Politics

Thomas Sowell speaks to TheDC about the financial crisis, health care, and his ideological transformation from Marxism to conservatism

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Caroline May
Political Reporter

While you may need a forklift to get it on your nightstand, Thomas Sowell’s most recent edition of his popular guide to economics, “Basic Economics: A Common Sense Guide to Economics,” will aptly navigate all — from laymen to experts — through the treacherous subject that has seemingly stumped many as of late.

Dr. Sowell recently spoke about his book with The Daily Caller and offered his insight on some of today’s most vexing problems:

TheDC: Why did you decide to write the initialBasic Economics” and how does this, the Fourth Edition, differ from the earlier versions?

Thomas Sowell (TS): Well I guess the most obvious difference is the Fourth Edition is about twice the size and it would have been even bigger had I not taken 60 pages out of the Third Edition and put them on the Internet, which kept the Fourth Edition from looking like the Oxford English Dictionary.

Why did I write it? Because there was so much more that needed to be said. I added one new chapter, which was on the history of economics itself and all the kinds of issues that are raised when looking at economics as a field. I also have a large section on the economics of the corporation, particularly because of the news in recent years — which I put in the chapter “Big Business and Government.” But obviously there have been many other developments that needed to be taken care of and so the book just expanded on its own, as it were. In other words, I didn’t sit down to write a bigger book. I sat down to update some figures and see what else needed to be said, it just took off from there.

TheDC: In your book you write, “Profits may be the most misconceived subject in economics.” What are the primary misconceptions about profits and why are profits important? Why are they so demonized in our current culture?

TS: Wow. Gee. Do you have a couple of hours? It is true, and I think part of it is sheer repetition and I think sheer repetition carries a big weight, as Joseph Goebbels understood back in the Nazi era. Over and beyond that, there are certain misconceptions. One misconception is that profits are fundamentally different from other kinds of income. I’m always fascinated by people who say, you know, “this came from a non-profit organization,” as if it is an organization that is unbiased. No, just because one person’s income is called profits and other’s is called something else does not change anything fundamental.

The amount of profits that a business makes, that is the percent return on investment, is — when people are asked what they think it is they almost always grossly overestimate — usually it fluctuates around 10 percent, usually much lower than that. The profit that really affects the price is the profit on sales and that is really small — just pennies on the dollar. A supermarket for example can prosper by making one penny profit on each dollar sale because they have those cash registers going all the time. It adds up to a nice return on investments.