I recently finished listening to Basic Economics: A Citizens Guide to the Economy.  The CDs were provided to me free by a friend on the condition that I listen and pass on the word.  After listening to all 15 CDs, I am convinced that the book or audio should be mandatory reading (or listening) for high school or college students.

Thomas Sowell, the columnist and senior fellow at Stanford's Hoover Institute, explains that economics is simply the study of scarce resources which have alternative uses.  He makes a very compelling case for allowing prices to drive the economy rather than letting the government attempt to do so.  In effect, exchanges in our economy are made based on the value of a particular resource for a particular purpose.  If the value is higher to one person for one purpose, a market economy allows the resource to be used for that purpose.

All of this starts to break down when the government intervenes.  For example, many cities passed rent control laws to aid the poor in obtaining housing.  The end result, however, was the opposite of what was intended.  Landlords simply closed buildings when it cost them more to maintain the building than the they could collect in rents.  These laws also caused developers to avoid new developments or to shift their development to luxury projects which were exempt from the rent controls.   Eventually, the poor had even more difficulty obtaining housing while wealthy residents were given artificially low rents. 

Sowell makes a compelling case that government intervention - while well intentioned - often does more damage than good.  Attempts to save jobs in one industry costs jobs in other industries.  For example, attempts to save jobs in the steel industry lead to higher prices, which caused products made from steel to be more expensive and cost jobs in those industries.  Often the number of jobs lost is several times the number saved.

At first I was concerned that the book would quickly go over my head.  However, Sowell puts things in very simple terms.  By the end of the book you realize that government policies should be based on their actual effect, rather than on good intentions.  However, without the average voter understanding the economic effects of various laws, it is much easier to sell good intentions than good economics.

 

When the CDs were provided to me, it was asked that I share a copy with any politicians I know.  Unfortunately, I do not think that is a great idea.  Sowell explains why what is in the best interest of politicians and bureaucrats is often in the worst interest of society as a whole.  The promise of government intervention gets votes today, while the negative effects of government interventions may take years to materialize.  (Just look at the clamor for the government to bail out people to bought houses they clearly could not afford and are now facing foreclosure.)  Most people do not connect the harm caused with the policies of many years ago and the politician can get more votes by promising intervention to cure the problems which are really the result of the prior "cure".

 

Giving the book or CDs to politicians would only be of benefit if they are more concerned with the longterm health of our economy than getting re-elected.  If widely read by average citizens, however, if would likely change they way we look at the "help" politicians are promising us.