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Applied Economics: Thinking Beyond Stage One | 
| Author: Thomas Sowell
Publisher: Basic Books
Category: Book
List Price: $30.00
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Avg. Customer Rating:  35 reviews
Sales Rank: 32144
Media: Hardcover
Number Of Items: 1
Pages: 256
Shipping Weight (lbs): 1.1
Dimensions (in): 9.2 x 6.1 x 1
ISBN: 0465081436
Dewey Decimal Number: 330
EAN: 9780465081431
ASIN: 0465081436
Publication Date: November 12, 2003
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Product Description
The application of economics to major contemporary real world problems--housing, medical care, discrimination, the economic development of nations--is the theme of this new book that tackles these and other issues head on in plain language, as distinguished from the usual jargon of economists. It examines economic policies not simply in terms of their immediate effects but also in terms of their later repercussions, which are often very different and longer lasting. The interplay of politics with economics is another theme of Applied Economics, whose examples are drawn from experiences around the world, showing how similar incentives and constraints tend to produce similar outcomes among very disparate peoples and cultures.
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| Customer Reviews: Read 30 more reviews...
 Price controls lead to shortages August 20, 2008
1.The purpose of economic analysis is not the goals being sought but the incentives and constraints that are created in pursuit of those goals. What we need to know is the characteristics of the processes set in motion and the incentives and constraints inherent in such characteristics rather than judging these processes by their goals. Once we start thinking in terms of the chain of events set in motion by particular policies and follow these events beyond stage one - the world begins to look very different.
2.Political decisions tend to be categorical, while economic decisions tend to be incremental.
3.Government subsidized prices force the tax-payer to pay for things that they have not chosen to pay for as consumers.
4.Most politicians when making economic discussion about policy on a wide range of issues stop at stage one with little thinking about the economic consequences going into decisions at the highest levels.
5.In high tax cities there is likely to be an increase in the rate at which business go out of business. When new arising companies have option of deciding where to locate their factories or offices, cities and states where high tax rates are likely are to be avoided. The high-tax jurisdictions can begin the process of losing business, even in stage one. But the losses may not be on a scale large enough that they are noticeable. Overseas shifting of production migrates towards locations where taxes are not so high. The reductions in local business in turn beings to reduce the locally earned income. Employees transfer to the new location and hiring new people at the remote location. Eventually, enough companies' desert, high tax city or state, for which, total revenue is less at a higher rate than during the time of lower rates. By this time, many of the politicians that set in motion higher-tax rate processes in motion have moved to higher office in state or national government. Remaining politicians in office are likely to be blamed for declining tax revenues.
6.New York city was home to 100 of the fastest growing companies in the country. NYC had the highest tax rates in the country and the most expensive real estate per square foot of business office space. Yet the city was spending twice as much per capita as Los Angeles and three times as much per capita as Chicago on a wide variety of municipal programs. The large, spend-and-tax policies had success political outcomes, but negative economic consequences. Killing the golden gooses is a viable political strategy.
7.Most government agencies are monopolies. Monopoly tends toward self-indulgent inefficiency. Monopoly is a norm for government agencies, whereas, few private firms are able to prevent rival firms from arising.
8.When government power is used to control price as a way of reducing the cost of various goods and service they are creating shortages. A classic example of controlling prices without controlling costs was the electricity crisis of Californina, 2001-2002. The cost of generating electricity used by California rose for a number of reasons, one being, a year of reduced rainfall and reduced water flow through hydroelectric dams and less electricity production. The cost of electricity of running the generators did not decrease the cost of generating the electricity increased. Electricity from natural gas was rising, so cost of electricity generation from those means increased. Normally, rising costs means rising price, but California politicians imposed legal limits on how high electricity prices would be permitted to rise. The companies generating the electricity passed on cost to the public utilities that distributed the electricity, to the public. The wholesale price was 15 cents per kilowatt and the retail price was 7 cents per kilowatt. "the wholesale prices signaled that electricity was increasingly scarce, but retail prices told consumers that nothing had changed." Blackouts were the inevitable results. The California public utility company went broke. The public companies lacked money and credit with the wholesalers. The governor used state money to buy electricity. In the end Californians paid more for their electricity: billing problems, higher taxes, and depleted surpluses. The rescue attempt was a failure.
9.Price controls have been causing shortages in countries around the world, and for literally thousands of years of recorded history. Almost all price controls were popular when they were implemented because most people did not think beyond stage one.
10.When a private or governmental institution that can no longer satisfy its customers are forced out of business. Government agencies, can continue on despite demonstrable failures, and the power of government can prevent rivals from arising.
11.All economic systems must find ways to restrict and deny the use of both resources and finished products through one mechanism or another.
12.Central planning is often used to describe an economic system where key decisions are made by political authorities.
13.Economic planning means the state takes a decisive role in the economy by using inducement and restrictive controls over the private sector.
14.Central planning put into effect in a variety of countries around the world turned out to be worse than anyone expected leaving planned economies falling behind free market economies. By the twentieth century some socialist and communist have abandoned central planning and selling state owned enterprises to private entrepreneurs.
15.The USSR is one of the richest endowments of natural resources on the earth, including larger reserves of petroleum than the middle-east, fertile farm ground, well-educated population. While it had the ingredients for prosperity, it was much poorer than the United States. What the USSR lacked was abundant incentives and mechanisms capable of converting its abundant inputs into outputs at a rate comparable to the United States.
16.The USSR set prices by the central planners. The prices did not reflect the relative scarcities of particular resources and did not correctly reflect the upward or downward movement of price according to supply and demand. The central planners could not have clearly reflected the complex and volatile relative scarcities of 20 million, resources and finished products. This was an impossible task.
17.In a capitalist economy, the prices of surplus good piled up in warehouse would have fallen because of cut backs on production. This would release labor, in order to avoid losses. On the other hand, shortages would create higher profits, greater demand for labor and material, and larger available supplies. Central planners allowed surpluses and shortages to last for years.
18.Price move is required to move resources, finished goods, and people where they are in demand.
19.The Soviet Union had surplus food to export before the government took over agriculture. The Soviet Union later had shortage and starvation and forced to import food, even while fertile soil existed to grow food.
20.Economic analysis systematically examines the consequences of various economic actions and policies over a period of centuries.
The 'look before you leap' principle applied to economics April 21, 2008
This book is absolutely fantastic. Thomas Sowell is truly an intellectual of the highest breed. His explainations on how economic policies, which look good on paper, can have far reaching and counter productive effects is clear and interesting. Somehow all his books apply to more then the sphere of life he intends to educate. This book likewise contains a message - of looking at long term outcomes - which applies to not only economists and policy makers but the average man as well. Economics, which has been called a dismal science, tells us of the necessary trade offs that people and institutions with vested interests will not.
Even nobility has real consequences February 18, 2008
I studied forensic chemistry in college and I very much enjoyed and was good at it. But, If i chose another discipline to study economics would have been it. Thomas Sowell has brought great enjoyment to a very real and useful subject. Economic thinking is wonderful because you can use it everywhere.
Even though this book comes after Basic Economics, I don't think the first is required to follow this book. Sowell simply takes us into real life examples of "incentive" and "constraint" and the consequences political decision leave on society. The greatest asset of Sowell is his ability to stay so level-headed and not get wrapped up in the drippy pathos of noble intentions. Everything has a cost, how great is that cost going to be on real people?
"Every economic system must operate within the inherent constraint that people's wants will add up to more than they can possibly get: therefore, the quetion is not what is the ideal system, or how do people behave ideally to produce ideal results, the question is what is the best economic system producing the best results, with people behaving as they actually do." (a rough quote of Thomas Sowell)
Good on its own merit. January 22, 2008
Alone, this book is a very good, quick read on several important issues of our time for anyone who already understands the most basic economic concepts like prices, supply and demand. I rate it 5 stars based own its own merit, but for those who have already read Sowell's "Basic Economics," little extra can be found here. In this book, Sowell skips the introduction to basic economic concepts and goes directly to briefly analyzing issues like health care, discrimination and the development of nations. While there is some new information to be found, and although I still enjoyed the reading, I had seen most of it before.
Question for reviewers November 23, 2007
0 out of 1 found this review helpful
I have read "Basic Economics". I know that Sowell is not the kind of writer who writes the same book several times under different names. However...does it pay buying this one if you already read "Basic Economics"?
P.D. Excuse the 5-star evaluation. Amazon asks for an evaluation and, usually, the books by Sowell deserve for me the 5-star score but I did not read this book. This is not a rethoric question but real.
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