Basic Economics (Thomas Sowell)

"Newton was not the first man who saw an apple fall. His fame was based on his being the first to understand its implications."

"To those who run businesses, profits are obviously desirable and losses deplorable. But economics is not business administration. From the standpoint of the economy as a whole, and from the standpoint of the central concern of economics— the allocation of scarce resources which have alternative uses— profits and losses play equally important roles in maintaining and advancing the standards of living of the population as a whole."

"While there are controversies in economics, as there are in science, this does not mean that the basic principles of economics are just a matter of opinion, any more than the basic principles of chemistry or physics are just a matter of opinion."

"Although the basic principles of economics are not really complicated, the very ease with which they can be learned also makes them easy to dismiss as “simplistic” by those who do not want to accept analyses which contradict some of their cherished beliefs."

"Often the knowledge that is economically crucial is highly specific to a particular location or a particular group of people— and is therefore unlikely to be widely known."

"No economic system can depend on the continuing wisdom of its current leaders. A price-coordinated economy with competition in the marketplace does not have to, because those leaders can be forced to change course— or be replaced— whether because of red ink, irate stockholders, outside investors ready to take over, or because of bankruptcy. Given such economic pressures, it is hardly surprising that economies under the thumbs of kings or commissars have seldom matched the track record of economies based on competition and prices."

"What is important is not the success or failure of particular individuals or companies, but the success of particular knowledge and insights in prevailing despite the blindness or resistance of particular business owners and managers. Given the scarcity of mental resources, an economy in which knowledge and insights have such decisive advantages in the competition of the marketplace is an economy which itself has great advantages in creating a higher standard of living for the population at large. A society in which only members of a hereditary aristocracy, a military junta, or a ruling political party can make major decisions is a society which has thrown away much of the knowledge, insights, and talents of most of its own people. A society in which such decisions can only be made by males has thrown away half of its knowledge, talents, and insights."

"Unfortunately, little of the knowledge and understanding within the economics profession has reached the average citizen and voter, leaving politicians free to do things that would never be tolerated if most people understood economics as well as Alfred Marshall understood it a century ago or David Ricardo two centuries ago."

"Some of the economic policies which have led to counterproductive or even catastrophic consequences in various countries and in various periods of history might suggest that there was unbelievable stupidity on the part of those making these decisions—which, in democratic countries, might also imply unbelievable stupidity on the part of those who voted for them. But this is not necessarily so. While the economic analysis required to understand these issues may not be particularly difficult to grasp, one must first stop and think about the issues in an economic framework. When people do not stop and think through the issues, it does not matter whether those people are geniuses or morons, because the quality of the thinking that they would have done is a moot point."

"Neither individuals nor companies are successful forever. Death alone guarantees turnover in management. Given the importance of the human factor and the variability among people— or even with the same person at different stages of life— it can hardly be surprising that dramatic changes over time in the relative positions of businesses have been the norm."

"Highly specific knowledge of particular groups of people can prove to be just as economically decisive as knowledge of particular places."

"Simple as basic economic principles may be, their ramifications can be quite complex, as we have seen with the various effects of rent control laws and agricultural price support laws. However, even this basic level of economics is seldom understood by the public, which often demands political “solutions” that turn out to make matters worse. Nor is this a new phenomenon of modern times in democratic countries."