Thomas Sowell on Economic Facts And Fallacies

[Editor’s note: the following is reprinted from Right Wing News.]

Thomas Sowell has just released Economic Facts and Fallacies: Second Edition . I read the first edition, thought it was outstanding, and would highly recommend it. I was also pleased to have the opportunity to interview Thomas Sowell about the Second Edition of the book. What follows is the slightly edited transcript of our conversation. Enjoy!

A lot of people say that income has stagnated for most Americans over the last 40 years. Talk about that a little bit; is that true?

No, it’s not true. It shows what you can do by playing games with statistics. It’s not true that income stagnated. People who argue that way almost invariably cite the household statistics or family income statistics when in fact the income per person, even in real terms eliminating inflation, has been rising very substantially over the years.

The problem is that households and families are getting smaller and smaller so that today if there is a family where, for example, there are two people working and in the past there were three people working, now the two people are making what the three people used to make. Then they say, “Well, you see, income has stagnated.”  No, income has gone up by 50 percent.

We also hear a lot about income inequality these days. There is a wide disparity between the rich in this country and everyone else and that’s presented as evidence the system is not fair, that it’s bad for the poor and the middle class, and that we need to tax the rich a lot more. True?

No. One of the sad things that happens is that people look at numbers and they translate the numbers into a concept that has no relationship to those numbers.

Being rich and being poor are thought of as classes of people who endure over time. In reality the great income inequality is between people of different ages. People in their 50s make a lot more money than people in their 20s. But that’s not a class because anyone who lives a normal lifetime is going to be in his 20s at some point and in his 50s at a later point. I see all this stuff about wealth even moreso than income and, yes, most people under the age of 15 don’t really have any wealth and there are millions of them, but that is not a class issue. That’s an age situation and most of the people who have no income and are under 15 are being supported by other people. So there are all kinds of numbers that are seized upon to be forced into some kind of a pattern, a pattern that bears no relationship to reality.

Now, poverty is commonly believed to be a root cause of crime and even terrorism. How much truth is there to that?

Close to zero. In fact, if you look at say, the 1950s, people were a lot poorer in 1950 than they are today. The crime rate was a lot lower. The crime rate was lower even during The Great Depression than it was in some later times. So there is a correlation, but what little correlation there is has to be looked at in terms of the correlation is not causation. Many of the same characteristics that lead people to remain poor are also characteristics that promote crime by the same people. Even there, when you find a correlation, you have to find out which way the direction of causation goes. Most people who talk this way just automatically assume that people commit crimes because they’re poor.

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  • John42

    Congressional Budget Office disagrees, and the data speaks for itself. Income inequality is unfortunately rampant. (related to age? that's an interesting new twist. since I have never heard of poor seniors…)

    People had less money in the 1950's, and it also cost less to to buy food and make housing payments. Your argument is incoherent. The connection of crime to poverty is well documented, although granted it is a complex issue that has many factors.

  • Jim_C

    This is a "great thinker?" More like a "great excuse maker."

    Three-income families? Poor people "under 15"? "Close to zero" evidence that poverty and crime are related??

    You trippin', Uncle Thomas!

    • Vicki_W

      you cited not a single fact in your rebuttal. Feelings and emotions do not belong in the debate. reason and facts do.

      • Jim_C

        Incidentally, I know people make a lot of hay by appealing to "resentment of the rich." Indeed, people should instead aspire to be rich, not resent those who are. But when you have a government that nickes and dimes YOU, while allowing (or sometimes creating) an environment where those with vast, enormous resources can multiply same and neither bear risk nor pay their share…it's time to ask what's up.

  • bobby mcroy

    Income inequality is a bunk concept. Of course people who refuse to participate in capitalism are poor. Income comes from work, not the avoidance of it. Those laying around can expect to be poor and that is exactly as it should be.