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Rating: 8.5/10. Genre: Economics. Pages: 282

A Quick Note

I’ve been trying to write this review for days. Despite its short length, Sowell covers many subjects using empirical evidence to counter common economic and social fallacies. The content is vast and critical, making it challenging to write a concise review. 

To keep this review at a decent length, I will only discuss the most exciting or controversial fallacies, although Sowell mentions a few fallacies per chapter in his book.

About The Author

Thomas Sowell, an American economist and author, is known for his conservative perspectives on economics, race, and social issues. 

He critiques affirmative action policies and advocates for free-market capitalism to uplift disadvantaged groups. His influential works include “Basic Economics” and “Race and Culture.”

Brief Summary

Economic Facts and Fallacies by Sowell examines economic fallacies in urban economics, gender pay gaps, income disparities, academia, race, and global poverty. 

Each chapter focuses on a different domain, where Sowell presents common fallacies often proclaimed by politicians, news outlets, and economists. For every fallacy Sowell discusses, he presents counterarguments using empirical evidence and various forms of reasoning.

General Thoughts

There’s no denying Sowell’s impressive intellectual abilities. If I weren’t in such admiration of Sowell’s intelligence, I’d almost be envious of his ability to think on a much more profound and vast scale.

The first Sowell book that I read was Black Rednecks and White Liberals, and it left a deep impression on me by challenging my traditional views on society and race. I had high expectations for Economic Facts and Fallacies after my positive experience with Sowell’s first book. 

While I did enjoy reading it, I didn’t find it as impactful as Black Rednecks and White Liberals.

With Black Rednecks and White Liberals, Sowell defied common misconceptions surrounding race and social theories. Although I didn’t agree with everything Sowell argued, I enjoyed being challenged. 

However, concerning Economic Facts and Fallacies, I am already familiar with and agree with many of Sowell’s counterarguments. Nevertheless, the lack of challenge made the book simplistic and less intriguing. 

Urban Facts and Fallacies 

In the chapter discussing urban economics, Sowell also dispels the fallacy that government regulation helps make housing more affordable. 

As Sowell puts it, “the biggest economic fallacy about housing is that ‘affordable housing’ requires government intervention in the housing market.”

In this context, government intervention includes rent control, subsidies, zoning restrictions, environmental laws, and permits. 

Looking at the supply and demand model, government restrictions limit the supply of homes. When demand exceeds supply, the price of the supply (in this case, homes) surges.

The restrictions imposed by the government limit the supply of homes in several ways. 

First, building homes quickly is made difficult by the need for permits, adherence to zoning regulations, and compliance with environmental laws, all of which take time. Secondly, the availability of land suitable for home construction is limited, as a finite amount of privately and publicly owned land is available for this purpose.

I don’t have a clear political or economic stance regarding government regulations. 

I typically oppose government intervention because government bodies often act in their best interest instead of the people’s, which can lead to an abuse of power and create more inequality between the working and ruling classes.

However, after recently learning about climate change and the importance of government regulations, I do believe that it’s imperative that we have environmental laws in place to avoid the destruction of natural habitats on a mass scale.

That said, although there is data to prove that government interventions can contribute to rising house costs, I’m weary of complete non-government intervention, especially concerning environmental laws.

Income Facts and Fallacies 

This chapter was by far the most interesting and, therefore, my favorite chapter.

One fallacy that Sowell discusses is the vanishing of the middle class.

We often hear this in the news from journalists and politicians. Many believe that the gap between the poor and rich is getting wider, and consequently, the middle class is starting to disappear.

However, Sowell demonstrates why this fallacy is false.

The middle class has not vanished; they’re just making more relative to inflation. However, their purchasing power still remains the same. 

“One of the complications of making income comparisons over time – especially time as long as a generation – is that inflation can move people into higher income brackets without their actual purchasing power or standard of living rising.”

Thomas Sowell

Another interesting point that Sowell discusses is the inappropriate use of statistical categories, such as average household income or income brackets, which can be deceptive when discussing income stagnation or inequalities.

“Income comparisons using household statistics are less reliable indicators of standards of living than are individual income data because households vary in size while an individual always means one person.”

Thomas Sowell

For example, using average household income to measure a region’s income stagnation or discrepancies is unreliable since the number of people in any given household is not all the same, which can skew the average household income. 

Unless the houses being measured and reported have the same number of people living in each home, it’s better to use per capita income instead of a broad-stroke measurement like average household income.

I genuinely enjoyed reading this chapter and the fresh perspective that Sowell offers. 

The biggest lesson I learned from this chapter is to critically analyze what’s being calculated, how it was calculated, and why—especially in the case of economics. 

It’s so easy to manipulate data to paint a skewed picture of the economy, which is why it’s imperative that we analyze economic data presented more critically.

Male and Female Facts and Fallacies

In the chapter “Male and Female Facts and Fallacies,” Sowell dispels fallacies surrounding income disparities between the two genders. 

A common fallacy is that women make less than men only because of discrimination. However, Sowell and many other economists, including Nobel Prize winner Claudia Goldin, have proved this is false. 

Women tend to earn less than men for various reasons.

One reason is that women often experience interruptions in their careers due to pregnancy, childbirth, and the need to care for their children. As a result, women may take time off work, leading to an income gap compared to their male counterparts.

Other reasons include career choices with a more flexible schedule, fewer hours worked, and cultural and structural factors.

That’s not to say that women don’t experience workplace discrimination.

However, claiming that discrimination is the only or primary cause of the income gap is untrue and doesn’t fully capture the reason for the wage gap between men and women. 

Academia Facts and Fallacies

Sowell suggests that one of the biggest fallacies in Academia is the belief that an Ivy League education is of higher quality than a non-Ivy League education. Moreover, there is also the belief that an Ivy League education leads to more significant success outcomes. 

Along with Sowell, I disagree entirely with the notion that you need an Ivy League degree to be successful. If we’re defining success solely monetary, there are and have been plenty of wealthy individuals without Ivy League degrees who are successful (Bill Gates, Steve Jobs, Richard Branson, Mark Zuckerberg, etc.).

Sowell also argues that an Ivy League education isn’t necessarily better than a State or College education because Ivy League schools tend to be higher ranked because of research, not better classrooms. 

“Since a college’s academic prestige, and especially that of a university, depends primarily on its professors’ research and publications, students will not necessarily get a better education at the more prestigious institutions with the higher paid faculty.”

Thomas Sowell

Since I didn’t go to an Ivy League school, I can’t attest to whether or not this is necessarily true. School, education, and success ultimately boil down to the individual. However, being in the right environment can help mold and shape people into having particular characteristics, increasing the likelihood of success.

That said, although you don’t need an Ivy League degree to have the highest quality of education or be successful, I’ve yet to meet anyone who went to an Ivy League and wasn’t impressively intelligent and successful.

Third-World Facts and Fallacies

As interesting as the book was, this chapter stumped me the most. 

Sowell clearly distinguishes blame and causation, which is the root of many fallacies surrounding global poverty.

According to Sowell, “Blame is much easier to understand than causation, more emotionally satisfying, and more politically convenient. But it is also a source of many fallacies.”

Sowell investigates explicitly the impact of Western colonization and exploitation on regions like Africa and South America.

He argues that colonization did not necessarily result in economic destitution in these areas, attributing their poor economic conditions to factors such as geography, culture, and a lack of law and order.

For instance, countries in more favorable geographical locations with access to waterways for trade or suitable soil for agriculture are naturally better off than landlocked countries or those struggling in agriculture. 

One point that Sowell raises that I find particularly interesting is: if colonization is the cause of poverty in these nations, why are these countries still economically destitute decades after imperial nations like Britain, Spain, and France left and gave them their independence?

While Sowell isn’t necessarily incorrect in this observation, he overlooks an essential factor: institutions. 

Even after imperial nations departed, their extractive institutions were inherited, allowing equally self-interested local leaders to assume power.

As described by Acemoglu in his book Why Nations Fail, extractive institutions are “economic and political arrangements that concentrate power and resources in the hands of a small elite or ruling class, often at the expense of the broader population.”

For example, Zimbabwe, one of the poorest countries in the world, was formerly under British colonial rule and was profoundly impacted by imperialism and colonization after the British left in the 1980s.

One of the most significant impacts of the British colonial rule, which we still see today, was land dispossession from the indigenous people of Zimbabwe.

British settlers and the colonial government seized large tracts of fertile land for commercial farming, displacing local communities and disrupting traditional livelihoods.

After the British left in the 1980s, President Mugabe initiated land reforms in the 1990s and 2000s to redistribute land from white Zimbabweans to black Zimbabweans. However, these reforms proved controversial, with a lack of transparency and a significant disruption in agricultural productivity.

In 2020, the government of Zimbabwe tried to reverse these land reforms, allowing white Zimbabweans to apply for land lost between 2000 and 2001. This also included a hefty compensation package of $3.5 billion to compensate for capital lost during this time.

To this day, land tenure remains a highly contentious issue in Zimbabwe, significantly affecting its citizens. The ongoing land dispute in Zimbabwe is a stark example of the extractive institutions left behind by imperial nations, continuing to have detrimental economic effects on the country.

So, although these imperial nations are not the sole cause of poverty in the third world, denying that they have any significant cause or lasting effect is too simplistic an answer and, frankly, untrue.

Conclusion

Regardless of political or social views, I always appreciate a book and Author who encourages me to think more deeply about beliefs I’m typically steadfast on. 

I naturally gravitate toward Sowell’s books because of their expansiveness and ability to prompt me to think more critically, especially concerning economic and social theories. 

I look forward to reading more of Sowell’s work this year. The next book I plan to read is Wealth, Poverty, and Politics, which I discovered after watching an interview with Sandford’s Hoover Institute. 

If you want to read more Sowell books, Economic Facts and Fallacies is a great place to start (since it’s relatively easy).

To read the book, you can purchase a copy here.