say that all the money in politics is because of corporate greed and that the rich own the government. It is just absolutely untrue.

Look at this info and you'll notice a bit of a trend of both where the money is coming from and who it's going to.

http://www.opensecrets.org/orgs/list.php

Big brother is not your friend.


Trevor So, the fact that both sides of your political system have been bought off by corporate interests is proof the rich don't own your political system? You are right - I'm just naive.


Jared Ok, you seem to have failed to interpret the data so I will do it for you. But yes, part of the point is that whoever is in power is most likely going to be somewhat corrupt and the more power they have the easier it will be for them to be corrupt and the worse it will be when they are, but yes you are correct let's let them distribute our incomes as well.

But onto the data, my point was not that democrats are just as bad as Republicans but it was that Democrats receive much MORE money overall and groups that people say corrupt Republicans, such as Goldman Sachs or Citigroup, actually give about equally to both parties and some tilt democrat. But mainly most of the big money (Fifteen out of the top 20 actually lean considerably to the democrat party while only one leans Republican) So if you're against big money in politics in America then you would by default vote Republican huh?

The democrats are the ones that share your viewpoint that a larger government is better and they are the party of big money.


Trevor Actually, I'm much more naive than even you imagine. I wouldn't vote for either side of your political system. They have both been bought off.

You are right to point out the myth that the democrats are somehow the party of equality. But as the Washington Post recently showed, rather than Obama's election campaign being funded by small donors it was actually the financial institutions that bought him the presidency. http://www.washingtonpost.com/politic...

No wonder he pumped them full of tax payer money.

What I think you need in America is some democracy. But don't worry - no chance of that happening any time soon.


message 42: by Whitaker (new)

Whitaker Trevor wrote: "What I think you need in America is some democracy. But don't worry - no chance of that happening any time soon."

LOL!! That's tellin' 'im Trevor! High five!!

But what can I say? I'm reaching the conclusion that the distrust for any kind of government is hard-wired into the thinking of certain Americans. Well, as far as I'm concerned they are welcome to their own particular brand of freedom, just don't foist it on the rest of us like they tried to do elsewhere(*cough*Iraq*cough*).


Trevor I saw this line in The Guardian today:

In a call to rebel against the markets, the octogenarian Soares, Portugal's first democratically elected prime minister after the 1974 revolution, claimed international finance was threatening democracy.

"We cannot democratically salute the so-called Arab spring and be afraid of [occupying] our own streets and squares," he said in a manifesto signed by leading socialists. "We cannot sit back and ignore the growth in international financial anarchy and the dismantling of countries, which puts into question the very survival of the European Union."


Like you I find the loathing of government a particularly surprising American disorder. Having been raised watching Americans put their hand on their heart and say 'of the people, by the people, for the people' you would think democracy would be a 'no-brainer' - so to speak. But obviously not. I guess that is why they are so happy to let their corporations buy their democracy off them. Seems an odd choice to me, but each to their own.


Trevor I would be infinitely more surprised if he believed in climate change. He would stand alone on his side of politics if that was the case.


Trevor Yes, I reviewed it here:
http://www.goodreads.com/review/show/...
He has recently written about the joys of fascism - a bit of a worry, really.

I think this book was good, but it is a bit hard:
http://www.goodreads.com/review/show/...


Trevor The problem is that most 'basic' economics books present it as a positive science, when really it is ideology dressed in numbers. Have a look at my economics shelf it contains all of the books on the subject I've read since 2008.


message 47: by Scribble (last edited Oct 17, 2012 12:42AM) (new)

Scribble Orca Gosh, Trev, are you still killing yourself with this subject?

Even if you read (let alone review) every book either purporting to be about or pontificating upon economics isn't going to change the fact that we are an energy based society (energy being synonymous with resources) and ownership is based on power and nothing else. I just think it makes you more miserable.

I'd rather have a glass of wine. At least it means I can spend part of the time I'm being exploited (and partaking of it actively or by acquiescence) by the established hierarchy forgettable.

Not to mention that you attract an awful lot of neoclassicists who've no idea they've been brainwashed into thinking economics is actually 'science' in the real, unadulterated sense of the word.


message 48: by Anna (new) - added it

Anna Read The Creature from Jeykll Island.


message 49: by Phillip (new) - added it

Phillip Trevor,

Nice review. When I was a libertarian, I used books with similar tenets as the basis for my knowledge and positions on economics. However, perhaps through life experience, I realized what I had 'learned' from the likes of Sowell were based on assumptions to validate rhetoric. I have recently come across a book that presents an interesting critique on neoclassical economics as a 'science'. You might of heard of it.

"The Origin of Wealth" by Eric Beinhocker

http://www.goodreads.com/book/show/22...


Take care.


Grant Robertson I really don't see how Thomas Sowell is bullying the USSR (punching bag) to support his agenda. Whether the facts have quotes on them or not, hundreds of millions of people starved due to social planning by the USSR, China and other communist countries. Thomas Sowell and the USSR both have the same problem: what's the best way to use scarce resources? When the USSR is suffering from starvation and the US from obesity, it is evident that the market has outdone social planning in providing the basic need of food.


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