Author: Thomas Sowell is an American economist and social theorist who is currently a senior fellow at the Hoover Institution at Stanford University. Sowell writes from a libertarian conservative perspective, advocating supply-side economics.
Book: Mr Sowell exposes some of the most popular fallacies about economic issues in a lively manner that does not require any prior knowledge of economics. These fallacies include many beliefs widely disseminated in the media and by politicians, such as fallacies about urban problems, income differences, male-female economic differences, as well as economic fallacies about academia, race, and Third World countries.
Opinion: Even if the book lacks a coherent structure, I really enjoy the way Sowell writes and expresses his ideas. No jargon, charts, excessive storytelling or hard algebra, just real economics. I like how he presents the basis on which much of modern political ideology depends before destroying their reasoning with facts and logic. The best part of the book for me was the one on academic facts and fallacies, as it is a field rarely mentioned by economists - He brilliantly explains the conflict of interest between students and professors that combine teaching and researching activities (teachers will lecture on their own research, and not on the issues that need students to obtain a job or perform well in the real world). This issue is one of the reasons why most students of economics, business, finance and similar learn nothing useful during their undergraduate years. The only negative point in my opinion is his view of inflation (p.138). He claims that CPI overstates inflation… I see inflation as a politically engineered increase in the money supply, where the CPI does just the opposite of what Sowell says, it understates real price increases…
On the point of inflation: (i) the natural tendency of any economy is towards deflation due to technological advances; thus, it makes not sense to compare p1 with p0. (ii) Since 1999 the inflation calculation assumes that consumers make changes when princes of one item raise. This should not need further discussion; it is corruption that understates inflation (lower quality of living for the same price vs same quality of life for higher price). (iii) The calculation does not include home prices because they are seen as “investments”, when it is the single most important consumption good for most families. (iv) It is in the best interest of politicians to understate it because tax brackets will remain unchanged, so they will increase their resources at the expense of the society, while lowering their real indebtedness… Saifedean Ammous explains brilliantly this idea in his book “The Fiat Standard”.
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