“Applied Economics: Thinking Beyond Stage One” is another great work by Thomas Sowell. This book is more of a summation of other, more detailed books of Sowell’s. Rather than being about one particular topic like education or affirmative action, this unifies his positions and approaches to various issues into one book. Thus, most of the examples he uses are drawn from other books he has written. The unifying idea behind this book is that we must think of other consequences of actions beyond the immediate and obvious effects of those actions. The idea reminds me of Bastiat’s “What Is Seen and What Is Not Seen.”

To support the main thesis, Sowell discusses the economics of discrimination, housing, and health care (among other topics). In each case, he discusses the current situation surrounding that topic, the history of that topic, and what the “usual” thinking is about that topic (i.e., not thinking beyond stage one). He then uncovers secondary and tertiary effects of particular policies and “solutions” to the perceived problem. By analyzing these less obvious effects, he unveils the fallacies in the original argument. One example that particularly stands out is his analysis of rent control laws. The normal rationale for rent control laws is that it will help to keep rents low, primarily for the benefit of lower-income people. However, rent control laws have led to several less obvious outcomes. First, when the price of something is pushed below the market value of that something, people demand more of it than they otherwise would. Families or groups that would otherwise share a dwelling demand more space in a rent control environment. This causes the scarce resource of housing to be allocated less efficiently than it would be in a free market, leaving less supply and higher prices for those that do not receive the benefit of rent control. Second, landlords in a rent control environment will not maintain their housing to the same extent that they would in a free market. Because demand has been increased at an artificially low price, these landlords no longer need to compete with other landlords by maintaining their buildings and apartments. In more extreme cases, landlords may abandon buildings entirely when it is impossible to turn a profit at the artificially low rents, leaving unused slums in their wake. Sowell also has similar discussions on restrictive zoning laws and housing standards in this chapter, possibly the most enjoyable chapter of the book.

Thomas Sowell’s analysis is always worth reading. I believe that his main thesis is worth absorbing; if we could apply this type of analysis to every major topic in the political realm, we would be much better off as a society. Unfortunately, I am not sure if that type of discussion will ever become the norm, but we would still be better off even if just more of the population was willing to think beyond stage one. Rarely can a simple policy or law solve a given problem without having large ripple effects. Rent control laws do not keep rents low without distorting the rest of the housing market and deteriorating the supply of housing available. Ambitious anti-discrimination laws do not reduce discrimination without providing an incentive for businesses to locate in areas with low minority populations to avoid being accused of discrimination. Things are rarely as simple as academics and politicians present them to us. Adopting Sowell’s advice in this book will help readers to see through the obfuscation that is all too common.

Great book! Sowell has a unique way of simplifying complex economic concept. The section where he compares Social Security to a pyramid or Ponzi scheme was eye-opening. From insurance rates to agricultural Innovation to the differences between prejudice and bias and so much more.

Yet another fantastic exploration through all things economic, social, and political, guided by none other than master economist Thomas Sowell. This particular book addresses the consequences associated with "stage one thinking", which just happens to be a common point of failure for a huge number of modern politicians and a shockingly vast majority of the voting constituents today. As always, he matter-of-factly spells out how such thinking has gotten us into grave trouble in the past, and he does so with such poise and cold fact-slinging so as to render his points practically indisputable. Naturally, he is as laissez-faire as ever in his philosophy, but you just might end up the same way if you manage to work your way from cover to cover. His brilliance on the subject is truly addictive.

Enlightening!

As a master in economics student, I've found this book pretty interesting. Some chapters sound like a bit over-the-point, like the chapter on "the economics of medicine". Last chapter is so great, I have to say. Overall, nice book, that I've enjoyed reading.

3.5

Thomas Sowell should be required freshman reading at every college and possibly at the upper levels of high school as well.

One of the best books on Economics

This books explains, with facts, the reasoning behind several aspects of economics as they impact our lives. This book should be taught in high school. The only thing I would love to see in this book is the role of central banking systems and the international monetary funds on the economics and liberties of the people.

Straight up common sense - highly recommend all around. I look forward to reading more of his books (he only has about a thousand)

I took a ton of notes, but I don’t feel like transcribing all of them. Key takeaways - always think beyond stage one. It’s not just what will happen next. It’s what happens after that and after that and so forth

Four things happen following a price control:
1) increased use of the product
2) reduced supply
3) quality deterioration
4) black markets

So well done - covering healthcare, economics, discrimination, etc etc

So Sowell is clearly a good writer and I'll give him another chance with "Economic Facts and Fallacies" but let's not make a habit of this. The book reads like a textbook, and if the title wasn't enough deterrent, let's dig in and see what the problem is.

In the audiobook format it was a long one like 12 hour. With 1.5 speed it still took me over a week (I'm thankful for the narrator so I didn't have to read this with my eyes). It has several chapters that are completely different from another. And you might only like one or two while having to go through an hour+ of each that you don't particularly find interesting.

What do I remember? Well :D Price control (or fixing) doesn't work and has unintended side effects. Government pension plans are ponzi schemes or pyramid games. That's about it. So the problem isn't with the writing, but that I expected something different. I thought it was going to be something about how interest rates affect stock prices, but the word interest rate appears like 2 time. (I read these kind of books to make me a better investor and understand some macro.) On the other hand it has way too much about history, geography, politics, discrimination, (im)migrants, labor. Maybe there were some aha moments in the medial and housing chapters but nothing new drastic knowledge.

In other words, it was skippable and there are books with way more impact. It should have been split into seven separate books with each topic elaborated a bit more and the readers could pick just the one they are interested in, if any.

Sowell's points are ludicrously grounded and clear, which is perfect for not only a parsimonious read but also in understanding dense economic theory in context. His treatment of the housing bubble is stellar as is his insistence in looking beyond the initial stages of policy. Looking at reverberations and side effects of well meaning legislation is something that is rarely considered, but Sowell does it masterfully here, to the point that his pronouncements seem like common sense; this is the making of a great thinker and writer. Someone who is so lucid and clear, that they can change opinions by making their position seem entirely justified and normal, based on the evidence.

A minor critique is that his focus on laissez faire economics can at times feel a tad utopian, in assuming that the market will enforce and maintain regulations that are required in maintaining safety standards for example.

Not as good as Basic Economics by the same author, but this is still an excellent read.