Sowell's, Basic Economics a Good Introduction for the Average Citizen

If each citizen wants a piece of the scarce resources of its society, he must work for it, since there is always competition for such resources. Even in primitive times, when there were no complex monetary systems or units, banks, or scrupulously organized governments, there has always been competition. According to Thomas Sowell's Basic Economics: A Citizen's Guide to the Economy, there are a limited number of resources that must be distributed, regardless of how it may seem, and those people who are strongest acquire the most.

One of the main principles addressed in Basic Economics is that resources tend to move to where they are most useful. That is, wherever those resources will contribute most is where they will end up being used. For example, an alpha male chimpanzee will be able to fight off other chimpanzees for the best bananas. As a result, those bananas are put to best use because they are feeding the alpha male, who will help sustain his species better than a weaker male, who will most likely have weaker offspring.

This can easily become confusing, and in a lot of ways, a simple understanding of economics is not easy to obtain. This is especially true in our modern society, where we believe we are entitled to a certain amount of income or a certain standard of living, especially if we were raised in relatively privileged settings. We often fail to grasp the economic realities pertaining to our privileges, and often see them as rights. Politicians are often guilty of setting aside the long-term economic implications of a decision in favor of gaining immediate votes from vocal groups with a specific interest that is not necessarily representative of the good of the entire population. What is probably more common is that politicians don't see these implications at all, and though their intentions may be good, they end up causing more problems with their policies than if they had not intervened.

That is why it is so important to understand the principles illustrated in Basic Economics. It is an empirical explanation of the basic functions of the economy, and as Sowell states in the preface, it is meant to be understood by the common citizen with no background in the study of economics. The book explains how wealth is transferred, how some societies with few natural resources thrive more than others with more natural resources, and additionally, how emotions and politics, especially in conjunction, lead to economic policies and practices that are detrimental to the society as a whole.

Sowell repeatedly expounds on the importance of a free market in order for a society to flourish. He says that prices should be allowed to fluctuate according to what the market demands. "In...a price-coordinated capitalist system, the amount of inputs ordered would be based on the enterprise's most accurate estimate of what was really needed...(Sowell, 12)." Allowing consumers to decide which products and services to use prevents waste because a business must learn to adapt to what consumers desire, or risk bankruptcy. In a government-run economy, such as the Soviet Union, companies could
continually produce unwanted goods while other desperately needed goods were given no priority.

Sowell contradicts many "emotional" terms that have been tied to the free market. For example, rising prices are often attributed to greed, but a business is only willing to charge as high as consumers will pay without losing to competition. Capitalism is an agreement between the consumer and the business. Throughout the book in fact, Sowell finds himself at odds with those who are morally minded but fail to realize that making policies that benefit certain individuals or causes can create bigger problems for a society as a whole. He believes that scarce resources should be put to optimal use with the acknowledgement that there will always be some who suffer. This way of thinking is not often embraced by political candidates seeking favor with the most influential interest groups.

Though Sowell expounds the importance of free market, he acknowledges that government intervention is required in some areas. "The most basic form of government is to provide a framework of law and order, within which the people are free to engage in whatever economic and other activities they choose (Sowell, 238)." One example mentioned in the book is air pollution regulation. It's true that limiting pollution also limits a company's output in some way, but controlling pollution protects the health of those in the area.

The book in essence separates political or governmental issues from free enterprise issues, making it clear when government is needed and when it should stand off. Any politician can play off public fears or outrage caused by such events as an oil

shortage or massive corporate layoffs. A temporary measure to benefit one group in crisis can certainly help a politician's career at the moment, but as the repercussions of such a measure begin to materialize, that politician's career is put in jeopardy. That's why Basic Economics and the fundamental principles it illustrates are so important for someone who wishes to maintain a long-term career in politics. Knowing how government policies affect the economy makes a politician more accountable to the people in economic matters.

As Sowell states repeatedly, economics is a strictly empirical field. "Economics is not a value in and of itself. It is only a way of weighing one value against another (305, Sowell)." What makes this book so useful in understanding how the economy functions is that Sowell has recognized the confusion that results from the media and politicians serving their own interests, and is therefore willing to explain fundamentally simple concepts such as allocating scarce resources in a way that is clear and that avoids unfamiliar terminology.

Throughout the book, Sowell uses numerous real world examples to illustrate his points. He understands that the perceptions of most of his readers regarding the economy have developed from unreliable sources, and therefore, readers need an illustration to make the connection between how the fundamental processes of the economy work and when such processes took place in history. He talks about post-World War I Germany, and how the German government printed off more money to pay for war supplies, causing a massive inflation. This in turn led to extreme animosity toward the government and subsequently, the rise of Adolph Hitler. Anyone who wonders why the government

doesn't just print more paper currency need look no further than this example, which shows explicitly that more currency with the same amount of available goods brings down the value of that currency, which will devastate a society whose government is spending all the new printed money instead of releasing it into the free market.

If Sowell's purpose in this book was to illustrate to us the basic processes of allocating and using scarce resources, then it certainly succeeds. No one can be expected to easily grasp the fact that true value is not in the money we carry with us, considering that we use this money to purchase what we need and want everyday (if we've acquired enough). The true value is in the goods and services that money purchases; any form of currency is just an arbitrary way of circulating our limited natural resources to where they are most useful. Sowell's book simply explains these processes, and by becoming aware of them, we can learn the importance of managing our own resources, and in turn, putting them to their most effective use.