Product Description
This revised edition of Applied Economics is about fifty percent larger than the first edition. It now includes a chapter on the economics of immigration and new sections of other chapters on such topics as the “creative” financing of home-buying that led to the current “subprime” mortgage crisis, the economics of organ transplants, and the political and economic incentives that lead to money earmarked for highways being diverted to mass transit and to a general neglect of infrastructure. On these and other topics, its examples are drawn from around the world. Much material in the first edition has been updated and supplemented. The revised and enlarged edition of Applied Economics retains the simple readability of the first edition, even for people with no prior knowledge of economics.
Posted in 
Tags: 
Thomas Sowell’s central point is that government intervention to right economic or social problems can lead to unintended subsequent consequences. The book’s main weakness is that it only provides examples where implemented governmental policies have caused problems: as if all government interventions are terrible. A second weakness is that it provides no guidance in making better policy. There is small to learn from this book.
Rating: 1 / 5
You Sowell worshippers just don’t get it do you? Your country is in a truly shocking state. If you measure US performance against any other developed country on virtually any social/health index (homicide rate, obesity, educational performance, life expectancy, teenage births, mental health, drug usage, crime rates, imprisonment… I could go on) you will immediately see that the US performance is nothing small of desperate. It is precisely the policies that Sowell promulgates in this book (more rights for private property, lower and regressive taxation, weak unions and fewer regulations) that cause this state of affairs, and which are tearing your country apart at the seams. Nearly all social and health problems are fundamentally related to the level of inequality in a society. In Scandinavia and Germany – where there are high levels of Government intervention, including strongly progressive taxation to ensure that inequality does not become too fantastic – the performance on these indices is streets ahead of the US (eg. three years higher life expectancy in Sweden, half as many infant deaths per thousand live births in Sweden, three times as many obese adults in the US as compared to Sweden, three times more homicides per million people in the US than in Sweden etc. etc.). Indeed, across the OECD there is an nearly perfect linear relationship between inequality and worsening performance on any social or health related index. You may have a (slightly) higher GDP per head than Western Europe (whatever it is that GDP measures), but the USA really is a deeply dysfunctional society.
And what is right for your social infrastructure is just as right for your physical infrastructure. Just try landing at JFK and then taking the New Jersey turnpike – it is literally crumbling in front of your eyes. It is the same tale wherever you go in the US (remember the Minneapolis bridge collapse a couple of years ago?). I was genuinely shocked on my first visit to the USA at the poor state of repair of your cities compared to Germany. I could not believe that this was supposed to be the richest country in the world.
Please go and visit Germany or Scandinavia and see for yourself the gaping chasm in the quality of life that exists between the USA and most of Western Europe – you certainly won’t find evidence of it in a Thomas Sowell book. All he can do is offer a more extreme version of the already extreme right wing economic policies that have practically ruined the social fabric of the USA since the 1980s. This is because Sowell is at heart a dogmatic ideologue who uses highly selective arguments and evidence to promote a deeply unpleasant political philosophy (essentially social Darwinism). For some more specific criticisms of his basic arguments see my review of Sowell’s `Basic Economics’.
Rating: 1 / 5
Let’s face it: you picked up this book because you like Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (P.S.# and SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance. If you have not read those books, I would recommend those books over this one because not only do they deal more clearly will the issues they are covering, they more accurately show how economics can work in unexpected ways. Assuming you are still interested in Applied Economics, I would question two questions: have you studied economics before #any course at all)? And are you in the habit of thinking critically? If the answer to any of these questions is no, then avoid this book.
My score of two stars is based off of how misleading this book can be to non-economists. The subtext of the title is “Thinking beyond Stage One,” but for every illuminating chapter based on this concept, another makes fatal mistake after fatal mistake in failing to apply this thought. The chapter on slavery was fascinating and fascinating, but the chapter on health care was riddled with holes. Based on this book, one would believe that the British NHS was a third-rate system that was slowly killing its patients, rather than a well-liked system that is often used as a functioning model of health care that should or should not be copied (It should be noted that the NHS is essentially a national version of the Veteran Affairs hospitals in the United States). Sowell also oversimplifies pharmaceutical advertising to make it seem that the sole purpose of advertising is to raise public awareness. Anyone who has ever seen pharmaceutical ads will attest to their ability to make even a healthy viewer question whether he or she suffers from the disease or disorder which the advertised drug is supposed to help. If we consider for a moment, the economic incentives strongly favor drug companies convincing individuals to demand treatment for diseases they do not have. And if the patient is found out to have been misdiagnosed, the doctor is far more likely to get the blame. While the chapter on housing is honestly smart (although price controls are understood to be harmful by virtually everyone will an understanding of economics), the emphasis on the stage two effects of “open spaces” regulation ignores the stage one effects, particularly the positive externalities which greenery in cities is supposed to bring. The purpose of considering the stage two effects is to do a cost-benefit analysis of the stage two effects against the stage one effects and determine whether the overall benefits merit a certain choice.
These are just a few of issues on which Sowell has incompletely thought about. The central premise of this text, that every choice has unintended consequences, seems to fizzle out roughly halfway through the text. Once you have read the first two chapters (the best two in my opinion), your knowledge is best expanded elsewhere. The Risky Business chapter is more clearly and more in-depth covered by books such as Paul Krugman’s “The Return of Depression Economics and the Crisis of 2008,” (despite Krugman’s reputation as a liberal, his book is probably the best text on the subprime crisis that will be written before the end of the Recession). The economics of immigration and the development of nations chapters are best covered by Jared Diamond’s “Guns, Germs, and Steel: The Fates of Human Societies.”
All that being said, “Applied Economics” is a thought provoking text for those who like digging into the text. But based on my reading of this book, I would say that this book is for those with at least some college education, otherwise the tendency to accept the author’s examples at as settled truths will be too fantastic.
Rating: 2 / 5
Very helpful book for thinking through policy issues economically. It demonstrates why free democratic people must reckon beyond stage one as a public group, and why certain political ideologies really hurt the very people they purport to try to help.
Rating: 5 / 5
The revised, enlarged edition of Applied Economics: Thinking Beyond Stage One is fifty percent larger than the first edition and includes a chapter on the economics of immigration and new sections on other topics, making this a ‘must’ for collections that have loved the previous edition. Much material in the first edition has been substantially revised, also, in a book recommended highly and equally for students of economics as well as those with no experience.
Rating: 5 / 5