Summary of Basic Economics

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Anyone not familiar with the work of Thomas Sowell would be well advised to check out the blurbs on the back of the dust jacket of Basic Economics, where praise flows from conservative bastions like The Wall Street Journal, The Washington Times and the American Enterprise Institute. Take this as a warning that, even though Sowell’s book does offer an excellent plain-English explanation of fundamental economics, its real mission is to explain how many societal catastrophes are caused by government policies he deems faulty. In so doing, he takes aim at minimum wage standards, rent control and, through his spirited defense of international trade, the anti-globalization crowd. But no matter which side of the ideological fence you occupy, getAbstract.com suggests reading this book for its insightful distillation of some of our most passionate political debates down to their economic essentials.

About the Author

Thomas Sowell is the Rose and Milton Friedman Senior Fellow on Public Policy at the Hoover Institution, Stanford University. He has taught economics at colleges and universities across the country and has published articles and books on economics in the United States and overseas.

 

Summary

What is Economics?

When the African countries of Ghana and Ivory Coast achieved independence in the 1960s, the presidents of neighboring nations made a bet about which nation would be more prosperous in the years to come. At the time, it seemed like a sucker’s bet: Ghana was already richer than Ivory Coast and also had many more natural resources. But the president of Ivory Coast was confident his nation would prosper because it had embraced free markets while Ghana was committed to a government-run economy. By 1982, there was no doubt about who had won the wager: the poorest 20% of Ivory Coast’s population had a higher real income than most of the people in Ghana.

In country after country, free markets have delivered greater economic growth and prosperity than any other sort of system. How do free markets deliver this consistent performance? In government-controlled economies, politicians or bureaucrats decide the use of resources and determine who gets the goods that are ultimately produced. Free markets use a more reliable method to answer these questions: prices.

Prices

Prices are like messengers that convey news. The news that they deliver concerns...


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