Thomas Sowell: Understanding Markets and Free ChoiceTags Free MarketsSocialismU.S. History
June 30 marks the ninetieth birthday of Thomas Sowell. But it is insufficiently celebrated, in no small part because he shares that birthday with Frederic Bastiat, one of history’s most famous economics writers, whose work attracts a great deal of attention then.
That is ironic in that Sowell and Bastiat share an uncommon ability to write sensibly about economics in ways “real people” can understand, especially in spotting the errors that are so common in public policy, without overreliance on jargon, diagrams, or mathematics.
But fortunately for modern readers, we have been able to benefit from Sowell’s much longer productive life, including roughly fifty books, decades of popular articles as a syndicated columnist, and continuing contributions on Twitter, where he is one of the few who seem able to consistently make sense within its narrow space constraints. In fact, while I was working on this article, he provided an example when he tweeted, “Have we reached the ultimate stage of absurdity where some people are held responsible for things that happened before they were born, while other people are not held responsible for what they themselves are doing today?”
I have been one of those who has benefited greatly from Thomas Sowell’s work, ever since overlapping at UCLA when I was an economics graduate student. I have read most of his books and reviewed some. I am expecting an early copy of his latest book, with an eye to reviewing it as well. A dean once asked me to construct a “replacement” course for a master of public policy student who after acceptance to the program produced a doctor’s note stating that he was unable to process either diagrams or mathematics, making the standard approach to teaching them unworkable. So I constructed readings (and complementary essay questions) that offered sensible public policy approaches and insights without overrelying on those tools. Five Sowell books were on that reading list, and when students ask me today about good nontechnical analyses of economic issues, I routinely recommend his books. In fact, another professor and I have conducted student reading groups for the last three years, and the first two years involved Sowell books (last year’s group read Hayek’s The Road to Serfdom).
Sowell’s interests go well beyond just public policy. Yet even outside my areas of particular interest, to say that I have never failed to be stimulated and educated by any of his books is a substantial understatement, in that he provides not just a few insights, but many, often densely packed ones. However, particularly for anyone who is interested in careful thinking about public policy, his writing offers serious, comprehensible understanding over a wide range of applications (making me glad Sowell did not give up writing between his first submitted article at age seventeen and his first sold article at age thirty). But there is so much material that it is impossible to do his work justice in a short space.
A sample worthy of his milestone may be found in one of my favorite Sowell books—his award-winning Knowledge and Decisions, celebrating its fortieth anniversary this year. It is a favorite of mine, because it is an expansion on Friedrich Hayek’s “The Use of Knowledge in Society,” which threw a major roadblock in the way of assertions that central planning could efficiently organize society. Hayek demonstrated that one could not just put all relevant information into a master computer, tell it to equate marginal everything to marginal everything else, and generate economic efficiency centrally. The reason is that vast amounts of valuable information consist of details of time and place confronting different people in different circumstances, which are unknowable by a central planner. And throwing away all that information must throw away the wealth (what people value) whose creation it would have made possible. Only by allowing those affected individuals to make their own plans, coordinated by voluntary market arrangements, can that information be efficiently utilized.
While Hayek’s seminal article focused on what central planners could not achieve, in Knowledge and Decisions Sowell focused more on the upside of what markets could achieve. He noted “the civilized man’s utter lack of knowledge of the everyday apparatus on which he depends,” that is, how little each of us must know when markets allow us to utilize the vast complementary knowledge of others and yet not just survive, but thrive. As he wrote,
each civilized man…need know little beyond his [field]. Food reaches him through processes of which he is probably ignorant, if not misinformed…technical, economic, and political intricacies are barely suspected, much less known to him. His home is likely to be stocked with many devices working on mechanical and electrical principles which he neither understands theoretically nor can cope with as a practical matter…yet markets can still put others’ valuable knowledge at our disposal to create a standard of living unimaginable to earlier generations. And what we now have, not just what we might achieve, is threatened by expanding central planning in society. If people recognized not just what central planners cannot do, but what central planning would force us to give up, they would have few acolytes.
Sowell also laid out how most criticisms of markets versus government “solutions” are confused.
“The market” is nothing more than an option for each individual to choose among numerous existing institutions, or to fashion new arrangements suited to his own situation and taste. The government establishes…the answer to a given problem. “The market” is simply the freedom to choose among many existing or still-to-be-created possibilities….Any comparison of market processes and governmental processes for making a particular set of decisions is a comparison between given institutions, prescribed in advance, and an option to select or create institutions ad hoc….The advantages of market institutions over government institutions are not so much in their particular characteristics as institutions but in the fact that people can usually make a better choice out of numerous options than by following a single prescribed process.
Sowell went further, showing how the diversity of our abilities, tastes, circumstances, etc., leads to false perceptions of chaos and inefficiency in markets, yet means that any single “answer” government dictates cannot serve humanity well:
Diversity…insures that no given institution will become the answer to a human problem in the market….Responsiveness to individual diversity means that market processes necessarily produce “chaotic” results from the point of view of any single given scale of values. No matter which particular way you think people…[should have their needs met], the market will not do it just that way, because the market is not a particular set of institutions. People who are convinced their values are best—not only for themselves but for others—must necessarily be offended by many things that happen in a market economy.
Another crucial implication is that “The diversity of tastes satisfied by a market may be its greatest economic achievement, but it is also its greatest political vulnerability.” We see this illustrated in “Denunciations of ‘inefficiency’ and ‘waste’ [that] are often nothing more than statements of a different set of preferences” and the fact that “Schemes to turn particular decisions or processes over to ‘experts’…are often simply ways of allowing one group of people to impose their subjective preferences on others.” As Sowell summarized it,
To those who feel that their values are the values, the less controlled systems necessarily present a spectacle of “chaos,” simply because such systems respond to diversity of values. The more successfully such systems respond to diversity, the more “chaos” there will be, by definition, according to the standards of any specific set of values—other than diversity or freedom as values. Looked at another way, the more self-righteous observers there are, the more “chaos” (and waste) will be seen.
This also leads to a recognition of how “Ringing calls for a national consensus on this or that are often preposterous…because, given the enormous cost of consensus, it is unlikely to [generally] be achieved.” In fact, freedom points us in a different direction.
We satisfy our desires at least cost—which is to say, we can satisfy more of our desires—by minimizing the amount of consensus that is necessary. We easily provide ourselves with food and clothing precisely because there is no consensus needed as to what is the best food or the best clothing. If we had to reach consensus first, we might destroy ourselves in the process of trying to meet basic needs.
All of Thomas Sowell’s insights above are worth thinking through carefully. But they are only a small part of what Knowledge and Decisions had, and still has, to offer. In fact, all of the quotes used here come from just six different pages (7, 41–45, and 52) out of a 400-plus-page book, which is only 2 percent of his book output—not even counting millions of his words in other venues. It is my hope that this short article will act as bait to induce people to seriously read some of his incredibly productive life’s work. As for myself, I would just like to say thank you, Tom, for what I have learned from you.