Review of the Book:

The Limits of Government Regulation
by Thomas Sowell

Edward J. Dodson

[A review of conclusions reached by Thomas Sowell in th book The Limits of Government Regulation, edited by James F. Gatti, published by Academic Press 1981. Reprinted from Equal Rights, Fall 1981]

Henry George's analysis of the poverty cycle is widely appreciated by those of us who embrace his socioeconomic philosophy. Lately, I have become quite interested in the rather uncharacteristic perspectives of Thomas Sowell, who is in the unique position of being not only one of the few nationally renowned economists of Afro-American ethnic heritage but is also a strong advocate for fiscal conservativism. To hold viewpoints counter to those basic in the political rhetoric of Black leadership is surely as rare as George's reform-mindedness during the era of the "robber barons". What, then, are this maverick, black economist's criticisms of our nation's political and economic structure?

For starters, Thomas Sowell strongly opposes the growth of government intervention in the society and attempts by those who favor implementation of income redistribution programs in an attempt to end "poverty". The process of retreat from a market system, he is arguing, changes the system of wealth distribution from one based on "behavior" to one based on "status". And, it is the creation of power to assign status which bothers him most.

One is left with the feeling that Mr. Sowell feels the subject of "poverty" almost irrelevant. He acknowledges and seems to accept the fact that poverty has almost always been with us. "Even countries that are rich now were once poor, typically not too far back in history", he writes. He apparently has given little thought to the underlying principles of slavery, a "status system" in which wealth produced (perhaps by his own ancestors) was, by law., the property of non-producers. However, today is not the nineteenth century. What about modern-day America? Why are so many blacks and others still so poor?

Race is discounted by a comparison between native black Americans and second-generation West Indians, who have income levels 94% of that of whites, while blacks have only 62%. Sex is eliminated as a direct source of poverty by a convincing statistic that "the age of marriage of college-educated women was constantly declining between 1905 and 1960".

His investigation into cause goes no further (at least not in this article). He now takes on the spectrum of solutions with which we are familiar -- education or political reform. Lastly, he places a great deal of blame on government:

"In coping with poverty today, the most productive thing the government could do to help would be to stop making things worse."

On the subject of a just and fair distribution of wealth, he believes the consequences of change must be seriously considered before taking action. An example of such a situation is worth repeating:

"Let us imagine someone who has an ill-gotten fortune. We will assume he has acquired it by some method which was not technically illegal but which was clearly immoral. Some time in the past his ancestors landed on an island, murdered all the Indians, and took over. The island, which became a valuable property, has now come down through the family; it is legally his. We might talk about confiscating that fortune because of its immoral origin. But we have to think also what prospective results will come about from doing this. Clearly if we're going to step in and confiscate property -- not because of any illegality, but simply because of moral judgments on its history -- then all property is subjected to great uncertainty, and declines in value immediately. The present value of anything includes its future value, and that in turn is affected by the risk that it will be lost, partially or completely. Thus if you attempt the "just solution", you will have confiscated part of the property of people who have worked for decades to have homes for their families. More important, you will have created an incentive for people to keep their wealth in forms that the government will find hard to get: to keep it in gold and silver and Swiss bank accounts instead of in factories and mines and other productive investments. The people most dramatically affected by all this would be people employed in the factories and the mines. The damage to them may have an economic value far exceeding that of the ill-gotten fortune."

Henry George also realized the difficulty in turning back the pages of history and trying to begin anew. The difference between the two economists is that George learned from Adam Smith and David Ricardo what Thomas Sowell apparently has not; that the market system cannot operate "freely" nor "competitively" so long as society fails to recover (for the public good) the rental value of land society's members have created. Let us hope Mr. Sowell's education is not yet finished.