Last month, I reviewed Thomas Sowell's 2011 second edition of Economic Facts and Fallacies. This month, I read the 2009 revised edition of his book Applied Economics. Like the other book, this one is written in a clear and easy-to-read style, and supported by empirical evidence (not Sowell's own evidence, but evidence gathered from other research). However, there is a fair amount of overlap between the two books in terms of topic coverage, with discrimination and development in particular seeming to cover the same ground in both books. The 'hook' in this book is different though, and captured by the subtitle "Thinking beyond stage one". When I read that, I was thinking it meant beyond stage one economics - that is, intermediate economics in a standard progression through an economics major. Instead, Sowell refers to the tendency for politicians, policy makers and others to only think of the short-run first-order effects of a policy change, and not to work through subsequent effects that will occur in the medium-run or long-run. It is over these longer timescales that most unintended consequences become apparent, but for a politician in particular, negative impacts that occur after they are no longer in office will be of little consequence to them right now. As one example:
...a small-time criminal may find it expedient to kill some local store owner for the small amount of money in the store's cash register, if only to keep the store owner from identifying him, even though this might make no sense in organized crime.
Public outrage at such a murder could result in more law enforcement activity in the area, reducing the profitability of the crime syndicate's business in illegal drugs, prostitution, and other activities by making local customers more hesitant to engage in such activities when there was an unusually large police presence in their neighborhoods.
In this example, the small-time criminal isn't thinking beyond stage one, unlike crime syndicates that have strong incentives to do so. There are many similar examples that outline the consequences of failing to think beyond stage one. I feel like Sowell does a much better job of keeping on point in this book. However, like the other book, this one is a little uneven in places. For example, at one point he carefully explains why low American life expectancy cannot be taken as evidence of a poor health care system in the US, and then a few pages later uses declining life expectancy in the former Soviet Union as evidence of poor health care. There is also much that some readers will disagree with, in particular Sowell's views on the integration of immigrants.
Despite that, there is also a lot of really good material in the book. I especially enjoyed the section on prejudice, bias, and discrimination, and especially Sowell's explanations of the costs of discrimination. Many researchers and policy makers could do well to read that section. There is also more humour in this book. For example:
Where the issue is the safety of nuclear power plants, for example, the answer to the question whether nuclear power is safe is obviously No! If nuclear power were safe, it would be the only safe thing on the face of the earth. This page that you are reading isn't safe. It can catch fire, which can spread and burn down your home, with you in it. The only meaningful question, to those who are spending their own money to deal with their own risks, is whether it is worth what it would cost to fireproof every page in every book, magazine, or newspaper, not to mention paper towels, stationery, notebooks and Kleenex.
Of the two Sowell books that I have read over the last month or so, this one is clearly the better of the two. Given the overlap in content, and the fact that this one seems to keep on point a bit more, I would recommend Applied Economics, rather than Economic Facts and Fallacies, to readers interested in getting a clear-eyed (but not necessarily entirely agreeable) perspective on a range of issues from an economics perspective.
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