Most helpful critical review
14 of 18 people found the following review helpful
on December 2, 2011
This is the first book by Thomas Sowell that I read, and overall, I wasn't disappointed. However, although a decent read, I found a few of Sowell's facts to be dubious. In Chapter 5, Sowell discusses the common fallacy that the rich are getting richer and the poor are getting poorer. And that, in general, the middle class in the U.S. is getting smaller and smaller. Most of Sowell's arguments in this chapter are rather compelling, however, some arguments are very questionable. For example, Sowell states that, "Another inflationary bias to the consumer price index is that it counts only those things that most people are likely to buy. Reasonable as that might seem, what people will buy obviously depends on the price...". In other words, Sowell argues that the CPI overstates inflation, and therefore, real income should be higher. There are a few flaws with his reasoning. First, the most common inflation price index is core inflation, which excludes food and energy. Thus, since energy and food are a vital part of everyone's daily life, price increases (such as is happening these days) can greatly reduce the quality of life of people since a larger part of their income will be spent on food and energy.
Second, since the government changed the CPI's methodology during the years, it's highly problematic to compare the current CPI to the CPI that was used before the 1980's. Moreover, if applying the older method of the CPI to measure current inflation, inflation would be much higher. Therefore, one can argue that real income should be lower than what Sowell claims it is.
Lastly, and more relevant to the quote above, Sowell argues that if there is an increase in prices due to inflation, consumers will switch to other items, and therefore, price increases of those specific items will not affect them. Well, if someone stops buying a product, let's say beef, which he usually buys and enjoys, due to higher prices and instead buys chicken, his quality of life has declined because he cannot buy the product he prefers due to inflation.
In closing, even though not without flaws this book is still a interesting read, packed with plenty of insights.