Knowledge And Decisions

by Thomas Sowell

With a new preface by the author, this reissue of Thomas Sowell's classic study of decision making updates his seminal work in the context of The Vision of the Annointed , Sowell, one of America's most celebrated public intellectuals, describes in concrete detail how knowledge is shared and disseminated throughout modern society. He warns that society suffers from an ever-widening gap between firsthand knowledge and decision making—a gap that threatens not only our economic and political efficiency, but our very freedom because actual knowledge gets replaced by assumptions based on an abstract and elitist social vision f what ought to be. Knowledge and Decisions , a winner of the 1980 Law and Economics Center Prize, was heralded as a ”landmark work” and selected for this prize ”because of its cogent contribution to our understanding of the differences between the market process and the process of government.” In announcing the award, the center acclaimed Sowell, whose ”contribution to our understanding of the process of regulation alone would make the book important, but in reemphasizing the diversity and efficiency that the market makes possible, [his] work goes deeper and becomes even more significant.”

Genres: Economics, Politics, Nonfiction, Philosophy, Sociology, Business, History

443 pages, Kindle Edition

First published November 30, 1979

About the author

Thomas Sowell is an American economist, social philosopher, and political commentator. He is a senior fellow at the Hoover Institution. With widely published commentary and books—and as a guest on TV and radio—he became a well-known voice in the American conservative movement as a prominent black conservative. He was a recipient of the National Humanities Medal from President George W. Bush in 2002.
Sowell was born in Gastonia, North Carolina and grew up in Harlem, New York City. Due to poverty and difficulties at home, he dropped out of Stuyvesant High School and worked various odd jobs, eventually serving in the United States Marine Corps during the Korean War. Afterward, he took night classes at Howard University and then attended Harvard University, where he graduated magna cum laude in 1958. He earned a master's degree in economics from Columbia University the next year and a doctorate in economics from the University of Chicago in 1968. In his academic career, he held professorships at Cornell University, Brandeis University, and the University of California, Los Angeles. He has also worked at think tanks including the Urban Institute. Since 1977, he has worked at the Hoover Institution at Stanford University, where he is the Rose and Milton Friedman Senior Fellow on Public Policy.
Sowell was an important figure to the conservative movement during the Reagan era, influencing fellow economist Walter E. Williams and U.S. Supreme Court Justice Clarence Thomas. He was offered a position as Federal Trade Commissioner in the Ford administration, and was considered for posts including U.S. Secretary of Education in the Reagan administration, but declined both times.
Sowell is the author of more than 45 books (including revised and new editions) on a variety of subjects including politics, economics, education and race, and he has been a syndicated columnist in more than 150 newspapers. His views are described as conservative, especially on social issues; libertarian, especially on economics; or libertarian-conservative. He has said he may be best labeled as a libertarian, though he disagrees with the "libertarian movement" on some issues, such as national defense.

Reviews

[Luís · Rating 4 out of 5]

It might seem self-evident, but the people involved in the political system maintain their preferences, and self-interest is contentious. Economists, analysts, pundits, and the general public assume that those involved in the political system do so selflessly and focus on the "public interest" rather than their "self-interest." As one of the founders of Public Choice, the late James Buchanan put it, people don't become economic eunuchs when they enter government. The political system was characterized by people seeking their interests, just as in the market. This insight regarding the "interests" that guide people's decisions is critical in understanding the actual operation of government.
An application of this insight is that politicians are interested in re-election. Therefore, they must consider the pros and cons of the policies and their political implications for re-election. For example, economists generally agree that sales or consumption taxes are typically the best way to raise revenues, while business taxes are the worst. Alternatively, the average person hates sales taxes and prefers business taxes because they don't see how they ultimately pay such taxes. So, the politician's challenge is implementing good policy while still getting elected.

Source: https://www.fraserinstitute.org/blogs...

[Dan · Rating 4 out of 5]

If you can only read one book on knowledge and how it affects human decision-making, I would highly recommend Knowledge and Decisions. It is an updated expansion of Friedrich Hayek's famous paper "On the Use of Knowledge in Society", most of the extra material being relevant examples in the fields of economics, history, law, and politics. There is a wealth of facts and data here, and conclusions drawn from those facts will be a challenge to accepted ideologies on the left and the right. This book will force you to think carefully about how the world works, and how certain beliefs about this world can lead to consequences of which nobody could have conceived.

On the other hand, while the writing style is quite readable and to-the-point, it can also be a bit dry. My progress was very slow, mostly because it took a lot of energy to digest all the facts and arguments in this very dense, though relatively short book (many other books covering the topics this book addresses are much longer and much more boring). It is definitely something to be taken carefully with a heavy helping of deep thinking. A multi-grain, high-fiber diet for your brain.

[Otto Lehto · Rating 5 out of 5]

Out of all of Sowell's books, this might be his masterpiece. It provides one of the clearest articulations of the epistemic dimension of economic and political decision-making according to the best available neoclassical economic analysis. It is written in some of the best prose ever presented in the economics profession. Don't get me wrong, I don't agree with everything Sowell says. The book has two main weaknesses, none of which are especially dire. In fact, they are the inevitable result of who the author is and what the book intends to do. Explaining what the weaknesses are is actually a good way to explain what is so great about the book:

1) The book recapitulates several decades of neoclassical, Chicago School, and Austrian School economic thinking. It therefore lacks scholarly originality. It mostly restates the accumulated insights of generations of scholars before him. It does not propose new economic theses or offer new proofs to existing ones. However, there is a time and place for scholarly synthesis. While this book is no substitute for reading Hayek, Friedman, and others, it is an excellent introductory text or a companion piece to them, and in some ways it exceeds the originals in its scope and clarity. In fact, the book DOES manage to offer something new in the novel connections and bridges that it draws between disparate fields of analysis, such as economics and sociology, and the striking examples and thought experiments it uses to illustrate its arguments and conclusions.

2) The book is written by a conservative-libertarian economist who inevitably brings some of his biases and prejudices into the book's arguments. This is most evident in his treatment of cultural and social issues, where some of Sowell's arguments are tainted by a deep conservative bias that leads the author to a selective reading of statistical facts around family, abortion, crime, etc. On these issues, I remain unconvinced by some of Sowell's normative arguments. The worst part of the book, for me, is the last section on war and geopolitics, which seems polemical and tacked on, not to mention excessively apologetic towards American foreign policy with all its many flaws. Nonetheless, there is something to learn from his analysis even when I disagree with it.

However, what the book fails to achieve in political prescriptions, it more than makes up for in its positive analysis of institutions. The book's dispassionate, lucid, and sharp analysis is at its best when it presents a nuanced and positive analysis of the epistemic challenges and hazards of decision-making in various areas of life. It summarizes decades of accumulated wisdom, articulates the relevant problems in novel ways, and offers ample material for thinking for beginning students and advanced economic scholars alike. Although Sowell comes from a very different intellectual tradition that Michel Foucault and other left wing critics of organized power, there are some interesting similarities between their analyses of the relationship between knowledge and power, and these should be studied further. Indeed, developing a better understanding of institutional failure - both market failure and government failure - is at the heart of any politics of liberation and emancipation. On this issue, conservatives, libertarians, and progressives can learn from each other and cooperate.

[David · Rating 5 out of 5]

Knowledge And Decisions by Thomas Sowell is a reissue of his classic study of decision making, which includes a preface by the author, updates his seminal work in the context of The Vision of the Anointed. Sowell, one of America's most celebrated public intellectuals, describes in concrete detail how knowledge is shared and disseminated throughout modern society. He warns that actual knowledge is being replaced by assumptions based on an abstract and elitist social vision of what ought to be. Knowledge and Decisions, a winner of the 1980 Law and Economics Center Prize, was heralded as a landmark work and selected for this prize "because of its cogent contribution to our understanding of the differences between the market process and the process of government." In announcing the award, the center acclaimed that the "contribution to our understanding of the process of regulation alone would make the book important, but in reemphasizing the diversity and efficiency that the market makes possible, [this] work goes deeper and becomes even more significant." Anytime you tackle a book by Thomas Sowell, you know your brain is about to have a workout; Knowledge and Decision fulfills that expectation!

[Amy · Rating 5 out of 5]

2024 Review
I re-read this book as part of my re-reading-my-20s challenge, but just realized I was actually 19 when I read it. So, I guess strictly speaking, it doesn't count. Bother.
This book did, however, impact me in a very profound way. I can trace many of my views about government and society to the arguments found here. And it really was this book. Looking at my reviews of other Thomas Sowell works, I seem confident and comfortable in his thoughts and arguments. This is where I was introduced to them. This is where it started.
But this is not where I would recommend starting. One reason Sowell remains timeless is that for the most part, he engages with ideas and not current events. You can read something written by him in the 1980s and feel like it applies to the 2020s. That is, to an extent, still true here. His philosophy remains consistent and applicable. But it is hard to miss that this was published in 1979. He casually uses certain words that are socially unacceptable today like 'retarded' in the original sense of the word and not in a derogatory way, but it still jars and references the USSR and Burger court as ongoing considerations.
For a new reader, I'd probably recommend something written more recently, like Social Justice Fallacies.
For a fan of Sowell's thoughts, this is one you don't want to miss. It is the foundation, in many ways, for The Vision Of The Annointed: Self-congratulation As A Basis For Social Policy.
I'm glad this was my introduction and I'm glad I re-discovered it, even if it didn't fit into the category I thought it did!

2012 Review
Thomas Sowell should be required reading for everyone everywhere! So worth looking into and reading.

[Ari · Rating 4 out of 5]

Knowledge and Decision is a bit hard to categorize. It's about decision making, asymmetric information, incentives, and public policy. It's also, sneakily, an introduction to economics and economic thinking. It's the sort of book that makes economics look like a fun and interesting topic, as well as a disciplined science.

Sowell isn't an ideologue, and he backs his claims with data, and with wonderfully chosen examples. It's a fun read, as well as a highly illuminating one.

[Nicholas · Rating 5 out of 5]

One of the densest books I have ever read. In the words of Tucker Max, it teaches you "how to think."

It can be summed up as such;

The question is not what is the decision made but who makes it and with what constraints, incentives, and feedback mechanisms.


Quotes:

"The kinds of people attracted to the original insurgency, under the initial set of incentives and constraints, tend to be very different from the kinds of people who gravitate to it after it has become successful and achieved a major part of its goals. By definition, an insurgent movement forms under a set of incentives and constraints very different from those which it seeks to create."

"The more general and more important point is to distinguish between (1) examining issues and institutions in terms of their process characteristics versus (2) examining them in terms of their proclaimed goals or ideals."

"Feedback mechanisms are crucial in a world where no given individual or manageably-sized group is likely to have sufficient knowledge to be consistently right the first time in their decisions."

"There are inherent constraints, given the limitations of nature and the unlimited desires of man, and economic systems are simply artificial schemes for administering the inherent scarcities."

"We are all in the business of selling and buying knowledge from one another, because we are each so profoundly ignorant of what it takes to complete the whole process of which we are a part."

"The residual claims method of payment creates a set of monitors who do not need to be monitored themselves, because they have the incentive of self-interest to see that residual claims are maximized."

"As the government adds its own set of prerequisites to those of the negotiating parties, the number of negotiations that result in mutual agreement is almost certain to decline."

"Nobody needs to know the whole story in order for the economy to convey the relevant information through prices and secure the same adjustments as if everyone had known."

"The most basic question is not what is best but who shall decide what is best."

"Most objections to sorting and labeling in general are based on ignoring the costs of knowledge, or ignoring differences in the cost of knowledge between one decision making process and another."

"Arbitrary, categorical or 'bureaucratic' rules in general cannot be criticized as wrong merely because some individual consequences are sometimes nonsensical as compared to what an intelligent and impartial person would have decided in the light of all the facts of the particular case. Neither the facts, nor intelligence, nor impartiality, are free goods. Categorical rules are a recognition of this and an attempt to economize on the resources available in the light of their costs."

"Governmental agencies are generally authorized to carry on processes rather than to achieve results."

"There is no such thing as objective, quantitative 'need.' Whether with airports or apartments or a thousand other things, how much is 'needed' depends on the price charged."

"The use of force is significant not simply because force is unpleasant, but because it distorts the effective knowledge of options."

"What is politically defined as economic 'planning' is the forcible superseding of other people's plans by government officials."

"Its problems were the classic problems of planning. Initial miscalculations based upon the inadequate knowledge of the distant planners were not readily correctable by feedback based on the knowledge possessed or acquired by the experience of those actually on the scene."

"A legal right worth X is not in fact a right if it costs 2X to exercise it. This is obvious enough when the rights and the costs can be reduced to money. The principle is no less true in cases where the values are nonfinancial."

"Every year if not every day we have to wager our salvation upon some prophecy based upon imperfect knowledge."

"If freedom was to exist, it had to be systemic rather than intentional."

"Freedom is not simply the right of intellectuals to circulate their merchandise. It is, above all, the right of ordinary people to find elbow room for themselves and a refuge from the rampaging presumptions of their 'betters.'"

[Josiah Edwards · Rating 4 out of 5]

A great followup to Basic Economics, Knowledge and Decisions is a beautiful blend of straight data and research, and Sowell's insightful social and political philosophy. It was one of the more intellectually challenging of Sowell's books, but I was in no way short of passages to underline. Brilliant stuff.

[Matt · Rating 5 out of 5]

A remarkable book about the ways in which various economic, social, and political institutions facilitate or hinder the transmission and use of knowledge in society. I approached this book thinking it would simply be an elaboration on Friedrich Hayek's famous essay, "The Use of Knowledge in Society." But there is so much more to it than that. I was especially intrigued by Sowell's identification of "articulated rationality" as merely one mode of knowledge transmission, which might or might not be superior to alternative modes in different contexts. Often, we have ways of knowing that something works without being able to verbally explain *why* it works. And this fact has important implications for a wide range of public policy issues.
Another feature of this book that surprised me was how conservative Sowell is on issues of crime and military defense. I tend to think of Sowell as more of a libertarian than a traditional conservative, but these are two issues where the gap between him and libertarians seems especially large.
I've heard Sowell refer to this as his best book. I agree. And given the high quality of many of his other books, that's high praise indeed!

[Sean Rosenthal · Rating 4 out of 5]

Interesting Quotes:

"What then is the intellectual advantage of civilization over primitive savagery? It is not necessarily that each civilized man has more knowledge but that he *requires* far *less.* A primitive savage must be able to produce a wide variety of goods and services for himself, and a primitive community must repeatedly duplicate his knowledge and experience in innumerable contemporaries. By contrast, the civilized accountant or electronics expert, etc., need know little beyond his accounting or electronics. Food reaches his local supermarket through processes of which he is probably ignorant, it not misinformed . . . A primitive savage could never survive knowing so little about the production and use of spears, grass huts, or with such utter naivete about which berries are poisonous, which snakes dangerous, or the ways and means of coexistence in the same jungle with the lions, tigers, and gorillas.

"Civilization is an enormous device for economizing on knowledge. The time and effort (including costly mistakes) necessary to acquire knowledge are minimized through specialization, which is to say through drastic limitations on the amount of duplication of knowledge among the members of society."

-Thomas Sowell, Knowledge and Decisions

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"Agriculture has its general principles and statistics, but agricultural production involves much highly specific knowledge about the characteristics and contours of particular plots of land, and about the freshness, flavor, and keeping qualities of specific batches of fruits, vegetables, and dairy products - all of which are changing by the hour. No expert can say from 100 miles away, and sight unseen, that this year's grape crop is good, or even that last week's good grapes are still good this week. By contrast, an expert on the manufacture of steel can specify the exact quality of steel that can be produced by given combinations of iron ore and coal at given temperatures. For these reasons, steel production has been successfully centrally planned and controlled in various countries, whereas agricultural production has had such chronic problems and periodic disasters in centrally planned economic systems that even the most centralized communist governments have had to make major exceptions in agriculture, allowing decentralized decision-making of various sorts."

-Thomas Sowell, Knowledge and Decisions

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"The transaction costs of choosing a new emperor of the Roman Empire often included tens of thousands of lives and the destruction of whole cities and surrounding countrysides in battles among contenders. The devotion of many rational and public-spirited men of later times to the principle of royal succession, which might seem at first to be only an irrational special privilege, is more easily understood against an historical background of astronomical transactions costs in choosing national leaders. Even one who felt that a given king (or kings in general) had only average intelligence, or even somewhat below average intelligence, might still reasonably choose to bear with royal succession if he felt that the likely differences in leadership were not worth the carnage involved in alternative political processes available at the time."

-Thomas Sowell, Knowledge and Decisions

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"Much of the Marxian *tableau* (and related social visions) depend, in a crucial way, on analyzing in retrospect only surviving and successful businesses. In this approach, the whole market process - risks, estimates, consumer validation, etc. - all evaporates, while the analysis concentrates on selected results in terms of theoretical examples of survivors. Because firms can survive only insofar as prices cover costs, this vision of survivors-only can proceed as if it is axiomatic that prices are somehow automatically suspended above costs, with the gap between them containing a profit to be siphoned off by those who happen to hold the legal title to the means of production - this arbitrary title being the economic cause as well as the institutional mechanism behind their proceeds. To generalize about any group from the experience of its successful survivors alone is often to miss the whole point of the process in which the group as a whole is involved. Using such an approach, one could, for example, prove that no one was killed in World War II.

"Where such a vision of the market economy proceeds empirically rather than theoretically, it can appear plausible only for relatively brief historical periods. The great successes of one era tend to disappear into oblivion in subsequent eras - witness Life magazine, the Graflex Corporation, and W.T. Grant, all of whom were once giants dominating their respective fields. The disappearance of these once dominating enterprises within the past generation is part of a longer history of such disappearances. Virtually none of the top industrial giants of a hundred years ago are still with us today. Such disappearances are perfectly understandable in a vision of a risky process of estimation and subsequent validation. They are hard to explain in a vision of prices mysteriously suspended above costs for the convenience of 'capitalists.' "

-Thomas Sowell, Knowledge and Decisions

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"Perhaps the most widespread misunderstanding in economics is that it applies solely to financial transactions. Frequently this leads to statements that 'there are noneconomic values' to consider. There are, of course, noneconomic value. Indeed, there are *only* noneconomic values. Economics is not a value itself but merely a method of trading off one value against another. If statements about 'noneconomic values' (or, more specifically, 'social values' or 'human values') are meant to deny the inherent reality of trade-offs, or to exempt some particular value from trade-off process, then such propositions need to be made explicit and confronted. Dedication to high and selfless ideals can be no more effectively demonstrated than by trading off financial gains in the interest of such ideals. This is an economic trade-off."

-Thomas Sowell, Knowledge and Decisions

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"From the point of view of career criminals, there is some optimal quantity of violence associated with economic crimes, such as robbery. With zero violence and zero threat of violence, no one would turn over his economic assets to the criminal. But beyond some point, violence causes public outcries which bring more police power to bear in a given sector, reducing crime opportunity for other criminals as well as for the one who committed some 'senseless' violence against an economic crime victim. Where each criminal is a separate decision-making unit, these external costs of his crime have no deterrent effect on his conduct. When crime is organized into larger units, however, these larger units have an incentive to minimize public outcry per unit of economic crime, which usually means reducing the amount of 'senseless' violence against the victims. In short, with organized crimes . . . internalizing the external costs created by individuals means greater social control and greater responsiveness to public reactions which might safely be ignored by an individual malefactor whose identity was unknown to authorities or whose guilt would be difficult to establish through formal legal processes. In both cases, the source of this greater control is the lower cost of knowledge by those with whom he is closely associated. The relative abandon with which organized rime figures kill each other only reinforces the point; there is little or no public outcry at the death of a mobster."

-Knowledge and Decision, Thomas Sowell

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"Choice through the ballot box has often been equated with choice through the market. But inherent constraints mean that democratic governments have no wider array of options to offer than anyone else - regardless of what options many may believe to exist - and that one crucial difference between ballots and prices is that prices convey effective knowledge of inherent constraints, while ballots do not. If I desire a Rolls Royce and simultaneously a normal standard of living, the price tag on the automobile immediately informs, convinces, and virtually coerces me to the conclusion that these two things are inconsistent. But if I believe simultaneously in a large military arsenal, low taxes, a balanced budget, and massive social programs, there are no constraints on my voting that way. Some time after a voting decision, it may become apparent that what was asked or promised did not in fact materialize, but this can easily be blamed on the dishonesty of political candidates, with no greater public awareness that the set of options simultaneously desired was inherently unrealizable from the outset. Instead of feedback to the voters to reduce their desired set of options to what is simultaneously realizable, the message may be to choose different persons as leaders, or different ideologies, movements, etc., in order to continue pursuing the same set of options. Indeed, when social progress is viewed retrospectively, it is often regarded as axiomatically attributable to such insistence on better things, rather than to technological and organizational advances over time which create wider arrays of options from which to choose. It is as if the historic increase in the Gross National Product was incidental to the rising living standard caused by political activity."

-Thomas Sowell, Knowledge and Decisions

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"Specific governmental organizations do not simply administer to some generalized well-being of the public, as various social or economic units are free to do. That is, nongovernmental units are usually free to determine their own respective degrees of specialization, and to change these over time as they see fit. Wells Fargo used to run the 'pony express,' but now they have abandoned this and conduct more or less conventional banking activities instead. A baby food manufacturer may diversify its activities to include life insurance, and a bowling equipment manufacturer can produce motor vehicles as well. A typical mother changes her whole routine and role several times as a child proceeds from infancy to adulthood. By contrast, a governmental agency has a specific set of assigned activities to pursue, rather than a general goal to maximize, such as profit making or family well-being. Governmental agencies are generally authorized to carry on *processes* rather than to achieve *results.* If the postal officials were to become convinced that communications could be vastly improved by a large-scale shift from the use of letters to the use of telephones, telegraph, and various forms of person-to-person radios, it would still have no authority to use the money at its disposal to subsidize these latter activities instead of carrying the mail. If there were a government baby food producing agency, it could not decide on its own that a point had been reached at which some of its money should be incrementally redirected toward life insurance, as Gerbers has done; a government photographic agency could not decide to produce raincoats, as Eastman Kodak has done . . .

"A nongovernmental organizations, such as the March of Dimes, could - as it did, after conquering polio - turn its attention to other serious diseases, but if it had a government mandate strictly limited to polio, it would have little choice but to continue into such activities as writing the history of polio, collecting old polio posters, etc., while children were still dying from birth defects or other maladies. The point here is not that the leaders of the March of Dimes were either more intelligent or morally superior to the leaders of the government agencies. The point is that a non-governmental organization subject to feedback from donors or customers has incentives and constraints that lead to institutional decisions more attuned to rational social trade-offs."

-Thomas Sowell, Knowledge and Decisions

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"One of the more dramatic recent examples of the effect of forcibly keeping prices below the market level has been the so-called 'gasoline crisis' of 1979. Because of the complexities in long-standing government regulations controlling the price of gasoline, their full effects began to be felt in the spring of 1979. As in the case of rent control, the effects were *not* primarily on the quantity of the physically defined product - gallons of gasoline in this case - but on the auxiliary services not articulated in the law. Just as rent control tends to reduce such auxiliary services as maintenance, heat, and hot water, so controlling the price of gasoline reduced such auxiliary services as hours of service at filling stations, credit card acceptance, and checking under the hood. Indeed, what was called a 'gasoline shortage' was *primarily* a shortage of hours of services at filling stations, and the traumatic effects of this indicate that unarticulated aspects of the physically defined product are by no means incidental. In New York City, for example, the average filling station was open 110 hours a week in September 1978 and only 27 hours a week in June 1979. The actual amount of gasoline pumped declined only a few percentage points, while the hours of service decline 75 percent. That is, filling stations tried to recoup the losses from price control by reducing the man-hours of labor they paid for, while the motorists' losses of man-hours waiting in gasoline lines went up by many times what the filling stations had saved. Moreover, the motorists suffered from increased risks in planning long distance trips, given the unpredictability of filling station hours en route. This prospective psychic loss to motorists was reflected in dramatically declining business at vacation resorts, for example, but retrospective data on the actual amount of gasoline sold showed only small percentage declines. In short, the real cost of the so-called gasoline shortage was not simply the small statistical change in the quantity of the physical product, but the large prospective change in the ability to get it when and where it was wanted. AS in so many other cases, objective retrospective data do not capture the economic reality."

-Thomas Sowell, Knowledge and Decisions


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"Once a rationale for regulation has been created, the actual behavior of regulatory agencies does not follow that rationale or its hoped-for results, but adjusts to the institutional incentives and constraints facing the agencies. For example, the scope of the regulation extends far beyond 'natural monopolies,' even where it was initially applied only to such firms. The broadcast-interference rationale for the creation of the Federal Communications Commission in no way explains why it extended its control to cable television. The 'natural monopoly' that railroads possessed in some nineteenth century markets led to the creation of the Interstate Commerce Commission, but when trucks and buses began to compete in the twentieth century, the regulation was discarded but extended to them. Airplanes have never been a 'natural monopoly' but the Civil Aeronautics Board has following policies completely parallel with the policies of other regulatory agencies. It has protected incumbents from newcomers, just as the FCC has protected broadcast networks from cable TV, as the ICC has tried to protect railroads from trucking, or municipal regulatory commissions have protected existing transit lines from jitneys or other unrestricted automobile-sharing operations. As a leading authority has summarized CAB policy: 'Despite a 4,000 percent increase in demand between 1938 and 1956, not a single new passenger truck line carrier was allowed to enter the industry."

-Thomas Sowell, Knowledge and Decisions

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"Examples [of the problems a central planner has trying to articulate specifically what should be produced] abound in the Soviet press, where economists and other decry particularly glaring instances and demand 'better' specification - rather than raising the more politically dangerous question of whether *any* articulated specification by central planners can substitute for monitoring by actual users, as in price-coordinated economies. For example, when Soviet nail factories had their output measured by weight, they tended to make big, heavy nails, even if many of these big nails sat unsold on the shelves while the country was 'crying for small nails.' When output is measured in value terms, the individual firm tends to produce fewer and more expensive units - whether clothing or steel, and regardless of the users' preferences. Where the articulated measurements are in units of gross output, the firm tends to buy unnecessarily large amounts of parts from other firms, receiving credit in its final product statistics for things produced by others; where the articulated measurements are in units of *net* output, then the firm tends to make as much as possible itself, even where the cost of parts produced by specialized subcontractors is lower. All of these are perfectly rational decisions from the standpoint of the individual Soviet firm, maximizing its own well-being, however perverse the results may be from the standpoint of the Soviet economy. Even terror under Stalin did not make the individual producer adopt the economy-wide viewpoint. On the contrary, where imprisonment or death were among the penalties for failure to fulfill the task assigned by the central planners in Moscow, the individual firm manager was even more prone to fulfill the letter of the law, without regard to larger economic considerations. In one tragi-comic episode, badly needed mining equipment was produced but not delivered to the mines because the equipment was supposed to be painted with red, oil-resistant paint - and the equipment manufacturer had on hand only oil-resistant *green* paint and non-oil-resistant red paint. The unpainted equipment continued to pile up in the factory despite the desperate need in the mines, because - in the producer's words - 'I don't want to get eight years.' To the actual users, the color of the paint made no difference, but the incidental characteristic carried as much weight as *articulation* as the most important technical specification . . .

"In price-coordinated decision making, the user can monitor *results* with little or no articulation by either himself or the producers. The kind of mails that are incrementally preferable will become more saleable or saleable at a higher price, and the producer will automatically emphasize their production, even if he has not the faintest idea why they are more in demand. If a certain color of paint makes mining equipment more saleable, the producer will tend to use that color of paint, but he will hardly forego, or needlessly postpone, sales until he can get the particular color of paint, if the demand for the equipment is such that it sells almost as fast with a different color."

-Thomas Sowell, Knowledge and Decisions.

[Ryan Schmitt · Rating 5 out of 5]

I've read a number of books by Thomas Sowell; although he is obviously a brilliant systematizer (cf. A Conflict of Visions: Ideological Origins of Political Struggles), I didn't fully appreciate what a gifted economic theorist he was until now. This book has a very small number of core ideas:

1. The consequences of knowledge being unevenly distributed and inherently costly to produce, transmit, and verify
2. Systemic analysis in terms of processes, incentives, and constraints, as contrasted with so-called "intentional" explanations
3. The role of unarticulated knowledge versus articulated rationality
4. The contrast between incremental and categorical decision-making

Like "Economics in One Lesson," the book can seem repetitive at times, because the same core ideas are being applied systematically throughout the text in order to analyze a vast spectrum of social, political, legal, and corporate issues. Despite this work being nearly forty years old now, only a handful of the issues discussed seem dated today (such as street crime, and Cold War military spending); the great majority of this book's wisdom and insight is evergreen, with readily apparent implications for today's world.

Like anything Sowell has ever written, it is impossible to get bored while reading this book. Brilliant aphorisms frequently come out of nowhere (for example: "'Distributive justice' as a social goal means 'distributors' justice' as an institutional process."), and complex ideas are conveyed with a clarity that not one writer in ten thousand can equal. Not since Human Action: A Treatise on Economics has a single book had such a significant effect on how I view the world.

[Paul · Rating 4 out of 5]

I'm having some trouble judging this in the sense that with my love of EconTalk, I'm already so familiar with the paradigm of prices as information and the other ideas from The Use of Knowledge in Society that I'm already very much on Sowell's wavelength. It's interesting how topical this book seems, given that it was published almost 40 years ago.

With these caveats out of the way, I'd definitely recommend reading this book. Sowell does a great job of explaining in a common-sense way about why who chooses rather than what is chosen is often the right way to think about things. There were some things in here that I'm not sure I 100% agreed with Sowell on, and I am generally suspicious of most social science research, but if anything the high quality of his reasoning has made me question the source of my disagreement rather than dismissing Sowell as some sort of an intellectual sucker.

I will say it is fortuitious that I've moved on so quickly to The Blank Slate , as the books pair well together. Both deal with the undercurrent of anathema topics and research results that is rampant among anything determined to be politically relevant (race, psychology, biology, etc). I find across the entire political and ideological spectrum, there is a disturbing trend of "thoughts that must not be thought" and the idea of "dangerous research topics". It seems that both Sowell and Pinker have the same concerns.

[Sotiris Makrygiannis · Rating 4 out of 5]

Intellectuals exist in order to promote their own wit, ok that was nice :)
the book is very deep and extensive, mathematics spoken with words and explains the thinking behinds many decisions. I wonder if he forgot anything, if he did we will see a new edition soon.
However, must say that this is not a book for listening but for reading, so don't buy the audiobook but the actual paper version.

[Sylvester · Rating 5 out of 5]

Knowledge is power. Sowell's analysis of how knowledge is transmitted in the society as capital can influence law, politics and history is captivating and compelling.

[Adam Marischuk · Rating 4 out of 5]

How can anyone give a Thomas Sowell book only 4 stars? How can anyone give a book described by F.A. Hayek as "wholly original" and Milton Freidman as "brilliant" only 4 stars? How can the winner of the Law and Economics Center Prize receive only 4 stars?

Without a doubt the book was groundbreaking, brilliant and an exceptional example of economic thought applied to real life. But the book is very much in need of an update and is incredibly dense, even for those familiar with much of the history that Professor Sowell uses to illustrate his examples.

Please allow me to explain.

The first half of the book (part 1) is its own book about the role of knowledge in the decision making process and is often quite philosophical and psychological. Professor Sowell does an admirable job first arguing that people (the market) make rational decisions as individuals with the best knowledge they have available because knowledge is not free. Allow me to use an example from my own life. Recently my wife and I decided to buy a car. We did research which cost both time and money online, asked friends, went to a few different dealerships, test-drove a half dozen different vehicles etc. Eventually she got fed-up and left me in the precarious position of making the right decision (for her) because she had other more pressing concerns and obligations. I as well was pressed for time because I needed the vehicle for work. Eventually we reached a place of negative returns on any further investment of time and effort and I made the decision. Did I make the correct decision? Impossible to know today, but if the car breaks down in the next year, I suppose not. Or if the government changes the emissions laws, perhaps not. I could have theoretically avoided this by getting an engineering degree while simultaneously studying to be a mechanic and scouring the minutes of each European Union meeting to guess the trends in vehicle emissions but such an investment would only yield negative returns (cost more than I would save by having to replace the vehicle).

This is a direct shot across the bow of those central planners who assume erroneous decisions are made by irrational people and thus the great masses are in need of some centralized planning on a rational basis to prevent such irrational and wasteful behaviour. I suppose this is why the 1970s Lada was the pinnacle of vehicle engineering.

But additionally, the Government, despite all the perceived waste or maybe because of it, does not make irrational decisions either. Rather, the various government agencies and bureaucracies make completely rational decisions based on much different criteria. The criteria is not only different from that of the free market individuals, but often at odds with the very founding principles of the department. For instance, the bureaucracy makes the perfectly logical decisions to spend its entire budget every year by highering new workers, or risk having the budget slashed, regardless of the pressing need for more workers.

All of these are perfectly rational decisions from the standpoint of the individual Soviet firm, maximizing its own well-being, however perverse the results may be from the standpoint of the Soviet economy.p.215

Here Professor Sowell argues that the most efficient/just system is the system where those closest to the ramifications of the decision are those who make the decision; and this is rarely the Federal government. He could have used the term "subsidiarity" but the term doesn't even appear in the index.

But Part II of the book is less theoretical and focuses on "trends" in economics, law and politics. To call 1980 "trends" is unfortunately now really only interesting from an historical perspective despite the 25 page preface to the 1996 edition. And an historical perspective is very necessary. If one is unfamiliar with the Warren court (boy does he not have anything good to say about it), I suggest reading up on the history of the American Supreme Court before beginning.

This part of the book's general thrust is that governement will continue to expand and curtail freedom, and Professor Sowell thankfully offers no prognostications:

Whether this [the Burger Court as opposed to the Warren Court] particular period is merely a pause in a long march or a time of reassessment for new directions is something that only the future can tell. The point here is not to prophesy but to consider what is at stake, in terms of human freedom.

How much more could be added with the inclusion of Ronald Reagan, the fall of the Soviet Union and the election of Donald Trump? Like with the stockmarket, upswings and downswings belie the general trend upwards.

The book is great but the references are dated and difficult to follow even for an historian. One example which jumps to mind is the government involvement in radio broadcasting and monopolies. The advent of the internet, the netscape/microsoft anti-trust cases, and the recent discussion on hate speech, free speech and social media platforms would make interesting reading in relation to the general theme of government intrusion.

Additionally, there are the odd paragraphs which read like this:

To "solve" some social "problem" is (1) to move the locus of social decision making from systemic processes of reciprocal interaction to intentional processes of unilateral or heirarchical directives, (2) to change the mode of communication and control from fungible and therefore incrementally variable media (emotional ties, money etc.) to categorical priorities selected by a subset of a population for the whole populations, and (3) because of the diversity of human values, which make any given set of tangible results highly disparate in value terms (financial or moral), pervasive uncompensated changes through force are lekely to elicit pervasive resistance and evasion, which can only be overcome by more force-which is to say less freedom. p.337

The above style is rare, but indicative of the full pressure when Professor Sowell opens the faucet a little too much. It is like trying to drink from a firehose.

[Mark Geise · Rating 5 out of 5]

Thomas Sowell’s “Knowledge and Decisions” is just as important today as when it was written. This book is dense and takes a bit of time to get through, but it’s worth it. Sowell’s main thesis is that decision-making power has shifted to centralized bodies. This has profound impacts on economics, law, and politics. As power is concentrated, there is less faith in the public and in mutually beneficial, voluntary transactions. Top-down, one-size-fits-all “solutions” are much more likely with increases in centralized power. Local transactions in free markets are seen as chaotic and irrational when compared to articulated policies from above. This has led to increased involvement by intellectuals in politics; the need to articulate “rational” policies precipitates the need for them. Sowell laments the popular belief that intellectuals live for ideas rather than live off of them. He insists that we need to evaluate the incentive structure inherent in intellectual professions just as we evaluate the incentive structure for other positions. He writes that we also need to do much the same for government employees. There is no evidence that intellectuals or public employees operate under a different incentive structure than anyone else. They are ultimately self-interested, as are all the rest of us. The public expects too much of intellectuals and public employees, to the public’s own demise.

Sowell ends with some discussion on the United States and the intentions of the Founding Fathers, which was a fitting ending to the book. He believes that the Founding Fathers were realists about the human condition. They understood that all of us, including public employees, are ultimately self-interested. The United States was designed to not allow ambition to override other portions of the government. The French Revolution, instead, grew out of the belief that people could be changed if they only saw the light. This is very much the same approach that a majority of intellectuals believe today. Even if something is not favored by a large portion of the populace, they will learn to like it because the almighty intellectuals have proclaimed it superior. Sowell believes that this is a slippery slope that eventually leads to totalitarianism, which is certainly plausible. Government has intruded further and further on our lives since this book was written, and a large portion of young voters want even more government involvement in every part of our lives.

As usual, Sowell weaves historical examples and logical deductions extremely well. He is one of the best at looking at economics and history from a libertarian perspective and enforcing his points with diverse examples from all over the world at all points in history. He continually emphasizes that we need to evaluate everything based on the incentives and constraints of the decision makers. This is an economic principle that can be applied to politics, law, business, and sociology. Though it is simple, this type of evaluation is shirked by most of the public. We can judge judicial activism and the rapid growth of governmental agencies within this scope; both grew from the incentive to wield power, money, and influence. Though constitutional controls are meant to limit any part of the government from growing too powerful, judicial activism has allowed for courts to escape many of the constraints facing them. Much the same, governmental agencies have consolidated legislative, executive, and judicial powers within one body, contrary to the spirit of the Constitution. This agencies now hire more people, use more taxpayer money, and wield more power than they would without this consolidation of powers.

This is worth reading. As I said in the first paragraph, this may be even more relevant today that it was when it was written. Leftist intellectuals now wield greater influence over the public’s opinion than they did even ten or twenty years ago. The public need not trust them simply because they are “experts”. Without empirical proof, they are nothing more than talking heads pushing an agenda.

[Vadim · Rating 5 out of 5]

Некоторые полагают: чтобы сделать общество лучше, нужно принять предлагаемые ими экономические, политические и правовые решения. Однако Томас Соуэлл утверждает: нужно договориться не о "решениях", а о том, кто при каких стимулах и ограничениях будет их принимать. Результаты политической деятельности, с его (и большинства экономистов) точки зрения, определяются не заявленными или даже желаемыми целями, а механикой производства этих результатов, как раз тем, кто и с какими целями и информацией в голове делает выбор.

Книга прилагает стандартные экономические понятия (альтернативные издержки, маржинальные издержки, время, убывающая отдача, субъективная ценность и т.п.) к реальности экономической и социальной политики и показывает, что отдача от такого приложения все еще очень высока: в пустыне политических дискуссий даже капля экономики может быть спасительной. Если у вас в списке чтения нет множества книжек с рекомендациями двух Нобелевских лауреатов (в данном случае -- Фридмана и Хайека), не пожалеете, если следующей прочтете эту. Отличное введение в экономику для тех, кому интересна политика.

[Chris · Rating 5 out of 5]

Superb.

[. · Rating 5 out of 5]

(Трето четене)
Много, много добра книга. За трети път изслушвам първата й част (В главите от първата част се говори по общо за играта между формирането, събирането и проверката на знанията и взимането на решения.)
Общо взето Том Соуел те хваща за ръката и те научава как да мислиш. Някак си е като математика с думи, вместо с цифри.

Говори се за хората, които взимат решения в нашия свят, но не за тяхния "характер", ами за стимулите, ограниченията и обратната връзка от знания, които оформят и насочват техните решения. За това как много по-лесно се концентрира властта - вземането на решения, но много по-трудно се концентрират знанията, които да оформят и подобряват тези решения. И че най-важното решение не е КАКВО да се направи (по някакъв политически или фирмен проблем), а решението КОЙ ще взима тези решенията и под контрола на какви стимули, ограничения и фийдбек механизми (свързани със знание за проблемите засягащи го) е той.

Говори се и за това какво е знанието, и как се формира то от груба информация, и колко разпръснато е то в нашия свят. Говори се за това как колкото повече напредва цивилизация отделния човек има все по-малко, а не повече знания от всички налични знания, за разлика от първите години на човека, когато сме били ловци и събирачи, където всеки общо взето е трябвало да знае почти всичко необходимо му за да оцелее.

Том в много големи детайли разглежда това и как нарастващото разпръскане на знанията към все повече различни хора - все по-ограничено познание се отразява на нашия свят, на семейството, на обществените групи, на фирми, неправителствени организации, и държавни и политически формирования и как концентрацията на власт все повече се отразява върху качеството и адекватността на решенията, които тази концентрирана власт ще взима. Защото всеки човек може да вземе много по-добри решения в полетата, където е концентрирано собственото му знание в сравнение с решенията спуснати отгоре, където решаващия е бил с много по-малко знания, дори да е бил като цяло "знаещ" човек, дори много "по-знаещ" от обикновения човек взимащ решение. Общо взето дори най-умните и знаещи хора нямат вероятно дори 1 % от функционалното знание които е разпръснато из масата.

Например всички "знаем" как се дой крава, но колко от нас, знаем в такива ДЕТАЙЛИ, че ако ни се даде една крава и празна кофа, ще се върнем с кофа пълна с мляко и издоена крава. И така е общо взето за всяко действие в нашия свят. И когато някой, който няма функционалните знания в дълбочина на един кравар (например) независимо колко ОБЩА култура иначе има, то неговите решения свързани с доенето на кравата вероятно, ще са много по-лоши спрямо решенията на дори един много прост кравар без никаква обща култура.
И тъй като натрупването на всички необходими знания от взимащите решение отгоре е общо взето невъзможно (поне за сега), за това за обществото е по-добре цялостна децентрализация на взимането на решения - общо взето свобода за хората - ТОЧНО обратното на утопичната визия за света, която имат много (и много от най-вече умните хора).
Много хора, особено умни млади студенти тепърва учещи си мислят, че поради своите знания могат да взимат по-добри решения от другите незнаещи хора дори за техния живот. Не че другите хора са лоши или глупави, но просто "докато и те поумнеят" е добре "някои който разбира повече", някой като умния студент или още повече като умният професор временно, докато и те се научат "да са добри хора" да взима той решенията вместо тях.

Например откъде бедни и необразовани родители ще могат да вземат правилно решение за това в кое училище да запишат детето си, ако те самите не са ходили на училище. Ние като умни хора, ще вземем по-��обро решение за дете което не познаваме, не сме виждали през живота си, дете с което по никакъв начин не сме обвързани, нито емоционално, нито финансово и чието бъдеще добро или лошо ние няма как да проследим в детайли и за което, за разлика от неговите родители.

Да така казано звучи абсурдно, но страшно много хора, включително и аз като бях на 20 имат такава визия за света. Чак е плашещо.

Да на хартия ни пука за бъдещето на това дете, но на практика самите ние в нашия си живот имаме решения, които са по-важни за нас и за чието взимане ще прекараме повече време от колкото за това решение което ще определи бъдещето на това непознато дете. Наивно е да се лъжем, че експертите ще вземат по-добро или също толкова добро решение за чуждо дете така както биха взели за собственото си дете. Дори и намеренията да са еднакво добри кой РЕАЛНО има повече познания за нуждите и възможностите на това дете... А това, че родителите му не са ходили на училище не означава, че не знаят важността на училището.

И като си говоря с млади хора много от тях СА с такава визия за света. Говорил съм си и с професори, които са с такава визия за света, които смятат, че света трябва да се управлява и решенията да се взимат от хора като тях - които "знаят". Интересно е как дори тези, които знаят много, забравят колко още страшно много не знаят. Дори професора в случая (от медицинския университет) въпреки знанията си най-вероятно една сестра знае много по-добре как да вземе кръв или да разтвори антибиотик, една лична лекарка знае много повече как да сложи ваксина и да реагира при странична реакция, и един лекар по инфекциозни болести знае много по-добре как да лекува един пациент от професора, който е писал и чел цял живот по темите, но не е виждал пациент през живота си. И пак добре, ако той взима генералните решения. В повечето държавни бюрокрации решенията се взимат от лелички, чийто стимули и ограничения са да запазят работата и отдела си и да излязат в обедна почивка.

Смразяващо е колко глупави са дори "умни" хора. Прав е Том Соуел да каже че "са необходими огромни знания за да може човек да осъзнае своето невежество".
Работата е там, че дори депутатите и министрите да са все професори, философи и интелектуалци тяхното ограничение на знания ще доведе пак до това, че решенията които те ще взимат от наше име, ще бъдат неадекватни. Дори не е до правилните хора. Добрите политици сложени в система с централно управление ще взимат не по-добри, решения от прости депутати. Много вероятно е даже "експертното" правителството да взима ОЩЕ по-лоши решения, тъй като поне депутат - прост човек едва ли ще се набута между шамарите да си създава работа регулирайки неща от които не разбира. Докато професорите "разбират" и няма какво да ги спре в поемането на решенията на обикновените хора от тяхна милост. Просто се замислете колко много нови неща сте научили и си представете колко още нови неща никога няма да научите.

Смешно е как за нещо което е резултат от несъответствие между знания и власт се обвиняват корупция и лоши намерения.

И решението не е да назначим Господ за министър председател, който да наблюдава и да знае всички и да взима всички решения, които да са възможно най-правилни и съобразени с всички. Цаката е просто границите в които хората да са свободни да са широки и всеки да има свободата да вземе най-правилното решение спрямо неговото си положение и знания. Нещо което е много трудно толкова много умни и знаещи хора да осъзнаят.
Държавата я има за да пази законът и редът - да живеем в мир помежду си, а не да взима решения вместо нас. И дори само поддържането на този ред и мир е еволюирал да е разделен в ТРИ самопроверяващи се власти - съд, полиция и правителство. Тези регулиращи се институции ги има за да регулират нещо толкова просто. А не за да правят каквото всеки може сам в свободен пазар да регулира. Така сме се накаляли в бюрокрация, че е шокиращо как въпреки това хората прогресиваме и сме относително свободни. Дано продължи.

С разпръсването на знанието по отделните хора е редно да последва и разпръсване на властта за вземане на решения за това какво да става в нашия свят, а не обратното. Не за друго, ами просто, защото иначе решенията ще са по-лоши и съответно това което става в света ще е по-лошо.

(Второ четене, поне на увода)
ПОПРАВКА - Като преосмислих малко и като изслушах увода няколко пъти още всъщност това е гениална книга! Езикът е малко сложен, но все пак е писана в началото на кариерата на том. 4,5 звезди. Със сигурност ще я изслушам още не веднъж.
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3,5 звезди (добра книга, но едва ли ще я прочета цялата пак)
Хубава книга, определено не му е най-добрата. Повечето от тезите за МНОГО по-красиво написани в Интелектуалците и обществото. Но е стара книга. Личи си че човека е много подобрил писателските си умения с годините.

Основната теза в книгата е че най-важният избор който трябва да вземем не е толкова КАКВО политическо решение, КОЙ ще е този който ще взима решенията. Останалите тези за как интелектуаците затворени в своя интелектуален ехо балон се имат за много по мъдри и знаещи от околните и решенията които взимат статистически са по-лоши от колкото дори масата би взела. Ителектуалците са опасни защото се мислят за много по-прави от колкото нормалните хора от НЕинтелектуалната маса. Хората от масата е много по вероятно да загърбят грешна идеология която следват гледайки емпиричните резултати за грешността и, докато интелектуалците си затварят очите за фактите в името на прокарването на идеологиите си за по-добър свят, и по този начин отдалечавайки ни в доста моменти в историята точно от по доброто утре подкрепяйки кръвожадни диктатори, но споделяйки тяхната идеология. В Интелектуалците и обществото обаче много по-добре са написани. В настоящата езикът на моменти е излишно сложен, изреченията прекалрно некрасноречиви. Малко трудна за следене беше на моменти, особено ако човек не е наясно с тезите на автора. Но разбираемо е все пак книгата е от 80те години. Важен е напредъка в следващите му книги. Стщо така слушах тази книга не по пиратски, ами през аудъбъл и стигнах до извода как легалния начин е много по-неудобен. Функционалностите на плеъра на аудъбъл са много по-дървени и малко от тези на Смарт аудиобук плеяра за слушане на пиратски мп3ки. Но все пак за да стимулирам авъора вече съм си купил една негова книга - Основи на икономиката (страхотна книга), а в бъдеще бих си купил и други негови книги, макар да ги слушам пиратски. Наистина автори като Том си заслужава да бъдат спонсорирани куоувайки си лекално книгите им.

[MÉYO · Rating 4 out of 5]

When reflecting upon the extremely authoritative propaganda campaigns with regards to “Russia-gate,” vaccine mandates and “there are infinite genders and pronouns” edicts, it’s scary to think this overt form of totalitarianism was predicted with precision in the 1980s by Thomas Sowell. When the masses dutifully accepted the new reality in 2021 that “science was to be trusted and not challenged” and “falsehoods, mistakes and lies are to be accepted and not questioned,” it becomes apparent we’re already in lock step with what Sowell artfully describes as the radicalization of the intellectual elites. It is the peasants who must now shut up and just accept the fact that rich and powerful elites have all the “good” knowledge and thus know how to make all the “good” decisions. “There is no time for questions and debates; we’re about to lose our freedom and democracy!” the pseudo elites repeatedly remind us at EVERY opportunity! We’re getting played again folks and censoring EVERYONE trying to make you aware of this problem isn’t the solution!


“Various kinds of ideas can be classified by their relationship to the authentication process. There are ideas systematically prepared for authentication (theories), ideas not dereived from any systematic process (visions), ideas which could not survive any reasonable authentication process (illusions), ideas which exempt themselves from any authentication process (myths), ideas which have already passed authentication processes (facts) as well as ideas known to have failed or are certain to fail such processes (falsehoods, mistakes and lies)."

"Ideas which lack logical, empirical or general consensual support may still sustain themselves as acceptable to a consensus of those who regard themselves as special guardians of a particular truth, that is, as the consensual reference group that really matters. Sometimes, the elitism implicit in such a position can be tempered by depicting the idea in question [i.e. gender affirming care, vaccine madates etc.] as beneficial to a broad sweep of mankind outside the group, so that the group is only a temporary surrogate for a larger constituency which will ultimately approve the idea."

"The movement towards totalitarianism is a one way movement. No totalitarian goverment has ever chosen to become free or democratic, though a free and democratic nation may choose to move towards totalitarianism as Germany did in 1933."

"In Rome as in later Western countries, both the zealotry and the power were concentrated precisely in those particular intellectuals who dealt in non-verifiable theories; religious theories in the case of Rome, social justice the contemporary West."

[Paul, · Rating 5 out of 5]

This book was written before I was born, and is based on an book written before my father was born. The internet doesn't exist, nor do smartphones. And yet, the book is still eerily relevant. Dense at times, pedantic at times. But the strong mix of sound economic theory combined with political and judicial history is very helpful. The world has not yet shifted. The expert so roundly derided in this 40 year old tome has only become more powerful, as has the intellectual class. With the results that Sowell, Hayek predicted. Almost everything that Sowell writes can be reinterpreted, of course. But at least Sowell acknowledges the problems. Incentives matter. Strongly recommended.

Here are a few of my favorite quotes.

The unifying theme of Knowledge and Decisions is that the specific mechanics of decision-making processes and institutions determine what kinds of knowledge can be brought to bear and with what effectiveness. In a world where people are preoccupied with arguing about what decision should be made on a sweeping range of issues, this book argues that the most fundamental question is not what decision to make but who is to make it-through what processes and under what incentives and constraints, and with what feedback mechanisms to correct the decision if it proves to be wrong. Those convinced that they have "the answer" on whatever economic, legal, social, or other issues are the preoccupation of the moment are of course impatient with questions about institutional processes and their respective advantages and disadvantages for making different kinds of decisions. That is all the more reason for others to look beyond the goals, ideals, and "crises" that are incessantly being proclaimed, in order to scrutinize the mechanisms being proposed in terms of the incentives they generate, the constraints they impose, and the likely outcomes of such incentives and constraints. (P.19-20)

Intellectuals almost automatically explain the misfortunes of groups in terms of victimization by elites who are rivals of intellectuals. By asserting or defining (seldom testing) misfortune as victimization, all other possible explanations are arbitrarily ruled out of order, and with them perhaps hopes of in fact remedying the misfortune. The victimhood approach also requires ignoring, suppressing, or deemphasizing successful initiatives already undertaken by the disadvantaged group or portions thereof-thereby sacrificing accumulated human capital in terms of know-how, morale, and a favorable public image of groups usually portrayed as a "problem." In the victimization approach, intergroup statistical differences become "inequities," though in particular cases they may be due to group differences in age, geographical distribution, or other variables with no moral implications. Victimhood as an explanation of intergroup differences extends internationally to the Third World-typically countries that were poor before Western nations arrived, remained poor while they were there, and have continued poor after they left. The explanation of their poverty? Western exploitation! An economist who treats this as a testable hypothesis notes that "throughout the underdeveloped world the most prosperous areas are those with which the West has established closest contact" and contrasts this with "the extreme backwardness of societies and regions without external con- tacts."210 But like other victimhood approaches, Third-Worldism is not really an hypothesis but an axiom, not so much argued explicitly as insinuated by the words chosen ("the web of capitalism,"211 "the imperialist network""') and established by reiteration. (p.390)

Historically, freedom is a rare and fragile thing. It has emerged out of the stalemates of would-be oppressors. Freedom has cost the blood of millions in obscure places and in historic sites ranging from Gettysburg to the Gulag Archipelago. A frontal assault on freedom is still impossible in America and in most of Western civilization. Perhaps nowhere in the world is anyone frankly against it, though everywhere there are those prepared to scrap it for other things that shine more brightly for the moment. That something that cost so much in human lives should be surrendered piecemeal in exchange for visions or rhetoric seems grotesque. Freedom is not simply the right of intellectuals to circulate their merchandise. It is, above all, the right of ordinary people to find elbow room for themselves and a refuge from the rampaging presumptions of their "betters." (p.417)

[Aditya आदित्य]

The Market as a Natural Phenomena,
or, Economics as a Natural Science

The laws of physics govern the universe. From the galaxies to the quarks, all are subservient to the principles of physical sciences. Chemistry, which is nothing but applied physics, governs the inter-relational characteristics of matter. Biology, which is nothing but applied chemistry, governs genes, heredity, and life itself. The laws of nature, thus, preside over life on Earth. Except that they don’t. There are no laws written in stone. Only theories, that are acceptable because their veracity is proven by deduction and experimentation. Be that as it may, human beings, as a collective, then should be understood through this method of science. After all so much of life on earth is human.

There is hesitance, resistance even, to study humans as only Homo Sapiens. As there should be. We are talking of living breathing people after all. Not ants or rats or whatever else they run experiments on in their laboratories. People are not limited by the laws of nature. Human nature is not governed by natural sciences. So we must have something not as hard as hard sciences: physics, chemistry & biology. Therefore, we have softer disciplines: social sciences or humanities to perform this most important function.

There are criticisms though, shortcomings claimed, of the validity of theories forwarded by such sciences. Psychology, anthropology, sociology, and economics all strive to subsume the scientific methodology but fall short always. All of them fail to furnish results that are as predictable and repeatable as those of the true sciences. Also, all of humanities is outrageously susceptible to ideologies. And as a result they stop being sciences as the inferences are drawn first. The scientific method is then employed to bolster the position held on faith and conviction. A blatant flaw. Unpardonable.

Thomas Sowell cannot resolve this fundamental flaw. He is brilliant of course. But is only a man. A man with ideological convictions and innate beliefs. This book of his is an attempt to present topics lying in the domain of humanities objectively. There are shortcomings in his analysis too, some obvious to even myself. But it is worth a read nonetheless. Several reads in my opinion. Published decades ago, his words still ring true today. And I endorse his theory as it is based on both sound reason and historical evidence. If this much is enough to convince you to read the book then you may stop here. I’ll proceed to write down how I view the intricacies of his writing.

Creating Value

To the fundamental question of “what is value?” there are no simple answers. Great thinkers have struggled to propose a definition wide enough to accommodate all that is valued yet narrow enough to not make the definition itself inane. The truth is that many people value many things in many ways. The answer to the question then would be highly subjective. But given that we live in a society with many others, there has to be some agreement at least to allow for relationships. Mutually beneficial transactions. For which economists have developed the concept of utility. Utility is the usefulness of a goods or service for a person. Although it is still difficult to quantify, we can compare the utility of A, to that of B, for a person. It is dynamic in the sense that the utility of something could increase or decrease with the quantity of that thing already in possession of the person in question. The theory is simple, elegant, and versatile. And so it is a good enough substitute for value. For now.

Imagine all the commodities that you have or want to have. Everything is made of matter, and matter can neither be created nor destroyed. So what we actually value in the commodities is the knowledge that transforms primary materials into useful desired products. Value is created through knowledge. Suffice is to say that only knowledge is valuable. And so it is never free. Ideas and information are not knowledge. Knowledge is a specific type of qualified information that is useful and hence valuable. A tautology as we can all see. But if I could present to you the crux of this book in this review, then what would be the point of the book? As I just mentioned: knowledge is never free. There is a widespread misconception that it is so. There are other misconceptions as well. And this book will rid you of those. The book begins with an elaborate explanation of what is knowledge and how it is created. This part is enlightening and non-controversial. So those in disagreement with Dr. Sowell in general, would not find it jarring to read.

…even the most solid and heavy mass of matter we see is mostly empty space… specks of matter scattered through a vast emptiness have such incredible density and weight, and are linked into one another by such powerful forces that they produce all the properties of concrete, cast iron and solid rock.

…specks of knowledge are scattered through a vast emptiness of ignorance, and everything depends upon how solid the individual specks of knowledge are, and on how powerfully linked and coordinated they are with one another. The vast spaces of ignorance do not prevent the specks of knowledge from forming a solid structure, though sufficient misunderstanding can disintegrate it…

Delivering Value

Now that we've ascertained what is of value, we naturally wish to maximize that. But wait. Our definition is based on subjective utility. I mentioned that we could compare the utility of two different objects to the same person, but what about the utility of the same object to two different persons? For a transaction to take place, the participating parties must value the others' goods more than they value what they offer in exchange. And so there is a semblance of equity in such a mutually beneficial exchange. For this to occur, at scale and at length, knowledge has to be transmitted far and wide and at speed. Knowledge of the usefulness of goods and services on offer and knowledge of the costs to produce the same. This signal of value is the price of the goods or services. Economics has another beautiful explanation behind the origin of price: supply and demand. I won't get into that here but there are a few key points related to this mentioned in the book. Most fail to acknowledge these truths. But they are universal.

It is not the cost that creates value, however. Nor can we make other things valuable by incurring large costs for them...

The inability of the producer to know precisely what the consumer wants is a basic fact of life under any economic system.

The diversity of tastes satisfied by a market may be its greatest economic achievement, but it is also its greatest political vulnerability.

Communicating Value

Given that we are all attempting to maximize value but we also operate under severe constraints, there has to be an optimum. As we can't have it all, we just try to have as much as we can. In other words, we make trade-offs. These decisions are based on knowledge, which we know is scarce and costly. In addition to individuals, decisions have to be made by much larger and more complex units: institutions. The knowledge possessed by these is again diffused and incomplete.

Trade-offs form the fundamental framework of this analysis. In some ways like dialectics is for communists. Dr. Sowell was a fellow traveler in his youth after all. But this is a powerful template. The book presents our world as economic, political, and social trade-offs. And you must read the book to fully comprehend it. This is followed by current trends which have obviously become part of our contemporary history. I'll end my note here. It's messy I know.

Even among contemporary nations, differences in their economic conditions are often far more related to differences in their technological and organizational knowledge than to their respective endowments in natural resources.

The process of transforming current assets into future assets is known in economics as "investments"... so the term "disinvestment" can also apply to moving assets from the future into the present..."

Perhaps the simplest and most psychologically satisfying explanation of any observed phenomenon is that it happened that way because someone wanted it to happen that way.

...in the systematic approach, the outcome does not depend on the individual agents' subjectively pursuing the end result of the system.

Morality is intentional and therefore individual, while purely systemic results are neither just nor unjust, though some results may be preferred to others.

[Dwayne Roberts · Rating 5 out of 5]

Thomas Sowell hits a home run with Knowledge and Decisions. Although slightly dated (e.g., USSR), the book is presented in a principled manner. Well worth the time!

[Andrew · Rating 4 out of 5]

Good book on the economic and organizational use of knowledge and decision-making. I recall his discussion of the 'cost' of knowledge very insightful. A CEO of a fast food chain would have a high cost to obtain knowledge of the day to day customers of a single restaurant, yet have ease of access to aggregate data on the sales for the chain or individual restaurants as a whole. Compare this to the manager or even till-operator who sees the customers each day - the cost of knowledge for him is the opposite. What I took from this was a consideration of local vs. central control - depending on the knowledge required, if its complex enough local control is the most ideal, such as school systems, where the products, educating individual kids, are complex. In contrast, a mine or factory where operations are standardized can be more easily centrally run since conditions are nearly constant.

The above is merely one taste from the book, how knowledge is obtained, but the book links this very nicely with how decisions are made based on this obtained knowledge and the problems and inefficiencies that can arise when knowledge is costly or poorly acquired! What level of the organization decisions are made is also important, including what kinds of decisions are barred at various levels, such as certain kinds of decisions being relegated to higher levels. Sowell presents the problem, the 'trade-off,' very nicely here: central decision-making forces control yet are blighted with poor knowledge. Local decision-making is rich in knowledge of its present conditions yet can permit erratic behavior amongst the different local centres (not unified) which is a problem for a central organization (consider 'brand' control, maintaining standards of operation for customers). Franchise models seem to be an interesting middle-ground position since local entrepreneurs have local affinity and yet sign contracts to maintain certain standards with the larger 'brand,' so while they adhere to centralization, they also have some room to cater to their local conditions.

I recommend this book to anyone interested in how large-scale business or government institutions (should) organize and administrate themselves, particularly local vs. central control.

[Michael Connolly · Rating 3 out of 5]

As with most of Sowell's writing, including his newspaper columns, this book exhibits Sowell's ability to examine an issue from a novel angle, to see aspects of the issue that others have missed.
Sowell makes the point that knowledge has a cost. Sowell talks about the relationship between economics and knowledge. The kinds of knowledge that are relevant are supply and demand. That is, what people can produce and how much labor is required to produce it, and what people want, and how much they are willing to pay for it. The market and pricing are a way for producers and buyers to communicate this knowledge to each other. Sowell also makes one of his favorite points: determining what should be done versus who should make the decision.
Sowell expresses his dislike of vaguely defined terms, such as exploitation. Exploitation cannot be defined in objective economic terms, because it is based on an emotional aversion to the imagined immoral intentions of the employer.
Sowell talks about "articulated rationality". This implies that there is also such a thing as unarticulated rationality. By rational, we mean thought in conformance with reality. We can see that just because a person cannot state logical reasons why they believe something, that does not imply that their opinion is not based upon an honest appraisal of reality. A current example would be the Left-wing assertion that since the political Right cannot articulate a reason why homosexual marriage is a threat to heterosexual marriage, the political Right must be irrational. Similarly, it may be difficult to explain why a three-person marriage is a bad idea. Sowell believes that we should have some respect for cultural rules that have stood the test of time, even if they cannot be justified by rational argument.

[Todd Luallen · Rating 3 out of 5]

I didn't finish this book. I tried, but it was too hard to follow in audio format. I'm not an economist and some of the language Sowell uses isn't common in everyday conversation. As a result, listening in the car or listening casually is much more difficult. I found that I had to rewind or listen again in order to understand what was being communicated. Let me give an example. Read the following quote outloud and imagine if you were listening to it and did not have the advantage of the punctuation and syntax to help understand his meaning:

“A mere enumeration of government activity is evidence -- often the sole evidence offered -- of "inadequate" nongovernment institutions, whose "inability" to cope with problems "obviously" required state intervention. Government is depicted as acting not in response to its own political incentives and constraints but because it is compelled to do so by concern for the public interest: it "cannot keep its hands off" when so "much is at stake," when emergency "compels" it to supersede other decision making processes. Such a tableau simple ignores the possibility that there are political incentives for the production and distribution of "emergencies" to justify expansions of power as well as to use episodic emergencies as a reason for creating enduring government institutions.”

Having said this, I would agree with many of the reviewers that state this book is packed with great information. My 3 star review is really only a reflection of my audiobook experience. I think reading in print would be a much better experience all around.

[Mwansa · Rating 4 out of 5]

A very good good book though I have to admit that Thomas Sowell lost me a handful of times as I read him. Overall it was a very good experience and I look forward to reading more of his canon.

I would narrow down the books theme to the question of who is qualified to make certain decisions given the reality that knowledge has initial and incremental costs. Thomas Sowell goes in depth to show that the pursuit of increasing knowledge in order to make a specific decision is not always cost effective. This brings about the need to tag and sort things and even people. We do this naturally in the vast majority of cases (a brilliant feat of human ingenuity, albeit unknown ingenuity but brilliant nonetheless).

The book shows how knowledge, it's limitations and a poor choice over who should make what decisions has affected trends in History, Law and Politics. He does this so well that you begin to use his process to understand how things have gotten to where they are in your culture and context as well.

He ends the book with what I would call a scathing indictment of the intellectuals. He properly defines them and then explains how their involvement has been a sort of Trojan horse in the decision making field and has caused a lot of things to go haywire.

I would encourage anyone with access to this book to read it. It is brilliant!

[Jack Greenrose · Rating 5 out of 5]

Having read quite a few Thomas Sowell books by now, and liking them all, I'm quite surprised that this book may just be above them all. Why? It's just so beyond well-written that no review can do it justice. If you feel like modern societies have been overtaken by both institutional and decentralized lunacy even though, in theory, there is more knowledge easily available than ever in human history, and you ask yourself how people still can act in such a deeply irrational manner, you need to read this book. You may or may not agree with Sowell's politics, but once you begin to understand the terrible incentive structures that guide our institutions, the world just opens up before you. This book is pure lucid wisdom.

[Alvaro Berrios · Rating 4 out of 5]

While this is my least favorite of the Thomas Sowell books I have read so far, it's still very good. Despite its old publishing date, the information and lessons learned are rather timeless. Sowell gives clear and concise examples of how easily information can be distorted in today's society which skews knowledge and, therefore, decisions.

It's funny because there's so many books out today on decision making from authors such as Daniel Kahneman, Dan Ariely and Tim Harford which have become extremely popular. As a result, I feel like this book was far ahead of its time which is a testament to the quality work that Thomas Sowell brings.

[Jay · Rating 5 out of 5]

This is an amazing book about knowledge, which is scarce, diffused, and has a cost. The breadth of considerations Sowell tackles is almost mind boggling.

This may be Sowell's best work, or it's at least on par with his other two favorites of mine, Basic Economics and A Conflict of Visions.

I really can't recommend this book enough, the only draw back is that it's dense and perhaps a pretty difficult read.