Book Review: Economic Facts and Fallacies by Thomas Sowell

Heather Wilhelm of RealClearPolitics reviews Economic Facts and Fallacies, the latest book from brilliant economist Thomas Sowell. Here's a part:

"Economic Facts and Fallacies" hints at another intriguing explanation, however--a explanation that hovers around the murkier sides of the human psyche. In his discussion of income, Sowell cites a currently popular political lament: the impending "demise" of the American middle class. This widely-accepted assertion, he writes, is simply a function of statistical voodoo: defining a "middle class" income bracket (say, $35,000 to $50,000), claiming it is shrinking, and then ignoring the fact that the bracket is shrinking because average incomes are moving up, not down, the curve.

What could be a simple error for some, Sowell points out, is doubtful to be the case for many in today's chattering class--including Paul Krugman, a trained economist and frequent middle-class Cassandra, who falls into Sowell's category of "people who should know better (and perhaps do know better)." Why would writers like Krugman repeat a negative spin that is contradicted by facts? That, Sowell writes, is a "question that goes beyond the realm of economics."

Indeed.

There is really very little in economic news that would not be illuminated by a few semesters of college-level economics. I have met intelligent people who believe, for example, that an increase in the minimum wage will not decrease employment. Everyone knows about economic problems like the trade deficit; but without knowing the foundations of economic study (supply and demand curves, elasticity of demand, opportunity cost, etc.), no one knows what any of it really means, except that Lou Dobbs tells them that having a trade deficit is bad. (Incidentally, Jason Lewis pointed out yesterday on Rush's show that unless America becomes a bad place to invest--say, because of environmental regulation or high taxes--trade deficits don't matter. After all, he informed his borrowed audience, we had a nice trade surplus once. During the Depression.)

What is most shocking to me is the number of intelligent people who believe that the laws of economics might take a holiday if, say, we have a minimum wage, or price controls, or we make incentives not to produce.