I've read a microeconomics textbook afterwards and the book still doesn't seem too bad.
What would be your suggestion of a book for introducing laypeople to economic thinking?
Sowell is unserious because he misrepresents the other side. He basically argues that when you leave everything for the market to figure out it will automatically turn out alright, and if it doesn’t then clearly it means you need to deregulate more. You can look up what the arguments against complete free market solutions in healthcare, housing, education, and manufacturing are and you’ll see that the “obvious common sense market based” solutions don’t produce good outcomes for society.
“Economic decisions made through the marketplace are not always better than decisions that governments can make. Much depends on whether those market transactions accurately reflect both the costs and the benefits which result. Under some conditions, they do not.
When someone buys a table or a tractor, the question as to whether it is worth what it cost is answered by the actions of the purchaser who made the decision to buy it. However, when an electric utility company buys coal to burn to generate electricity, a significant part of the cost of the electricity-generating process is paid by people who breathe the smoke that results from the burning of the coal and whose homes and cars are dirtied by the soot. Cleaning, repainting and medical costs paid by these people are not taken into account in the marketplace, because these people do not participate in the transactions between the coal producer and the utility company.
Such costs are called “external costs” by economists because such costs fall outside the parties to the transaction which creates these costs. External costs are therefore not taken into “account in the marketplace, even when these are very substantial costs, which can extend beyond monetary losses to include bad health and premature death. While there are many decisions that can be made more efficiently through the marketplace than by government, this is one of those decisions that can be made more efficiently by government than by the marketplace. Clean air laws can reduce harmful emissions by legislation and regulations. Clean water laws and laws against disposing of toxic wastes where they will harm people can likewise force decisions to be made in ways that take into account the external costs that would otherwise be ignored by those transacting in the marketplace.”
He goes on to spend the rest of the chapter talking about limitations of the market. Maybe you should try reading the book before you criticize it.
With regard to health insurance, he argues "Whenever I hear about how many Americans do not have health insurance, my usual response is to wish that I were one of them…I would rather pay doctors and pharmacies directly, without sending the money through bureaucratic channels in the government and the insurance companies".
He (intentionally) misunderstands that the entire reason to have a health insurance mandate is to force healthy people to pay into the system. If only sickly people had health insurance the fees would be impossibly high. You can't have a system where people only start paying for health insurance after they get sick. And if you have a system without insurance people won't be able to afford expensive treatments so they'll just die. Sowell's policy suggestions aren't serious, and he's not taken seriously because of it.
- Singapore, Lee Kuan Yew
- Mysore State, India, Visveswaraya
You study the biographies/auto biographies of ministers of these states, you see the practical challenges with getting free markets. Especially in the initial years (50-100 years of development), until you have factories, industry-oriented education system, discipline, solid work-habits, inclusion of women in the economy, etc, free-market doesn't work. And it doesn't happen on its own, as well. Early days, consistent commitment and encouragement by powerful forces within society is key.
One could say that free markets is a stage of evolution; one cannot recommend free markets as a blanket recommendation. The contextual reality of a place is more important in what's going to work in reality.
