EBC Book #2 - Applied Economics by Thomas Sowell

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I've had a chance to look through the book and think our five-hour weekly target would get us through it in 3-4 weeks. What's everyone think about doing 25% each week? That's roughly 50 pages per week.

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I think that's a good call. I'll throw my hat in the ring for moderator. After the first book, do we have any suggestions for best practices?

11% in already. It's a page turner! It reads pretty quickly. I think we could do it all in three weeks - 33% each week.

That's an incredible story. Looking forward to your insight as we move along. It's written so clearly it's almost hard to believe.

Me too. Between a hell of an interview process, and having the time of my life on a long vacation, I haven't had the time or will to read anything other than fiction.

Would everyone prefer to split the book into 20% or 25% increments instead of 33%? Want to make sure everyone is keeping a similar pace.

Not nearly as comprehensive of a summary as RSBR, but I thought I’d provide a quick summary with a couple of links so people can read up on him. Everything is on wiki, but below is the quick tl;dr version of his background and evolution to a free market economist. Apologies on the tardiness...pulling 80-90 hours past couple weeks at work has put me back a bit.

Thomas Sowell Wiki

• Born in North Carolina; Grew up in Harlem, New York
• Family migrated from NC to NYC in the 1940s as a part of the African American migration from the South to the North to pursue opportunities
• Dropped out of high school due to financial and behavioral issues and was drafted to the US Marines during the Korean War, where he became a US Marine Photographer
• After the Korean War, Sowell went into civil service in Washington DC while attending Howard University. After receiving high scores on entrance exams, he matriculated at Harvard and graduated magna cum laude
• In his early 20s now, Sowell was a self proclaimed Marxist (he wrote his senior thesis on Marx) up until 1960 when he held a summer internship with the federal government. Here he got his first glimpse of how consistently raising the minimum wage of workers in the sugar industry in Puerto Rico resulted in a similar increase in unemployment. At this point, he started to advocate for a free market economic policy, which led him to study more about
• Sowell continued to study the free market under Milton Friedman & George Stigler at the University of Chicago where he later earned his Phd with a dissertation titled  “Say's Law and the General Glut Controversy”
• For information on “Say’s Law” Link
• For information on the “General Glut Controversy” Link

Other Information
• Long time critic of affirmative action and race based quotas noting that in harms everyone involved regardless of race. His argument centers around non qualified students taking seats from qualified students and subsequently failing due to their lack of preparedness for the challenge and vigor of the studies.
• Some of his more controversial views, at their core, are still based on his advocation of a free market economy: such as the de-criminalization of drugs, the notion that government programs have not led to progress within the African American community, and while he doesn't mention it often, his view that gun control on a net balance does not save lives but rather costs lives.


Significant Influencers (Based on proximity and tutelage)
• George Stigler
• Milton Friedman

Other Influencers (Through economic theory)
• Friedrich Hayek
• Henry Hazlitt
• John Maynard Keynes
• Edmund Burke

Let's do 20% then and really drill down.

I'm thrilled he gets into the wage topic so early. That was my favorite Hazlitt discussion. Considering that inflation is a form of real wage cuts, how inflationistas like Krugman can argue for inflation out of one side of their mouth while knocking wage cuts out of the other just tells me they are for wage cuts without actually telling people they are wage cuts. I can't think of a more arrogant and elitist mindset.

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By the way, have y'all seen the study results looking at Seattle's minimum wage hikes? Turns out it hurt the very people it was trying to help since the wage hikes weren't tied to production increases.

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Fantastic. Thanks for sharing.

Was reading through section on the price control of electricity for the state of California, and I can't help but wonder where we would be today with regard to renewable energy and alternative fuel costs had they stayed the course. In theory, firms would either build more power plants to cater to the rising prices & demand, or consumers would find cost effective alternatives that satisfy their needs. This is exactly what happened more recently with regard to the demand in the solar energy industry.

Here's an excerpt on cost where manufacturers "overcorrected" for the demand because of a pricing surge in components of solar modules...something that in theory would've happened with power producers in California during the pricing surge in the reading.

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As can be seen from the graph at the left, recent solar module prices have experienced a dramatic price reduction. From 2006 to 2014, an eight year span, worldwide average module prices have dropped about 78% from $3.25 per watt to about $.72 per watt, an incredible drop.
The main reason crystalline silicon module prices dropped so much was because the price of the raw material polysilicon, which makes up a very significant part of the total cost, dropped so tremendously. Back in 2007 there was a world wide polysilicon shortage and prices increased to about $400/kg. Polysilicon suppliers made a lot of money and added tons of capacity so that there was a huge polysilicon capacity oversupply by 2010. Over a three year period from 2008 to 2011, polysilicon prices dropped from $400 per kilogram to $25/kg - a 94% drop. There continues to be a major overhang of polysilicon supply which is expected to continue for a few more years.
In addition to the polysilicon issue, the decline is also being driven by a) the increasing efficiency of solar cells (ratio of electrical energy produced to sunshine energy) b) dramatic manufacturing technology improvements, c) economies of scale and d) intense competition which lead to module oversupply. The solar growth rate of 23% per year over the last 5 years allowed manufacturing efficiencies that are unheard of in other industries. In addition, there are way too many competitors jousting for major contracts, which is also driving prices down precipitously.

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FYI, found this excerpt on a fairly low-tech, biased website...so take that for what it's worth, but facts seemed legit and in line with our reading. LINK