Thomas Sowell's "Economic Facts and Fallacies"

I enjoy Thomas Sowell's books on economics. They are meant for the general reader, but are full of useful info. Think of it as university-lite.

I just finished this book, Economic Facts and Fallacies, and found it fascinating. Sowell is a political conservative (he calls himself a libertarian). So my initial reaction is to distrust what he says, but he writes so lucidly and so compellingly, that I'm forced to admire his point of view. I don't subscribe to it, but I admit that his arguments are very good and very persuasive.

This book takes on topic dear to a leftist or liberal viewpoint and destroys them. Here are the six key chapters:

1. Urban Fallacies: He shows that crowded cities doesn't mean overpopulation. We are a social species and like to crowd together to maximize access to social riches. He shows that "urban sprawl" isn't a disease and has a rational basis. He attacks public housing, rent control, and urban renewal with excellent arguments. He has an excellent exchange between Jane Jacobs and an Urban Planner that shows how centralized planning is a disaster because it doesn't understand community (p. 41).
2. Male-Female Fallacies: He looks at the rise, fall, and rise of female education and show it is tied to female choice about marriage and child-bearing. He shows that arguments about a wage gap between males and females is built on misconstruing the underlying facts on sex-based differences in job and career preferences. He points out that law grads will sort themselves in ways that seems to demonstrate sex discrimination in hiring practices, but he points out female law grads will tend to choose civil service jobs rather than join high pressure law firms. So their pay will be lower. But they have rationally chosen limited hours and less job stress to allow them to focus on home and family while the males seek to maximize salary to give themselves advantage in sexual competition for mates. He gathers facts in many places. "As young beginning workers, British women's incomes were 91 percent of that of British men, but as mothers, their incomes were just 67 percent of that of men who were fathers. Mothers' incomes declined as a percentage of male income more or less steadily until about a dozen years after giving birth, when it began to rise again, though never getting back to where it was before a child was born, perhaps indicating the permanent income loss due to interrupted careers" (p 75). The pay gap between male and female doctors looks big until you factor in that male doctors work over 500 hours more per year than female physicians (p. 78).
3. Academic Fallacies: He points out the conflict between research and teaching and how this pushes tuition costs up. Even more outrageous he points out how accreditation groups push tuition up by requiring colleges and universities to provide resources that have no obvious connection with teaching the curriculum (p. 99). He looks at the paradox of good teachers failing to get tenue and how the tenue system is creating a two tier system for academics.
4. Income Fallacies: He shows how income statistics can be played with the "prove" a viewpoint from either right or left. "Long-time New York Times columnist Tom Wicker, for example, used per-capita income statistics when he depicted the sucess of the Lyndon Johnson administration's economic policies and family income statistics when he depicted failure for the policies of Ronald Reagan and George H. W. Bush (p. 126). Statistics can be based on incomplete data: "In the case of statistics claiming that workers' incomes have not risen significatnly -- or at all -- over the years, these data exclude the value of job benefits such as health insurance, retirement benefits and the like, which have been a growing share of employee compensation over the years" (p. 130). He looks at income inequality and points out that they ignore dynamics that cause the data to misrepresent the facts. Statistics about "the poor" include groups who don't belong there: wives of the rich, wealthy people wose incomes can vary widely, kids who graduate mid-year and join the work force and don't have time to create an annual salary that would show them in anything but the bottom quintile, professionals who are beginning a career and haven't yet built a clientele, young adults living at home who only work sporadicly, and retirees who don't need a big income because their homes are paid for (pp. 134-135). The fundamental flaw is that you are reporting stats by category when the underlying category is not static, i.e. people enter and leave the category and this skews the meaning of the category-based statistics.
5. Racial Fallacies: First he points out that discrimination has no real pattern in history: it grows and decreases. He points out slavery has been widespread with no clear racial basis: e.g. he repeatedly points out more whites were enslaved by North Africans than Africans were ever enslaved by Europeans (p. 161). He attacks the view that goals of racial integration were achieved only as a result of the civil rights struggle. "The percentage of black families with incomes below the poverty line fell most sharply between 1940 and 1960, going from 87 percent to 47 percent over that span, before either the Civil Rights Act of 1964 or the Voting Rights Act of 1965 and well before the 1970s, when 'affirmative action' evolved into numerical 'goals' or 'quotas' (p. 159). He attacks the victim mentality of blaming black family breakdown on slavery: "While 31 percent of black children were born to unmarried women in the early 1930s, that proprotion rose to 77 percent in the early 1990s. If unwed childbirth was 'a legacy of slavery,' why was it so much less common among blacks who were two generations closer to the era of slavery?" (p. 164). He attacks employment discrimination with arguments to show that they are a rational response of business to the risk of hiring an employee where it is hard to prove the quality of the employee while a racial characteristic makes it easy to identify members of a group which poses great risks to a business. Criminality in the black community is a problem with the minority, but it is rational for a business person to take the risk of hiring a black person. He points this out in the most startling way: black taxi cab drivers are reluctant to pick up black fares (p. 172).
6. Third World Fallacies: He points out that statistical flaws occur when you use categories that are dynamic: "The World Bank, among others, has produced statistics showing that the ratio between the incomes of the 20 highest income countries and the 20 lowest income countries has grown over the period from 1960 go 2000, rising from about 23-to-1 to about 36-to-1. Some have used such data to claim, among other things, that globalization increases the economic inequality between properous and poverty-stricken nations. But the directly opposite conclusion would be reached when comparing the same set of notions in 2000 as in 1960. The income ratio between the initially richest 20 nations and the initially poorest 20 declined from 23-to-1 to less than 10-to-1 (p. 196). He points out that most "aid" is wasted on prestige projects and that the donor institutions have no economic motive to use the donation effectively, so money flows to both corrupt as well as honest countries. Most foreign aid are political bribes: "In short, what are called 'loans,' whether by international aid agencies or by national governments like those of the United States or Britain, are in fact gifts of taxpayers' money to Third World political leaders" (p. 212). He points out that Lenin played a slight-of-hand in claiming that third world poverty was the result of imperialist exploitation. By choosing categories carefully he shows aid flowing to broad regions with the implication that much of it went to the truly impoverished areas, but in fact the lion's share when to the developed portion and very little to the large impoverished portion (pp. 208-210).
   

In this book, Sowell points out that he was a high school dropout, yet ended up getting his PhD. If you look at the Wikipedia article on him, you can see why. Born as a Black in the Deep South to a poor family, he succeeded in life. Like a lot of people who are able to succeed despite handicaps, he evinces a philosophy of do-it-yourself and go-it-alone. That is admirable. But in reality, as a social species, our best successes come from our cooperation. So, while I admire his grit and intelligence, I think his personal success has shaded his views too much. I agree that do-goodism and too much state welfare undermines society, but on the other hand, assistance from the state in terms of education, a sound economy, an infrastructure that lets you find a good job and freely move to take advantage of that job are not things that a libertarian appreciates enough. They are right to stress individual iniative (the "pluck" factor) but they are weak on seeing the taking-a-village-to-raise-a-child side of things (what I would call the "luck" factor, as in, if you are lucky enough to be born in a rich democracy then you can succeed, but genius and pluck in a dirt poor, vicious society won't get you too far unless you are a sociopath).