Basic Economics

In the introduction to the fifth edition, Sowell writes that he intends to write a book on economics that is written in plain English so that anyone can understand it. Unlike many books on economics, Sowell deliberately avoids the use of any charts or graphs, instead relying on pure description.[5]

According to the reviewer R. Bastiat in 2004, the book "starts out with a chapter discussing the subject matter and perspective of economics in terms of scarcity and trade-offs. This is followed by six main topical sections, each subdivided into a few short chapters and concluding with an 'overview' that wraps up the main topic of the section." The six main parts of the book cover Prices and Markets, Industry and Commerce, Work and Pay, Time and Risk, The National Economy, and The International Economy. The revised edition concludes with a new section, Special Economic Issues.

This is followed by discussions about the role of prices, incentives, competition, the consequences of price controls, costs as forgone alternatives, trade-offs and substitutes, taxes, and subsidies. The section on industry and commerce delves into the role of markets in coordinating production and distribution in the face of widely dispersed information, and moves on to profit and loss, specialization, monopoly, antitrust, economic regulation, and a comparison of markets versus central planning. Sowell presents arguments about the social and economic consequences of minimum wages, and questions of income distribution, mobility, and poverty.[6]

An example of an argument and case study that Sowell discusses in the book is that governments often turn small problems into major ones by using blunt force, such as price controls, to respond to public panic about rising costs of a given commodity. He recalls the U.S gasoline crisis of the 1970s when OPEC, a newly formed oil cartel, cut oil production, causing fuel prices to rise. He explains that there was not an actual scarcity of gasoline though since there was nearly as much gas sold in 1972 as the previous year (95 percent). Similarly, Americans in 1978 consumed more gasoline than in any other previous year in history. However, to address the fuel price rise, the government implemented price controls to keep fuel prices low for consumers. This, Sowell argues, had the affect of the government taking a small problem of temporary high costs of gasoline and turned it into a big one, with mass fuel shortages across the U.S. because of resources not being allocated efficiently due to the state-imposed price controls.[7]

Mark Hendrickson of Forbes praised Sowell's writing for its unusual clarity and accessibility in comparison to other economics books, writing, "My goal as a professor has been to teach an introductory course in a way that doesn’t turn off students to what is a fundamentally interesting and vitally important subject, and I have largely succeeded with the help of Professor Sowell’s book."[1] In a 2004 review of the second edition for Cato Journal, R. Bastiat dubbed Basic Economics "an exhilarating tour of the fundamentals of microeconomics, macroeconomics, financial markets, and international trade, with pointed anecdotes and pertinent examples illustrating every analytical point". He praised the Time and Risk section for containing discussion of concepts "that seldom get treated adequately in introductory courses or popular expositions".[6]

James Higgins argued in Claremont Review of Books that "he scores a bullseye. Anyone who hasn't studied economics formally should read Basic Economics to learn it in a logical, straightforward way. [...] Sowell does not jump in and take sides on big economic issues where serious economists still have legitimate disagreements".[8] Edmund A. Mennis wrote in Business Economics[9] that Sowell gives good examples of government controls having bad consequences, and of the way profits and losses in free markets signal to producers how scarce resources should be used. Mennis referred to the book as "an excellent gift for someone who is interested in learning more about economics without working through the economic jargon, graphs, charts, and equations usually found in textbooks."[10]

There has also been criticism. Josef Gregory Mahoney in reviewing Basic Economics and Applied Economics, both by Sowell, for the Review of Radical Political Economics, said that the books were written for the layman reader because; having "no knowledge of history, or anything else for that matter" would allow them to place their trust in the works.[11] Kirkus Reviews suggested that Sowell's economics is not truly free of subjective views, and that he downplays the extent of institutionalized racism. The reviewer stated, "Sowell’s economics in a social vacuum is as meaningful as color in the absence of light".[12]

Roger Meiners of the Foundation for Economic Education said Sowell does too little explanation of complex economic phenomena for a novice reader to follow the analysis, and can be repetitive. Meiners also criticized the typos and argued that "the book reads like a collection of incomplete articles from [Ideas on Liberty]. [...] Each chapter contains interesting tidbits, some of which were new to me and will be good to use in the classroom. But the chapters rarely stand alone as a solid overview of a topic."[13]

The book has also been reviewed for the academic journals The Appraisal Journal[14] the Journal of Economic Behavior & Organization,[15] and twice in the micro-review section for The Physics Teacher.[16][17]

• Free market
• Government agency
• Laissez-faire
• Minimum wage
• Rent control
• Supply and demand