I began this, my fourth Sowell book, for a book group. Despite my appreciation for Sowell and what he's doing here (expanding Hayek's great concept from "The Role of Knowledge in Society), I'm stopping 50 pages in because I want to focus on greater interests, and I broadly understand the principles of this material well enough. If only I had more time in life... I realize now this decision is one of the many kinds of trade-offs the book analyzes...

The second section applying ideas about decision making to various areas was a bit of a slog, but the first section on the more abstract ideas was really insightful, more than good enough to make up for the second half.

Covering a wide range of topics, starting with the concept of decision making units and then applying the framework to economic, legal, and political trends, this book provides a more comprehensive look at the constraints and incentives that govern all decisions. I would have given it 5 stars but I felt it was a bit too preachy at points and felt the arguments a but repetitive at points. Very good read.

The central theme of this book (another gem by Thomas Sowell) is that far too much decision-making, especially at the institutional level, is done without sufficient knowledge and without feedback. This problem may very well stem from the fact that far too little evaluation is made as to the actual processes, and instead too much emphasis is placed on hoped for results. (A broad example: socialism is often depicted by its proponents and advocates as seeking equality, security, and/or social justice but would instead be better described as the process in which property rights are divested from the individual and control of agriculture, commerce, and industry are vested in the government.) Defining decision-making processes by their characteristics also reduces the use of rhetoric to evade tough questions. Given the crucial importance of feedback in using knowledge to make decisions, another problem with institutional decision making is whether the institution in question is insulated from such feedback and whether the institution’s (and individuals working there) incentives differ from those of the group it seeks to serve (typically a group within the public). One such institution is the federal judiciary which, despite the best of intentions, cannot possess sufficient knowledge to make the best decisions for those who actually feel the ramifications of those decisions. (An example: minimum wage laws which are ostensibly intended for the protection of certain “marginalized” groups that end up not only divesting parties of their freedom to contract but have also resulted in increased unemployment rates for those groups.) On this topic there is ample discussion of the growing role of the judiciary (specifically the appellate courts and SCOTUS), whose role has grown for adjudicating who has and does not have decision-making authority to actually making decisions through judicial activism and policy making. Similarly, the rise of administrative agencies (which are likewise very insulated from feedback) since FDR’s New Deal has resulted in a “fourth branch of government” that is not accountable to the electorate yet has been given the combined powers of the executive, legislative, and judicial branches in contravention of the separation of powers principle envisioned by the Founders. A recurring subject throughout the book is the erosion of freedom (whether that be the freedom to contract, freedom of association, property rights, etc.) in exchange for the illusory promise of some greater social vision or ideal (what Sowell often refers to as “social justice”) - the danger of defining misfortune or disparate results as victimization is that all other possible explanations are ruled out of order, and with them perhaps the hope of remedying that misfortune or disparate result. The book ends with the following warning: Freedom is a rare and fragile thing - nowhere in the world is anyone outwardly against it, though everywhere there are those prepared to scrap it for other ideals that shine more brightly at the moment.

Good book on the economic and organizational use of knowledge and decision-making. I recall his discussion of the 'cost' of knowledge very insightful. A CEO of a fast food chain would have a high cost to obtain knowledge of the day to day customers of a single restaurant, yet have ease of access to aggregate data on the sales for the chain or individual restaurants as a whole. Compare this to the manager or even till-operator who sees the customers each day - the cost of knowledge for him is the opposite. What I took from this was a consideration of local vs. central control - depending on the knowledge required, if its complex enough local control is the most ideal, such as school systems, where the products, educating individual kids, are complex. In contrast, a mine or factory where operations are standardized can be more easily centrally run since conditions are nearly constant.

The above is merely one taste from the book, how knowledge is obtained, but the book links this very nicely with how decisions are made based on this obtained knowledge and the problems and inefficiencies that can arise when knowledge is costly or poorly acquired! What level of the organization decisions are made is also important, including what kinds of decisions are barred at various levels, such as certain kinds of decisions being relegated to higher levels. Sowell presents the problem, the 'trade-off,' very nicely here: central decision-making forces control yet are blighted with poor knowledge. Local decision-making is rich in knowledge of its present conditions yet can permit erratic behavior amongst the different local centres (not unified) which is a problem for a central organization (consider 'brand' control, maintaining standards of operation for customers). Franchise models seem to be an interesting middle-ground position since local entrepreneurs have local affinity and yet sign contracts to maintain certain standards with the larger 'brand,' so while they adhere to centralization, they also have some room to cater to their local conditions.

I recommend this book to anyone interested in how large-scale business or government institutions (should) organize and administrate themselves, particularly local vs. central control.

Thomas Sowell is quickly becoming one of my favorite authors. His Knowledge and Decision is an amazing book, one which at the same time confirmed some of my reflections while adding new ones.

Knowledge and Decisions is a book about... knowledge. Knowledge in society, and how it spreads, but also how knowledge is ignored. The author reflects upon three domains where decisions are made: economy (or business), law and politics.

The book is split into two parts. The first describes the general mechanisms of knowledge and decisions in economy, law, and politics; while the second one discusses the trends in the same.

The issue raised in the book that moved me the most is how people judge actions by their apparent or well wished intentions without reflecting on the (sometimes long term) consequences. Hence minimum wage laws are universally lauded as good, without reflecting that the de-facto minimum wage is 0 and minimum wage laws decrease employment.

Another point in the book is that even bad decisions cannot stay bad when a feedback loop is present. Businesses making money is a hoped for goal, yet many go bankrupt. Market realities force businesses either to adapt or go broke. Decisions which cause consumers to flee can be ignored, but only to the peril of a particular company. In contrast some decision making units are isolated from the consequences of their decisions.

Knowledge and Decision is a great book and my short review doesn't do it justice. Highly recommended.

Really dense book.
Sound arguments.
Pleasent reader.
Chapters of the audiobook are strange but great book.
Some minor dissagreements but not on major topics. Sowell has a great eye for detail and knows how to put these in propper context.

This book can change your life. I really mean it. If you can understand it, it can change your life. Here is what it says in a nutshell. The end result any organiaation claims to achieve is a distraction. Its existence and action can have consequences beyond what it hopes to achieve. Focus on the processes within the organization as well as the incentives and constraints its members are acting under. The appeal here is to do proper institutional analysis rather can counting on the virtue of individuals to deliver us desirable outcomes.

A solid piece of economic and political theory, but a little dated, and slightly long winded.

If I had not already read so much by Thomas Sowell prior to today, I may have given this book a 4, but as it stands, this is not my top choice among the many volumes I have read. As far as the works of this man is concerned, it is average when compared against himself.

Superb.

In this book, American economist and historian Thomas Sowell talks about how people, especially those in power, collect information and make decisions, in his usual instructional tone with plenty of real-life examples to illustrate his points. Unfortunately, this one felt more America-centric that usual, delving into the workings of the Constitution, legal precedents, and arms of government, with only a very brief mention of other places, mostly in contrast to the actions of the United States. However, whatever focus he takes, I do enjoy Sowell’s determination to avoid moral judgements on what people do and simply to describe it, although he does tend to focus more on the influence of the social, economic and political environment rather than the internal psychological processes that drive individual behaviour. First published in 1980, the specifics of his political commentary are completely out of date, but in a more general sense, it feels very modern, and discusses phenomena that have only become far more commonplace since then. One that stands out is the overreach of public intellectuals, who spread ideas and influence public policy without experiencing the consequences. Sowell would expand this idea into an entire volume, entitled Intellectuals and Society, some 30 years later.

One of the best books I've ever read! It's like an econ & law 101 for decision making, figuring out politics and understanding what's going on in the world, and specifically America. This book goes over the fundamentals, leaving (mostly) the judgements to the reader.

At times, reading the pages of this book gave me direct answers for the questions I have had in the recent years due to the recent events - the playbook did not change, evidently, since 1980s. That's just fascinating how relevant the themes covered there are.

Now, be warned, it's not an entertainment book - while it's written in a simple language and with a nice style, you just can't read it too quickly because it takes a lot of some mental power to process the material (of course depending on your starting level). The good thing though is that you really don't need to finish, or even read from the beginning - chapters are fairly self contained, and you'll get the return by even just reading one.

Now to the substance. The basic idea that Sowell advocates is: let's no be blinded by the agenda when talking about the decision making. Let's not be fooled by the programs/institutions named by their "hoped for" results - e.g. program for "affordable housing" does not automatically lead to the outcomes that the name of the program hopes for - just like a starting entrepreneur can't have a guarantee that their "for profit" business will actually earn any profits - we should look at the empirical evidence when making the decisions.

Another thread is about how the processes help to build a sustainable organizations. Specifically, how the constitution, with its separation of concerns, outlines *who* should make decisions of what kind and under what incentives and constraints. Then, Sowell goes into detail on how this principle had been muddled over the 20th century, and to what effect. One particular phenomenon is the "Affirmative Action", which makes helps to explain so many things we observe happening today.

Finally, there is a large section on the role of "intellectuals" in the politics. I find this bit the most controversial, but it's still fascinating to read about. Basically, Sowell argues that intellectuals have historically favored the centralized governments and accumulation of power, which led to the biggest catastrophes in history (fall of Roman Empire, French revolution, Nazi and Communist regimes). Furthermore, intellectuals typically ignore the critique by dismissing it and don't engage in testing of the hypotheses - in other words, they come up with "solutions" to "problems" based on whatever ideology happens to be in vogue at the time - be it the racism at the beginning of the century, or the "social justice" of the more recent times. Sowell points out the "more justice for all" is a contradictory term, as increase in justice in one domain reduces it in the other - the perfect justice is a tyranny - the real question is what's the best tradeoff and when the efforts for "more justice" lead to diminishing or even negative returns?

In the summary of the book, Sowell praises the very modern inventions - free market economy and a constitutional democracy - as the tools that by design assume the humans are only humans, and that the only rational expectations from them is the greed, sin, and strive for power and money. However, both market economy and constitutional democracy create such a structure of incentives and constrains that the very greed and strive for power acts as the system of checks and balances that ultimately leads to the sustained superior outcomes. In other words, we wouldn't need the government, were we the angels, and we would not need the constitution, were we governed by angels. Alas, neither is the case.

The only downside of this book, in my view, is that Sowell completely ignores the good parts of the government policies, intellectuals etc, which makes him appear biased - he does not event attempt to analyze which attempts have brought a positive change, and why. That said, I believe the readers are capable of doing that for themselves, while thinking about more fundamental topics covered in this book is too often completely obscured by the modern (mis)information.