Non-economist's question regarding Thomas Sowell's work

(I'm hoping this is the right forum for this.)

Okay - I'm not an economist, and have only a bare-bones understanding of the field from reading Sowell, Hazlit, Rothbard, and Higgs. (I've got _Human Action_, and it's on my to-read stack, but the stack is still over a foot (30 cm) high.  I'll get there, but not this week.)  I gave my teenager Thomas Sowell's book _Basic Economics - A Citizen's Guide to the Economy_ as an extra study project, thinking that basic economics an important thing for her to understand.  (She's a junior in High School - since I'm not paying for a better school, I'm working on supplementing her education.)

Her mother's new husband, who professes to study economics as a long-standing hobby, flipped through it and dismissed it, being unable to find any complex equations.  Reportedly, he claims that Sowell's work is flawed, ignoring important points known to "real" economists.  Intriguingly enough, Mr. Sowell teaches at Stanford, where my kid's mother is currently a student, but she refuses to discuss him.

As a check on my own impressions (which are not always valid - I supported McGovern in '72), I decided to ask here.  Is there some basic flaw in Sowell's work that I'll have to correct in my daughter's education, or can I just relax, and assume that her newest stepfather is mistaken?

Danno

He (the husband) sounds like a snide elitist imbecile - that is to say, any given positivist economist. They assume that if something lacks equations that it lacks in truth, something they long ago forsook when they took to empty, abstract models. Ask him what exactly is lacking other than empty, vague abstractions.

-Jon

I'm not an economist either, so I'm not competent to judge Sowell. However, I can state that the sharpest point of contention between Austrian economists and all the other economists is the use of mathematical models. Most Austrians absolutely deny the validity of such models, for various reasons.

One reason is that models aggregate humans into larger units, which is seen as an unacceptable violation of methodological individualism.

Another is that models usually reflect unacceptable assumptions, such as "perfect competition."

Still another is that models usually fail to account for the most important principle in Austrian econ: "Humans act." Specifically, humans act to minimize the bad effects of economic policies, and maximize the good effects. Models never account for that adequately. For example, models of tax revenue never properly account for the fact that individuals will evade the tax, by finding loopholes, evasion or outright black-market activity.

Since you've read Hazlitt, you'll understand when I say that "Economics in One Lesson" is the best book to recommend to your daughter, EVER, to get started.

--Len

I am in the process of reading it.  I decided to go through it after I finshed reading Black Rednecks and White Liberals and Economic Facts and Fallacies.

After reading the first 100+ pages, I am currently considering using it as my basic textbook for adults returning for their 4-year business degree.  It is well written and targeted for non-economists.  It does not use graphs or too much jargon, but it does explain clearly and concisely the basic principles of economics.  While it does not get into praxeology or methodological individualism, it does give proper emphasis on how an economist is supposed to think about problems.  This economic way of thinking is precisely what an instructor looks for in a textbook and that is why I am considering it for my classes.

I would strongly suggest that she finishes the book.  If there is any arguement about it, ask her to read Marx's commie Manifesto too.  Reading is good for you.

Danno:

As a check on my own impressions (which are not always valid - I supported McGovern in '72

So did Lew Rockwell.

Danno:

Her mother's new husband, who professes to study economics as a long-standing hobby, flipped through it and dismissed it, being unable to find any complex equations.

Equations give a flawed understanding of economics, as the "equals sign" functions as a magic wand.  One side goes up, the other side goes up proportionately.  That's how atoms and molecules work, but not human beings.  Human beings exhibit unregular behavior and have changing preferences.  They are also affected by a little thing called marginal utility, meaning that additional units of the same good have a different (lesser by an unknown amount) value to an individual, so for them doubling one side of an "equation" does not mean a proportional increase on the other side.

There is also the problem that human preferences are ordinal not cardinal, and the fact that subjective values can't be measured. 

Nor can most variables in economic equations be determined with any precision or accuracy, e.g. GDP, CPI, unemployment, etc.  Many assumptions must be made, in which bias runs rampant.

Long story short, your daughter's newest stepfather is quite mistaken as to the value of equations in understanding real-world economics.  This is one of the epistemological issues where Austrian economics differs from mainstream economics (or "neo-classical economics", as it's sometimes called).

Danno:

Is there some basic flaw in Sowell's work that I'll have to correct in my daughter's education

Sowell is of the Chicago School, i.e., he's a Monetarist.  They have a flawed view.  Firstly, they're positivist, which is a flawed approach as described above.  Worse, they are best known for valuing one equation above all else -- MV = PT (Money supply * money Velocity equals Price level * number of Transactions).  This leads them to believe that the government should have control over the money supply so as to control the price level.  The one time a monetarist gained influence over an American presidency it was a disaster (Milton Friedman convinced the Reagan administration to follow the equation in setting the money supply, resulting in the deflation/recession of the early '80s).

Secondly, they are ostensibly free-market but make an extraordinary number of concessions to state power (Milton Friedman was instrumental in establishing tax withholding, for example).

austecon:

I am in the process of reading it.  I decided to go through it after I finshed reading Black Rednecks and White Liberals and Economic Facts and Fallacies.

I haven't read _Facts and Fallacies_ yet - is it worth getting, or a rehash of other stuff?  My bookshelves are overflowing already, and I don't really want to have _The Compleat Sowell_ if some of it's redundant.  (I was quite impressed with my first Sowell, _Black Rednecks_).

After reading the first 100+ pages, I am currently considering using it as my basic textbook for adults (...)

That seems a strong recommendation - thanks!

I would strongly suggest that she finishes the book.  If there is any arguement about it, ask her to read Marx's commie Manifesto too.  Reading is good for you.

<sigh>  I should read the Marx - I've despised it for years, knowing exactly what I'm despising would be good for me.  She'll finish the book, and they won't argue with me - I've got the annoying traits of being vehement, well-documented, stubborn, opinionated, and too-often right.  But it is comforting to have solid third-party opinions.

Danno

maxpot46:

Danno:

Her mother's new husband, who professes to study economics as a long-standing hobby, flipped through it and dismissed it, being unable to find any complex equations.

Equations give a flawed understanding of economics, as the "equals sign" functions as a magic wand.  {...}

Long story short, your daughter's newest stepfather is quite mistaken as to the value of equations in understanding real-world economics.  This is one of the epistemological issues where Austrian economics differs from mainstream economics (or "neo-classical economics", as it's sometimes called).

Thanks - I'd always understood that econ using formulas with more than 6 factors was Keynesian, and largely invalid.  On the other hand, most of the reading I've done in economics has, apparently, been neo-classical, or Chicago - and I've seen very little reliance on complex formulas.  Then again, I'm very much at a beginner level in my reading.

Danno:

Is there some basic flaw in Sowell's work that I'll have to correct in my daughter's education

Sowell is of the Chicago School, i.e., he's a Monetarist.  They have a flawed view.  Firstly, they're positivist, which is a flawed approach as described above.  Worse, they are best known for valuing one equation above all else -- MV = PT (Money supply * money Velocity equals Price level * number of Transactions).  This leads them to believe that the government should have control over the money supply so as to control the price level.  The one time a monetarist gained influence over an American presidency it was a disaster (Milton Friedman convinced the Reagan administration to follow the equation in setting the money supply, resulting in the deflation/recession of the early '80s).

Secondly, they are ostensibly free-market but make an extraordinary number of concessions to state power (Milton Friedman was instrumental in establishing tax withholding, for example).

I'm not yet entirely sure I disagree with them.  It has been my impression that they factor government interference in the economy into their understanding, rather than encourage such interference.  I may have to go re-read my Friedman with a more critical eye.

At the time, I understood the deflation/recession of the early '80s to be the result of the economy adjusting away from the price/wage controls of the '70s.  I do recall calling Mr. Carter many bad names.

It doesn't seem to matter what I do - that to-read pile just gets bigger. <sigh>

Danno - the eternally undereducated

Danno:

I haven't read _Facts and Fallacies_ yet - is it worth getting, or a rehash of other stuff?  My bookshelves are overflowing already, and I don't really want to have _The Complete Sowell_ if some of it's redundant. 

I'd check it out at the library and look through it or go online to examine the table of contents.  You can decide if it appeals to you.  As a general rule, it is always good to read the subjects that you are already familiar with.  It will give you depth and expand your understanding of a subject.  For me, Sowell is rephrasing much that I have seen elsewhere.  (It is a Basic Econ book.)  Nevertheless, he'll say something different and I can use that in my next class.

Thomas Sowell is not an Austrian but there are many worse books you could have given your daughter.  It is much better than the vast majority of economics books.

I read an article by Sowell on Say (part of the same intellectural heritage as the Austrians) and it almost seemed as though Sowell was convinced of savings first leading to investment argument, but could not quite bring himself to jump the fence. 

Sowell might be one of those neoclassicals who has the right intuitions but not taken the time to act on them, or see good enough reason to realign his theoretical viewpoint. Either way, he is a damned sight better than most economists out there.

-Jon