Basic Economics (Thomas Sowell) Quotes

“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.”

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

“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.”

“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.”

“Prices play a crucial role in determining how much of each resource gets used where and how the resulting products get transferred to millions of people. Yet this role is seldom understood by the public and it is often disregarded entirely by politicians.”

“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.”

“Nothing makes us understand the many roles of electricity in our lives like a power failure. Similarly, nothing shows more vividly the role and importance of price fluctuations in a market economy than the absence of such price fluctuations when the market is controlled.”

“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.”

“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.”

“Under both capitalism and socialism, the scarcity of knowledge is the same, but the way these different economies deal with it can be quite different. The problem is not simply with the over-all scarcity of knowledge, but also with the fact that this knowledge is often fragmented into tiny bits and pieces, the totality of which is not known to anybody in any economic system.”

“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.”

“Economics is not simply a topic on which to express opinions or vent emotions. It is a systematic study of what happens when you do specific things in specific ways. In economic analysis, the methods used by a Marxist economist like Oskar Lange did not differ in any fundamental way from the methods used by a conservative economist like Milton Friedman. It is these basic economic principles that this book is about.”

“Knowledge and insight need not be technological or scientific for it to be economically valuable and decisive for the material well-being of the society as a whole. Something as mundane as retailing changed radically during the course of the twentieth century, revolutionizing both department stores and grocery stores— and raising the standard of living of millions of people by lowering the costs of delivering goods to them.”

“Economic changes include not only changes in the economy but also changes within the managements of firms, especially in their responses to external economic changes. Many things that we take for granted today, as features of a modern economy, were resisted when first proposed and had to fight uphill to establish themselves by the power of the marketplace. Even something as widely used today as credit cards were initially resisted.”

“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.”

“Just as a poetic discussion of the weather is not meteorology, so an issuance of moral pronouncements or political creeds about the economy is not economics. Economics is a study of cause-and-effect relationships in an economy. Its purpose is to discern the consequences of various ways of allocating scarce resources which have alternative uses. It has nothing to say about social philosophy or moral values, any more than it has anything to say about humor or anger.”

“There is perhaps no more basic or more obvious principle of economics than the fact that people tend to buy more at a lower price and less at a higher price. By the same token, people who produce goods or supply services tend to supply more at a higher price and less at a lower price. Yet the implications of these two simple principles, singly or in combination, cover a remarkable range of economic activities and issues— and contradict an equally remarkable range of misconceptions and fallacies.”

“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.”

“The gains and losses are not isolated or independent events. The crucial role of prices is in tying together a vast network of economic activities among people too widely scattered to all know each other. However much we may think of ourselves as independent individuals, we are all dependent on other people for our very lives, as well as being dependent on innumerable strangers who produce the amenities of life. Few of us could grow the food we need to live, much less build a place to live in, or produce such things as computers or automobiles. Other people have to be induced to create all these things for us, and economic incentives are crucial for that purpose.”