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7 of 16 people found the following review helpful
on November 1, 2014
Format: Paperback
Sowell is correct that the improper use of numbers and statistics can be misleading and lead to incorrect conclusions, or fallacies. Unfortunately that is what he does in this book, apparently to justify an ultraconservative ideology, which he seems unable to escape. Some examples follow.

On page125 in Chapter 5, he uses a per capita income number, which he says has gone up 51% over 1969-1996 to discredit the fact that the real (adjusted for inflation) earnings of the vast majority of Americans have been stagnant for many years. But for reflecting the condition of most working families it’s a bogus number for the reasons below. First, it is incorrect to ascribe the 51% difference between the family income growth number and the per capita income to family size change. The decrease in average family size over the 1969 – 1996 period was only about 15%. The main difference between the two numbers is due to income distribution. The family database does not capture the high end income, which is mostly in capital gains; the per capita one does. It is that high-end income and its substantial growth that has brought the per capita number up. For example, the top 0.1% earn about 10 % of the nation’s income and over the period he cites their income grew by 200%. So the part of the per capita increase due to them was 10%x200% or 20%. Similarly for the 1-0.1%, their contribution to the growth in the per capita number was about 10%. So the per capita number is averaging a small number of wealthy persons and their high-income growth with a large number of families whose income did not grow to come up with an average number that looks good, but in reality is meaningless for the vast majority of Americans. There are other differences in the databases as well but the income distribution is the main one. Sowell must know this but he hides it, and then he goes on and uses as a premise a “rising standard of living” for all in other paragraphs, which is false.

On the same page he implies that the poor have realized this per capita 51% growth but in fact their increase in expenditures, which did occur, was due to social programs, like Medicaid, food stamps, housing subsidies, not earned income. He makes it sound like they are doing all right economically but in reality the need for government subsidy is more a failure of the economic system.

On pages 130-131 he again presents some spurious arguments to cast doubt on the stagnation of workers income. If he truly wanted to show the real worker income growth or the lack of all he needed to do was go to Bureau of Labor Statistics(BLS) data and plot real (adjusted for inflation) hourly wages over time. The hourly data does away with his anomalies about part time vs. full time work. The BLS data shows virtually no growth, between his period of 1980 -2004 so it’s hard to see how he gets 13-17%. Even with benefits, like employer paid health insurance premiums, counted as “compensation”, real hourly median income has increased only 8%; so it’s a mystery how he gets 33%, unless he is still using high end income growth in his numbers, as in the first comment above. If so his numbers are again not representative of the economic condition of the vast majority of workers.

On Income Inequality, page 132, he presents some arguments implying that our tax laws have mitigated income inequality and it isn’t really a concern. The standard GINI chart is a simple, widely accepted measure to display income inequality. It plots cumulative income against cumulative population. It’s clear from the U.S. chart prepared by the Congressional Budget Office (CBO) that substantial income inequality exists. For example, the top 1% earn the same as the bottom 50%. Also the light blue line CBO chart shows the effect of taxes and “in kind transfers”, e.g., social welfare programs. These systems have moved the inequality curve toward a hypothetical linear system but in the U.S., the tax laws etc. actually don’t move the curve very much. In Scandinavian countries, for example, that movement between the two curves is much more pronounced. The more plausible case to be made is that the curve reflects different peoples value to society, but to argue that substantial income inequality doesn’t exist here is intellectually dishonest.

Regarding Social Mobility; page 145, he cites a study that apparently followed a specific group of persons of a single generation throughout their life, and comes up with high numbers for people showing rising incomes. But this is not a good measure of social mobility because it could include those born into high quintile group families who themselves start their careers at lower incomes, and then end up in high quintiles. The more accepted way of measuring social mobility is between generations not within a generation. Intergenerational studies show that two thirds of those born into the lowest quintile income group, as adults either remain there (42%- not the 5% he has) or move up one quintile (24%). Only 5.9% reach the top quintile (not the 29% which he cites). Conversely 73% of those born into the top 5% group either remain there or go down to the top 20% quintile. His numbers do not reflect reality and are misleading.

These are just misleading examples. To read this book and not be mislead requires enormous research and time. Best to put it aside and start from scratch.
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0 of 4 people found the following review helpful
on March 10, 2015
Format: Paperback
This book was poorly researched and poorly argued. Mr. Sowell is well known as a holding a conservative perspective on economics, and that is fine, but his arguments for conservative economics should at least provide counterarguments for governmental influence in the market. Externalities and public goods, among others, are usual reasons for governmental action, and Mr. Sowell could have easily addressed these. Instead, Mr. Sowell simply sets up straw men, like the obviously bad policies of Urban Renewal, and knocks them down. There is no real insight there. He re-uses other people's conclusions without making new ones.

If you want a conservative economist's take, read N. Gregory Mankiw. For urban economics, read Edward Glaeser. He's no liberal, either, as he frequently argues for smaller government. Don't waste your money on this book.
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0 of 4 people found the following review helpful
on January 3, 2015
Format: Kindle EditionVerified Purchase
Neither well thought out nor well written. Uncorroborated statements to prove preconceived and preordained points. The title and hypothesis is provocative and interesting. The end product feels like cable news shows
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64 of 170 people found the following review helpful
on April 14, 2010
Format: HardcoverVerified Purchase
There are a lot of serious flaws with this book. A lot of oversimplified conclusions based on incorrect assumptions.

Rather than focusing on the chapters on racial and gender issues, which press on emotional buttons too easily, I'm going to focus on the problems with the chapter "Income Facts and Fallacies" since these are flaws that can be more calmly discussed using measurable standards.

EXECUTIVE COMPENSATION: Sowell's position is that CEO pay may seem outrageous to outsiders but is simply the corporation paying the market price for talent. A corporation will act in its own self interest and pay what it deems is the best price for talent. A wonderfully simple explanation based on the flawed assumption that the people deciding CEO pay are the same people who own the company. What Sowell fails to mention is that unlike in small companies that are managed by their owners, the owners of large corporations (shareholders) do not make the decisions about management's pay. Those decisions are made by the board of directors, who are often times chaired by the very same CEO whose pay they are deciding, or filled with board members nominated by that CEO. Often times the salary of the CEO reflects the influence that CEO holds over the members of the board rather than some market determined price for talent.

REAL INCOMES: Sowell claims that when you factor in non-wage compensation like health benefits and retirement benefits today's workers are earning just as much as those of a generation ago, maybe even more. But compensation is only half of the picture when it comes to real incomes, the other half of the picture is purchasing power that those wages command. Getting a 10% raise sounds nice but if your expenses increase 20% due to inflation then your real income has actually decreased. Sowell addresses this by pointing out how inflation in consumer goods is merely the reflection of improvements in the quality of those goods over time ("if Chevrolets today contain many features once confined to Cadillacs [then that explains why Chevys cost more now than before]"). However, Sowell fails to mention that the largest expenses faced by households today (housing costs, healthcare, tuition, insurance) have all increased beyond the rate of inflation in consumer goods. Who cares if the price of a laptop computer has decreased by 10% if the cost of rent or college tuition or health insurance premiums have tripled during the same time. By focusing only on the nominal wages and benefits of workers while ignoring the purchasing power of those wages Sowell paints a misleading picture of the real incomes of workers today.

If this book was written by some undergraduate political science major then I could dismiss these issues as the sloppy mistakes of an amateur but when a man with Sowell's training makes these mistakes I take a more cynical view. I believe that Sowell is deliberately misrepresenting his facts in order to mislead the reader. He leaves out too many important details that don't fit his narrative. At the end of the day this is not a book about economic "facts and fallacies", instead it is a collection of the author's opinions that he declares to be "facts" based more on ideology than on actual data.
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16 of 105 people found the following review helpful
on June 23, 2011
Format: Kindle Edition
You buy this book and you will find analysis that takes a simple two variable look at the world, then backs it up with cherry picked data.
Whether you agree with this guy or not, if you have any kind of background in economics, this book is a waste of your time. It's stuck in econ 101.
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24 of 141 people found the following review helpful
on August 24, 2009
Format: Hardcover
This book in no way measures up to its relatively high rating. I read Chapters 1,2 and 4 and retired it. Sowell's points on urban fallacies are superficial in the extreme, and I assumed the other chapters would follow suit. Came away with nothing of value from this book - a rare occurence. Stay away.
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