This reader had toyed with the idea of skipping the fourth edition of Thomas Sowell’s Basic Economics, having read the third edition four years ago.
That would have been a mistake. Having just completed the nearly 700-page updated version of Sowell’s “common-sense guide to the economy,” one is reminded of the many ways in which an ignorance of economics — willful or otherwise — plagues public policy in the United States and abroad.
Near the end of the book, Sowell offers one of his recurring nuggets of wisdom. He starts with a discussion of the misuse of common terminology:
[S]loppy use of terms often occurs in media and political discussions of taxation. For example, the growing federal deficits of the 1980s in the United States have often been blamed on the “tax cuts” early in that decade. But, although tax rates per dollar of income were cut, the total tax revenues of the federal government were higher in every year of the 1980s than in any previous year in the history of the country, as a result of incomes growing by more than the tax rates were cut. It was increased spending which led to growing deficits — a fact concealed by sloppy use of the word “taxes,” which can refer to either individual tax rates or the total tax revenues of the government.
Many economic fallacies depend upon (1) thinking of the economy as a set of zero-sum transactions, (2) ignoring the role of competition in the marketplace, or (3) not thinking beyond the initial consequences of particular policies.