Steigerwald
10 minutes with Thomas Sowell
newsandopinion.com | Thomas Sowell, one of America's greatest intellectual treasures, is generally referred to as a "black conservative," but he is a revered hero in both libertarian and conservative camps.
A free-market economist, philosopher, social critic, syndicated columnist and senior fellow at the Hoover Institution, Sowell has written more than 25 scholarly, logical, usually provocative and often groundbreaking books on economics, politics, race, immigration, education, culture, the justice system, the U.S. Constitution and Marxism.
Sowell's latest book, "Applied Economics: Thinking Beyond Stage One," (Click HERE to purchase. Sales help fund JWR.) applies the principles of economics (without the jargon) to such real-world problems as housing, medical care, discrimination and the economic development of nations. I talked to him by telephone on Thursday from San Francisco:
Q: What's the biggest difference between the way a politician thinks and the way an economist thinks?
A: Well, the politician thinks in terms of what would get him elected in the next election. The classic definition, or my favorite definition of economics, is "the study of the allocation of scarce resources which have alternative uses," which may sound pretty dry. But whether those resources are used efficiently or inefficiently determines whether people are rich, prosperous or poor.
The Soviet Union, for example, had some of the most abundant resources, and quite possibly the most abundant resources of any country in the world. And yet the standard of living in the Soviet Union was not only far below that of the United States, it was lower than that of countries which have virtually no natural resources, such as Japan or Switzerland.
The difference is that what resources the Japanese buy — and they have to buy most of them — they use far more efficiently than the Soviets did.
Q: Who are your favorite economists, or the economists you look up to?
A: Well, of course, Milton Friedman. And the book "Applied Economics" is dedicated to Arthur Smithies, who had this wonderful way of questioning in class, as I say in the subtitle, to get us to "think beyond stage one," because so many policies that sound good, when you only look at the immediate effect, look totally different when you begin to look at the repercussions of those polices.
Rent control is a classic example. When you put in rent control, the tenants have lower rents, the tenants are happy. Fine. In no time, you discover that, 1), nobody is building any more housing, and, 2), the landlords are not maintaining the existing housing as well as they did before, because now there is a housing shortage and they don't have to. And so the housing stock begins to decline, and no comparable amount of new housing is built to replace it. And so now you get a progressively worsening housing shortage.
At some point, the politicians become aware that nobody is building any housing. In some places they say, "All right, we will maintain rent control for low-cost housing, but if you want to build luxury housing, we won't put in rent control." Fine. But resources have been shifted from building ordinary housing to luxury housing.
This has happened in cities across the United States and in countries in Europe and elsewhere. The ultimate consequence is that the people who wanted to produce affordable housing are making it impossible to build affordable housing and shifting resources to building housing that the vast majority of people can't afford at all.
Q: Who are your favorite politicians?
A: Oh, gee. George Washington and Abraham Lincoln.
Q: What's the biggest difference between the way politicians and economists think and act when it comes to health care?
A: The politicians look at it in terms of saying and doing "What will get me elected." What that means is that if you give people the impression that they are getting something either free or at a bargain, they are more likely to vote for you.
Economists, unfortunately, are handicapped because they know there is no such thing as a free lunch. They also know the difference between lowering costs and merely lowering prices. You can lower prices with a law, but that doesn't lower the cost by one penny. It still costs just as much to produce the medicines, educate the doctors and build the hospitals.
So you end up with costs being shuffled around. But they don't go away just because they're shuffled around. The HMOs try to put more of the costs on Medicare and vice versa, so you get this game being played, which doesn't lower anybody's costs.
Q: You say in the book that it's important to have a sense of humor when you're trying to learn about economic policies. What do you mean by that?
A: Well, so many of the policies are so badly mistaken. They not only don't solve the problem, they usually make the problem far worse than to begin with. So you can get quite angry just studying economic policies, even more so than economic theory.
The first thing to remember is that you will have the last word when Election Day comes around, and the time to get angry is in voting booth.
Q: Someone wanted me to ask you if $500 billion budgets matter in the long run?
A: (laughs) There was a time when the entire gross national product of the United States was about $500 billion. It would have mattered a lot then. When the gross national product is in the trillions, it matters less. I'm sure that if I had one-tenth the debts that, say, Donald Trump has, I would be ruined. But that doesn't mean Donald Trump is ruined.
Q: Of all your books, is there any one you'd recommend to someone that would explain who you are?
A: If there is any one book of mine I would most like most people to read, it would be "Basic Economics," (Click HERE to purchase. Sales help fund JWR.) because it does just take you from square one right on through everything, from price controls to international trade, stocks and bonds, whatever.
Q: Do you think the level of economic literacy has been going up or down among the general public?
A: I have no idea. I suspect that it is so low it would be hard to measure. In fact, that was the whole reason for my writing these two books — to do what little I can, because there is no great incentive for an economist to write at this level. It certainly won't help his career, but when you're an old man, you can do all kinds of things you couldn't do when you were young.
Q: I would suggest that after working in the media for 30 years, one of your key target audiences would be my fellow journalists.
A: If I were rich, I would send every one of them a copy of "Basic Economics."
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