Basic Economics

by Thomas Sowell

  {70} Emerson P. Schmidt, “The Threat of Wage and Price Controls,” Prices and Price Controls, edited by Hans F. Sennholz (Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc., 1992), pp. 58–59.

  {71} Nikolai Shmelev and Vladimir Popov, The Turning Point, pp. 198–199.

  {72} Thomas Sowell, Applied Economics: Thinking Beyond Stage One, revised and enlarged edition (New York: Basic Books, 2009), pp. 53–94.

  {73} Martin Wainwright, “Girl, 12, to Get Breast Implant,” The Guardian (London), November 9, 1998, p. 6; “Condition Still Critical,” The Economist, April 13, 2002, pp. 55–56.

  {74} “Walking Wounded,” The Economist, November 24, 2001, p. 52.

  {75} Jeremy Hurst and Luigi Siciliani, Tackling Excessive Waiting Times for Elective Surgery: A Comparison of Policies in Twelve OECD Countries (Paris: Organisation for Economic Co-operation and Development, 2003), p. 12.

  {76} David C. Wheelock, “Changing the Rules: State Mortgage Foreclosure Moratoria During the Great Depression,” Federal Reserve Bank of St. Louis Review, November/December 2008, p. 572.

  {77} Jim Powell, FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression (New York: Crown Forum, 2003), p. 134.

  {78} Joanna Slater, “The Problems of Plenty,” Far Eastern Economic Review, December 6, 2001, p. 63.

  {79} Amy Waldman, “Poor in India Starve as Surplus Wheat Rots,” New York Times, December 2, 2002, p. A3.

  {80} Ibid.

  {81} Andrew Martin, “Awash in Milk and Headaches,” New York Times, January 2, 2009, pp. B1, B5.

  {82} “Scandalous,” The Economist, October 5, 2002, p. 13.

  {83} David Barboza, “Sugar Rules Defy Free-Trade Logic,” New York Times, May 6, 2001, section 1, pp. 1, 40.

  {84} Stephen Castle and Doreen Carvajal, “Subsidies Spur Fraud in European Sugar,” New York Times, October 27, 2009, pp. B1, B4.

  {85} Brian Riedl, “Twisting ‘The Facts’,” National Review (online), August 29, 2002.

  {86} James K. Boyce, The Philippines: The Political Economy of Growth and Impoverishment in the Marcos Era (Honolulu: University of Hawaii Press, 1993), pp. 178–179.

  {87} “Patches of Light,” The Economist, June 9, 2001, p. 70.

  {88} Carl Bildt, “Fight Poverty, Not Patents,” Wall Street Journal, January 7, 2003, p. A13.

  {89} Brian Riedl, “Twisting ‘The Facts’,” National Review (online), August 29, 2002.

  {90} David Luhnow, “Of Corn, Nafta and Zapata,” Wall Street Journal, March 5, 2003, p. A13.

  {91} “Agricultural Subsidies,” The Economist, September 22, 2012, p. 105.

  {92} Robert L. Schuettinger and Eamonn F. Butler, Forty Centuries of Wage and Price Controls: How Not to Fight Inflation (Washington: Heritage Foundation, 1979), p. 33.

  {93} Ibid., pp. 33–34.

  {94} Nita Ghei, “Argentine Economy Plummets as Rule of Law Gets Trashed,” Investor’s Business Daily, August 6, 2013, p. A15.

  {95} Michael Wines, “Caps on Prices Only Deepen Zimbabweans’ Misery,” New York Times, August 2, 2007, p. A1.

  {96} Ibid., p. A8.

  {97} Holman W. Jenkins, Jr., “Hug a Price Gouger,” Wall Street Journal, October 31, 2012, p. A13.

  Chapter 4: An Overview of Prices

  {98} Oliver Wendell Holmes, “Law and the Court,” Collected Legal Papers (New York: Peter Smith, 1952), pp. 292–293.

  {99} Karl Marx and Frederick Engels, Selected Correspondence 1846–1895, translated by Dona Torr (New York: International Publishers, 1942), p. 476.

  {100} “Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances,” Federal Reserve Bulletin, June 2012, p. 32.

  {101} David Granick, The Red Executive: A Study of the Organization Man in Russian Industry (Garden City, NY: Anchor Books, 1961), pp. 133–134.

  {102} George J. Stigler, Memoirs of an Unregulated Economist (New York: Basic Books, 1988), p. 14.

  {103} Paul Johnson, Modern Times: The World from the Twenties to the Nineties, revised edition (New York: Perennial Classics, 2001), pp. 724–727.

  {104} Frank Viviano, “Russian Farmland Withers on the Vine,” San Francisco Chronicle, October 19, 1998, pp. A1, A4.

  {105} Ibid., p. A1.

  {106} Andrew Higgins, “Food Lines: Odd Borders Appear in Russia as Regions Face Poor Harvests,” Wall Street Journal, October 16, 1998, p. A1.

  {107} Binyamin Applebaum and Edward Wyatt, “Obama May Find Useless Regulations Are Scarcer Than Thought,” New York Times, January 22, 2011, pp. B1, B12.

  {108} “Employment, Italian Style,” Wall Street Journal, June 26, 2012, p. A14.

  {109} Ibid.

  {110} Cynthia Barnett, Mirage: Florida and the Vanishing Water of the Eastern U.S. (Ann Arbor, MI: University of Michigan Press, 2007), p. 156.

  {111} “Dry and Drier,” San Francisco Chronicle, January 18, 2014, p. A9; “Of Farms, Folks and Fish,” The Economist, October 24, 2009, p. 28.

  {112} “Grim Reapers,” part of a survey on India’s economy, The Economist, June 2, 2001, p. 14.

  {113} “Some U.S. Passenger Taxes Subsidize Smaller Airports,” Wall Street Journal, April 16, 2007, p. B3.

  {114} Terry Miller, et al., 2012 Index of Economic Freedom (Washington: Heritage Foundation, 2012), p. 8.

  PART II: INDUSTRY AND COMMERCE

  Chapter 5: The Rise and Fall of Businesses

  {115} Ram Charan, et al., “Why Companies Fail,” Fortune, May 27, 2002, p. 52.

  {116} Evan Osborne, The Rise of the Anti-Corporate Movement: Corporations and the People Who Hate Them (Westport, CT: Praeger, 2007), p. 72.

  {117} Jerry Useem, “Fortune 500: Intro.,” Fortune, April 14, 2003, pp. 89–90.

  {118} “Arrivals and Departures,” Fortune, May 21, 2012, p. F-27.

  {119} Deborah Gage, “Venture Capital’s Secret—3 Out of 4 Start-Ups Fail,” Wall Street Journal, September 20, 2012, p. B5.

  {120} Don Clark and Christopher Lawton, “Sun, AMD Results Mark Diverging Paths,” Wall Street Journal, January 27, 2007, p. B3.

  {121} Ben Dolven, “Picturing the Future,” Far Eastern Economic Review, November 28, 2002, p. 45.

  {122} Michael Arndt, “Up from the Scrap Heap,” BusinessWeek, July 21, 2003, p. 42.

  {123} World Steel Association, World Steel in Figures 2012 (Brussels, Belgium: World Steel Association, 2012), p. 8; Len Boselovic, “U.S. Steel Sees Loss in 2012,” Pittsburgh Post-Gazette, January 30, 2013, p. A11.

  {124} Alex Taylor, III, “Lord of the Air,” Fortune, November 10, 2003, p. 146.

  {125} Noel Forgeard and Gustav Humbert, “Airbus Problems Lead to Ouster of Key Executives,” Wall Street Journal, July 3, 2006, p. A1; Daniel Michaels and J. Lynn Lunsford, “New Course: Under Pressure, Airbus Redesigns a Troubled Plane,” Wall Street Journal, July 14, 2006, pp. A1 ff; Del Quentin Wilber, “Boeing’s 2006 Jet Orders Surpassed Airbus,” Washington Post, January 18, 2007, p. D3.

  {126} Richard S. Tedlow, New and Improved: The Story of Mass Marketing in America (New York: Basic Books, 1990), p. 199.

  {127} Ibid., p. 252.

  {128} Ibid., p. 253.

  {129} Frank J. Prial, “Suburban Sprawl Also Applies to the Circulation of Newspapers,” New York Times, November 18, 1990, p. E5.

  {130} Theodore Caplow, Louis Hicks, and Ben J. Wattenberg, The First Measured Century: An Illustrated Guide to Trends in America, 1900–2000 (Washington: AEI Press, 2001), pp. 268–269.

  {131} Frank J. Prial, “Suburban Sprawl Also Applies to the Circulation of Newspapers,” New York Times, November 18, 1990, p. E5.

  {132} Editor & Publisher International Year Book 2005, 85th edition (New York: Editor & Publisher, 2005), Part 1, p. ix.

  {133} Frank J. Prial, “Suburban Sprawl Also Applies to the Circulation of Newspapers,” New York Times, November 18, 1990, p. E5.

  {134} Steve Stecklow, “Despite Woes, McClatchy Banks on Newspapers,” Wall Street Journal, December 26, 2007, p. A1.


  {135} “Seek to Remove Postal Nemesis,” Chicago Daily Tribune, April 22, 1903, pp. 1, 5.

  {136} Nelson Lichtenstein, The Retail Revolution: How Wal-Mart Created a Brave New World of Business (New York: Metropolitan Books, 2009), p. 18.

  {137} Cecil C. Hoge, Sr., The First Hundred Years Are the Toughest: What We Can Learn from the Century of Competition Between Sears and Wards (Berkeley, CA: Ten Speed Press, 1988), pp. 83, 102.

  {138} Floyd Norris and Christine Bockelmann, editors, The New York Times Century of Business (New York: McGraw-Hill, 2000), p. 204.

  {139} Katrina Brooker and Joan Levinstein, “Just One Word: Plastic,” Fortune, February 23, 2004, p. 130.

  {140} David Stires, “Is Your Store a Bank in Drag?” Fortune, March 17, 2003, p. 38.

  {141} “Montgomery Ward: Prosperity Is Still Around the Corner,” Fortune, November 1960, p. 138.

  {142} Eric A. Taub, “Forget L.C.D.; Go for Plasma, Says Maker of Both,” New York Times, December 25, 2006, p. C4.

  {143} “The Last Kodak Moment?” The Economist, January 14, 2012, p. 63.

  {144} Dana Mattioli, “Kodak Shutters Camera Business,” Wall Street Journal, February 10, 2012, p. B3; “Kodak’s Digital Dilemma,” Los Angeles Times, January 8, 2012, p. A23.

  {145} “The Last Kodak Moment?” The Economist, January 14, 2012, p. 63.

  {146} Mike Spector and Dana Mattioli, “Can Bankruptcy Filing Save Kodak?” Wall Street Journal, January 20, 2012, p. B1.

  {147} “The Last Kodak Moment?” The Economist, January 14, 2012, p. 64.

  {148} Stephen Miller, “Remembrances: Harry B. Henshel (1919–2007),” Wall Street Journal, July 7–8, 2007, p. A4.

  {149} Robyn Meredith, et al., “The ‘Ooof’ Company,” Forbes, April 14, 2003, p. 75.

  {150} “The Quick and the Dead,” The Economist, January 29, 2005, p. 10.

  {151} “Did You Know? Trends in Profits Per Vehicle,” Michigan Automotive Focus, July 2012, p. 5.

  {152} Jerry Hirsch, “Ford Posts 55% Profit Jump,” Los Angeles Times, January 30, 2013, p. B4; Bill Vlasic, “G.M.’s Profit Rises Despite Weakness in Europe,” New York Times, February 15, 2013, p. B4; Hans Greimel, “Toyota Expects N.A. Rebound to Propel Profits,” Automotive News, May 14, 2012, p. 8.

  {153} Brian Bremner, et al., “Can Anything Stop Toyota?” BusinessWeek, November 17, 2003, p. 117.

  {154} Nick Bunkley, “Toyota Falls to No. 3 in Reliability Rankings,” New York Times, October 17, 2007, p. C11.

  {155} Terry Kosdrosky, “Toyota Slips and Ford Improves in Consumer Reports Survey,” Wall Street Journal, October 17, 2007, p. D8.

  {156} “Most Reliable New Cars,” Consumer Reports, December 2012, p. 61.

  {157} Richard Tedlow, “Toyota Was in Denial. How About You?” BusinessWeek, April 19, 2010, p. 76.

  {158} Anthony Bianco, et al., “Is Wal-Mart Too Powerful?” BusinessWeek, October 6, 2003, p. 102.

  {159} Burton W. Folsom, Jr., The Myth of the Robber Barons: A New Look at the Rise of Big Business in America, sixth edition (Herndon, VA: Young America’s Foundation, 2010), p. 86.

  {160} Ibid., pp. 86–89.

  {161} Ibid., pp. 87, 89.

  {162} Ibid., p. 87.

  {163} John F. Love, McDonald’s: Behind the Arches, revised edition (New York: Bantam, 1995), pp. 79–83.

  {164} Mark Maremont, “Scholars Link Success of Firms to Lives of CEOs,” Wall Street Journal, September 5, 2007, p. A1.

  {165} Ibid., p. A15. How much these findings in Denmark would apply to American corporations is a question raised by the Wall Street Journal: “It isn’t clear how applicable the study is to big public companies in the U.S. or elsewhere, the authors acknowledge. Most of those studied were small, family-controlled ones where a shock to the CEO might have more impact, though Prof. Wolfenzon said the effects appeared similar across all sizes of Danish companies.”

  {166} V.I. Lenin, The State and Revolution (Moscow: Progress Publishers, 1969), p. 92.

  {167} Ibid., p. 41.

  {168} V.I. Lenin, “The Fight to Overcome the Fuel Crisis,” Selected Works (Moscow: Foreign Languages Publishing House, 1952), Volume II, Part 2, p. 290.

  {169} V.I. Lenin, “The Role and Functions of the Trade Unions Under the New Economic Policy,” Ibid., p. 618.

  {170} V.I. Lenin, “Five Years of the Russian Revolution and the Prospects of the World Revolution,” Ibid., p. 695.

  {171} V.I. Lenin, “Ninth Congress of the Russian Communist Party (Bolsheviks),” Ibid., p. 333.

  {172} Andrew E. Kramer, “Russia’s Stimulus Plan: Open the Gulag Gates,” New York Times, August 9, 2013, p. A1.

  Chapter 6: The Role of Profits—and Losses

  {173} John Stossel, Give Me a Break: How I Exposed Hucksters, Cheats, and Scam Artists and Became the Scourge of the Liberal Media… (New York: HarperCollins, 2004), p. 251.

  {174} Patricia Callahan and Ann Zimmerman, “Price War in Aisle 3,” Wall Street Journal, May 27, 2003, p. B1.

  {175} Randal O’Toole, The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future (Washington: Cato Institute, 2007), p. 215.

  {176} Gurcharan Das, India Unbound: The Social and Economic Revolution from Independence to the Global Information Age (New York: Alfred A. Knopf, 2001), p. 170.

  {177} John Dewey, Characters and Events: Popular Essays in Social and Political Philosophy (New York: Henry Holt, 1929), Volume 2, p. 555.

  {178} Joseph S. Berliner, “The Prospects for Technological Progress,” Soviet Economy in a New Perspective: A Compendium of Papers, submitted to the Joint Economic Committee of Congress (Washington: Government Printing Office, 1976), p. 437.

  {179} “Free to Be Poor,” The Economist, September 11, 1999, p. 29.

  {180} Peter Popham, “Ambassador Gets a 30-Year Service,” The Independent (London), December 30, 1997, p. 14.

  {181}Forbes Greatest Business Stories of All Time, edited by Daniel Gross, et al (New York: John Wiley & Sons, Inc., 1996), pp. 247, 248.

  {182} Ibid., pp. 259–262.

  {183} “Oil Money and Hafnium,” The Economist, November 24, 2007, p. 70.

  {184} Cliff Edwards, “Hammer: The Right Tool for the Job?”BusinessWeek, March 10, 2003, pp. 66–67.

  {185} Don Clark, “Intel Promises Sweeping Overhaul Amid PC Slowdown, Rival’s Gains,” Wall Street Journal, April 28, 2006, p. A1.

  {186} “Intel to Lay Off Managers,” New York Times, July 14, 2006, p. C2.

  {187} Don Clark, “Price War Weighs on AMD’s Results,” Wall Street Journal, July 21, 2006, p. A11.

  {188} “Not Chipper on Intel Despite Share Gains,” Barron’s (online), January 25, 2013; Don Clark, “Former AMD Chief’s Book Describes Fight Against Intel,”Wall Street Journal (online), February 14, 2013.

  {189} Jeffrey E. Garten, “Andy Grove Made the Elephant Dance,”BusinessWeek, April 11, 2005, p. 26.

  {190} “The 45 Money Losers,” Fortune, May 21, 2012, p. F-27.

  {191} Peter Popham, “Ambassador Gets a 30-Year Service,” The Independent (London), December 30, 1997, p. 14.

  {192} “Make Us Competitive—but Not Yet,” part of a survey on India, The Economist, February 22, 1997, p. 6.

  {193} “Local Hero,” The Economist, August 16, 1997, p. 49.

  {194} “Make Us Competitive—but Not Yet,” part of a survey on India, The Economist, February 22, 1997, p. 6.

  {195} “Indian Carmakers: The Four-Wheeled Survivor,” The Economist, February 2, 2013, p. 54.

  {196} G.P. Manish, “Market Reforms in India and the Quality of Economic Growth,” The Independent Review, Fall 2013, pp. 257–259.

  {197} Paul R. Lally, “Note on the Returns for Domestic Nonfinancial Corporations in 1960–2005,” Survey of Current Business, May 2006, p. 7.

  {198} Richard Vedder and Wendell Cox, The Wal-Mart Revolution: How Big-Box Stores Benefit Consumers, Workers, and the Economy (Washington: AEI Press, 2006), p. 69.

  {199} Kat
e Linebaugh, “Inventory Traffic Jam Hits Chrysler,” Wall Street Journal, January 12, 2009, p. B1.

  {200} Ann Harrington, “Honey, I Shrunk the Profits,” Fortune, April 14, 2003, p. 197.

  {201} Walter E. Williams, The State Against Blacks (New York: New Press, 1982), p. 31.

  {202} Jeffry A. Frieden, Global Capitalism: Its Fall and Rise in the Twentieth Century (New York: W.W. Norton, 2006), p. 161.

  {203} Walter Adams and James W. Brock, The Structure of American Industry, ninth edition (Englewood Cliffs, NJ: Prentice Hall, 1995), p. 76.

  {204} Robert Genat, The American Car Dealership (Osceola, WI: MBI Publishing Company, 1999), p. 7.

  {205} Jeffry A. Frieden, Global Capitalism, p. 62.

  {206} Walter Adams and James W. Brock, The Structure of American Industry, ninth edition, p. 145.

  {207} “Thinking Big,” part of a survey on international banking, The Economist, May 20, 2006, p. 4.

  {208} Julian Birkinshaw and Suzanne Heywood, “Too Big to Manage?” Wall Street Journal, October 26, 2009, p. R3.

  {209} Walter Adams and James W. Brock, The Structure of American Industry, ninth edition, p. 77.

  {210} David Whelan, “Bad Medicine,”Forbes, March 10, 2008, pp. 86–98.

  {211} Gurcharan Das, India Unbound, p. 266.

  {212} Nikolai Shmelev and Vladimir Popov, The Turning Point: Revitalizing the Soviet Economy (New York: Doubleday, 1989), p. 117.

  {213} David Satter, Age of Delirium: The Decline and Fall of the Soviet Union (New York: Alfred A. Knopf, 1996), p. 184.

  {214} John A. Jakle and Keith A. Sculle, Fast Food: Roadside Restaurants in the Automobile Age (Baltimore, MD: Johns Hopkins University Press, 1999), p. 51.

  {215} Evan Perez, “Luxury Cruises at Discount Prices,” Wall Street Journal, October 29, 2003, pp. D1, D2.

  {216} Melanie Trottman, “Deluxe Travel at Discount Prices,” Wall Street Journal, July 19, 2001, p. B1.

  {217} Jesse Drucker, “Peak Season, Off-Peak Prices,” Wall Street Journal, August 10, 2001, pp. W1, W9.

  {218} Christina Binkley, “Hotels Raise Prices as Travel Picks Up,” Wall Street Journal, July 6, 2004, p. D1.