Sunday, December 04, 2005

So THAT's Economics

For those of you (like me) who struggled through economics in college - wondering why it was a required course - let me recommend two excellent books on the subject: Basic Economics: A Citizen's Guide to the Economy, and Applied Economics: Thinking Beyond Stage One, both by Thomas Sowell.

I wish my professors had been able to put the definition ("The study of allocating scarce resources that have alternative uses") and principles (starting with the role of prices) of economics so succinctly. Mr. Sowell not only makes economics understandable, he makes it almost fun. You will enjoy his many expanations of why high-minded policies for example, rent control) result in unintended consequences (like a shortage of affordable living space in New York and San Francisco).

Realizing that the incentives created by public policy trump the intentions of that policy, helps explain many apparent anomalies, like how lower taxes (wthin bounds) generate higher income to the government, or how wage and price controls contribute to a shortages and long lines. Why a centrally planned economy cannot match the efficiency of a market economy (We all saw the demonstrations of that in Russia, but some think it was the conduct of planning, rather than the idea of planning that was the problem).

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