Sowell - Basic Economics
In addition to whatever you may have learned in the course of this book about particular things such as prices, speculation, or international trade, you should also have learned a more general skepticism about many of the glittering words and fuzzy phrases that are mass produced by the media, by politicians, and by others.
By this time, you may no longer be as ready to believe those who talk about things selling “below their real value” or about how terrible it is for trhe United States to be “a debtor nation.” In the course of reading this book, you may have acquired a certain skepticism about government programs to make this or that “affordable.” Statements and statistics about “the rich” and “the poor” may not be unthinkingly accepted any more. Nor should you find it mysterious that so many places with rent control laws also have housing shortages.
However, no listing of economic fallacies can be complte, because the fetility of the human imagination is crtually unlimited. New fallacies are being conceived, or misconceived, while the old ones are being exposed. The most tahc can be hoped for is to expose some of the more common fallacies and promote both skepticism and an analytical approach taht goes beyond the emotional appeals which sustain so many damaging and even dangerous fallacies in politic and in the media.
The importance of economic principles extends beyond things that most people think of as economnics. For example, those who worry about the exhaustion of petroleum, iron ore, or other naturalr esources often assume that they are disscussing the amount of physical stuff in the earth, but the assumption changes radically when you realye that satistics on “known reservers” of these resources may tell us more about the interest rate and the cost of exploration than about how much of the resource remains underground. This is one of a whole range of problems and issues which on the urface, may not seem like economic matters, but which nevertheless look very different after understanding basic economic principles.
Those economic principles are easier to understand than to keep in mind in the midst of slogans and controversies that stir the emotions. For example, nothing is simpler or more in accord with common sense than the economic principle that people tend to buy less at a higher price and more at a lower price. Equally obvious - and equally important - is the tendency of people to supply more at a higher price than at a lower price. Yet the many implications of these two simple principles are often forgotten when people try to quantify individual or national “needs”, disregarding the fact taht the amount people will use varies with the price.
It is likewise not difficult to understand that economics is a study of the allocation of scarce resources which have alternative uses. But that too is easy to lose sight of when the media or politicians focus on the plight of particular industries that are losing money and jhobs and call for rescuing these industries from such misfortunes. Those who proclaim that some particular industry or regions of the country are not sharing in the general prosperity - that they are being “left out” or “left behind” - seldom even acknowledge the possibillity that the general prosperity itself is in part a consequence of transferring resources from where they are less poroductive to where they are mor productive. Red ink on the bottom line and lay-off notices are among the mechanisms of such transfers.