Facts and Fallacies with Thomas Sowell

welcome to uncommon knowledge be sure to join us on facebook at facebook.com forward slash UNC knowledge you can submit questions comments suggest guests today economist Thomas soul a fellow at the Hoover Institution and the author of such classics as basic economics and the vision of the anointed dr. souls most recent book a revised and expanded second edition of economic facts and fallacies Tom welcome economic facts and fallacies quote some things are believed because they are demonstrably true but many other things are believed simply because they have been asserted repeatedly close quote you wish to let that gloomy observation on human nature stand yes all right segment one housing economic facts and fallacies quote the biggest economic fallacy of a housing is that affordable housing requires government intervention close quote now Tom Tom I have to I have to remonstrate with you no poor person would be able to live on the island of Manhattan or in the city of San Francisco if there weren't substitute rent control or subsidized low income housing that these cities forced builders to set aside when they built their high-rises for rich people isn't that manifestly true no it's not even remotely true all right explain explain oh well first first history there were more people I believe living in Manhattan prior to the rise of a rent control and prior to the rise of government housing projects my gosh at one time the Lower East Side of New York was the most tightly packed place in the world New York and San Francisco have very long rent control laws open and severe ones and yet when you look at the cities with the highest rents in the country of any major cities they are number one New York and number two San Francisco so what's going on well why does the political system produce a perverse outcome which is then supported in the press try to mention a repeal of rent control in the times will go after you meet absolutely what happens in rent control around the world really because has been tried so many times is that people if the rent control is severe the people either reduce the amount of housing they build or they stop building housing altogether and so what happens the political authorities are then confronted with a situation do you want to have a situation where there is no new housing built and the old housing is wearing out usually faster on the read control because the landlord's don't have to keep it up as much and so they they step in and they'll have won some kind of modification so that well let's say we're trying to protect the poor so we won't regulate luxury housing of course luxury housing and ordinary housing use many of this much of the same labour the saver but a materials and so therefore all the materials that would otherwise are gone into making ordinary housing goes into building luxury housing economic facts and fallacies once again if we go back to the beginning of the twentieth century before government intervention became pervasive in housing markets we find and this is to me one of the most arresting assertions in the book we find people paying a smaller percentage of their expenditures for housing than at the end of the twentieth century in 1901 housing costs took 23 percent of the average American families spending by 2003 it took 33 percent of a far larger amount of spending what's going on what's going on is that they're restricting the amount of housing that can be built and obviously if you restrict the supply while demand is growing their prices will go up through the roof cui bono who benefits from this arrangement politicians most of all how because they get the reputation of being for the poor and the downtrodden and at the end they're setting aside affordable housing units usually in some token amounts they are preventing the evil landlords from raising the rent by rent control and and they make if they are able to keep the public paranoid that if they take off the rent control you know it'll be just sky-high prices and so they they gain by that both the landlords and the tenants lose they lose in different ways into different extents the tenants lose because they can't find a place to stay the landlord's lose because they don't make the property profit they would have made otherwise the builders lose because they're there's no demand for apartment buildings if they're nobody can make a profit on it all right economic facts the fallacies once again quote where builders are allowed to construct homes and apartments without severe government restrictions even growing populations and rising incomes do not cause housing prices to shoot up because the supply of newly constructed housing keeps up with the growing demand as in Houston now would you please contrast Houston with our own coastal calvo goodness there couldn't be a greater than easy one yes that's it Houston doesn't even have zoning laws but whereas the building anything in coastal California is just an ordeal I mean you have to not only go you have to go through all kinds of Planning Commission's I've had the misfortune of sitting you know - Planning Commission meetings I don't know what it did for my blood pressure watching these people the discouragement is huge so someone estimated for example a real estate company that a house that would cost a hundred and fifty five thousand dollars in Houston would cost a million dollars in San Francisco right the same house now but Tom what about a place like Las Vegas which overbuilt dramatically and now there are neighbor it's going to take who knows how many years for the already in place housing stock in Las Vegas to get purchased meanwhile of course it's declining that was an we could have used a little regulation there couldn't we well the regulation was was was the wood was one at one of the problems I don't think it's going to take years unless the government's intervene as it has to keep the prices from falling the people all the empty houses have every incentive to rent the houses for whatever they can get well whether that's I mean I had the very same problem here on the Stanford campus when I moved away that I didn't sell my house immediately and so I rented it out and I rented it out for a amount that was a hundred dollars a month less than the mortgage because the alternative would be to have a city empty and pay the whole mortgage payment myself segment to race and economics economic facts and fallacies quote few subjects produce more fallacies than race among these fallacies are that now get ready I'm going to give you a passage here race was the basis of slavery that racism is the main reason for black-white differences in incomes and in all the other aspects of life that depend on income moreover there is often an implicit assumption that racism and discrimination are so closely linked that they go up or down together now what you have produced is a handful of outrages and we'll take them one at a time how's that race wasn't the basis of slavery where it's a simple historical matter a slavery existed for thousands of years as far back as there are any records of human beings archeological find suggests that races raised that slavery rather existed before human beings could read and write so what race a racial difference between the slaves and the enslavers that is a relatively new phenomenon you didn't have in ancient times the ability to go to another continent and move millions of people across of a different race across the ocean so you enslaved the people who were nearby the Europeans and slaves Slavs for centuries before they in slate before they brought the phrase black African to the Western Hemisphere okay but so you're not suggesting you do not wish to say anything other than that slavery has practiced in the United States was it may have been recent but you'd are you'd be willing to grant it was particularly perverse and and and decided it's because it has race got mixed into it at that point right race got mixed into it for the United States more than anywhere else for a very simple reason the United States was founded it was a declaration said of the independence said men are correct all men are created equal if that's true then the only way you can justify slavery is to say there's some man a less than men I see so the racial attempt what happened Zil where where brazil imported more slaves in the United States there was no such ideology Brazil was not a democratic country the whole issue never arose I see I see all right race doesn't account for differences in black/white income know the differences between income between Western Europeans and Eastern Europeans is greater than the difference between blacks and whites in the United States differences in income are the rule they are not the exception so looking at all these sociological studies that show a persistent gap between African Americans in income and every other form of American and income is what useless it tells us things that we don't need to know it misleads us how would you describe that wrong I think sums it up it is not true Hispanics have a lower per capita income than blacks Hispanic households and families have a higher income than black households and families simply because the Hispanic families are larger okay now this last assertion race and discrimination you suggest are not so closely linked that they move up and down together first of all just described to distinguish the two race and discrimination well well well racism is an attitude inside people's heads right the discrimination is an overt act taking it place outside in the real world okay so and so not only with black piece you can find the same thing with Jews in previous centuries that that part of the United States where where there was the most racism against black namely the south right it's where black construction workers were much more common than they were in the north right on into the 20th century people must be aware that in the South blacks were the construction workers I remember a professor at Howard University saying that when he was a boy in the south his father pointed to some man in the street said he was the first black construction fresh white construction worker in this town and so what was going on there the racism did not so so whites whites could think of blacks as somehow or other separate but they still employ them oh yeah because the market made it profitable to do so yeah in fact yes and in fact the law had to be passed to stop this because in the 20s and particularly in the depression got underway black construction companies in the south using black non-union labor would come up to the north and underbid on government contracts taking them away and so this was this is where this was very common to the point where they passed the davis-bacon act we said that on government contracts you must pay the prevailing wage which met which always translated almost invariably into the Union wage right so so your point on the distinction between racism and discrimination is don't worry about racism it's inside people's heads you can't measure it there's a strongly subjective just forget about it concentrate only on discrimination and the best answer to discrimination is to let markets operate because then people will discover it will tend to militate against discrimination when people have skills to offer they'll be employed whatever this notion of racism in people's heads is don't worry about that is that right yeah when I what I'm saying essentially is that racism racist may prefer one race to another but they prefer themselves to everybody else so they'll they'll do what's profitable that's right that's right and that was even true in South Africa under apartheid that there were hundreds of construction companies in South Africa they were fined in a government crackdown because they were hiring more blacks and in higher positions than they were allowed to under the apartheid law because that was where the money was all right segment three race and culture economic facts and fallacies a fallacy is that the current fatherless family so prevalent among contemporary blacks are a legacy of slavery where families were not recognised under slavery this ignores the fact that the problem has become much worse among generations of blacks far removed from slavery than among generations closer to the era of slavery close quote explain that we explain why it is so are you see why is that why what what on earth is going on there that is so counter to what we what we assume well first of all the the people most people have not recognized the fact that in if you go back into the 20s you find that married couple families were much more prevalent among blacks then than today you find also in Sedalia that blacks were had as late as 1930 blacks had lower unemployment rates than whites so all these things that we complain about it's a tribute to the Aero slavery those things should have been worse in the past and in the present right but in fact they're worse than the president in the past and I think if you want to look for a turning point it would be since the 1960s and what happened in the 1960s oh you began to have not only the welfare state you began to have the mindset that goes with the welfare state so that there was no stigma anymore any longer attached for example to being one relief or welfare and so but why well legitimacy is exploding now among its high among Hispanics and it's it's exploding among whites but the Moynihan report when was that Tom or the 1650s wolf 65 when when a hand talked about the legitimacy rate among blacks which was exploding then so what if the welfare state changes the way Americans think yeah why did black Americans prove susceptible to that change first because they were poor III don't think that many Asian American girls who are preparing to go off to Stanford or Harvard I'm going to say hey well I I can live one welfare why should I abstain so it's nothing to do with slavery or at least it's less to do with slavery than it is to do with what with the government what we have balefully constructed since once again crime once again economic facts and fallacies the history of crime and violence among blacks contradicts many widespread beliefs about the causes crime among like black Americans like crime among white Americans was declining four years prior to the decade of the 1960's but it was during the 1960s that crime rates began skyrocketing among both blacks and why and it was after the historic civil rights laws were passed that blacks began rioting in cities across the country yes again the night this is just you know well actually not only do you know it but you relish you relish how contrarian this is to everything we think we understand how what did what happens in the 1960s that leads to rioting of one thing the justice oh the the the justification the rioting for one thing and the holding back of the police one of the one of the biggest of the biggest riots in terms of deaths occurred in Detroit and the governor said in a truce but he sent him with with strict orders to hold off and so on and once that once the rioters who I was just a small percentage of the population of the black community once they saw that the police weren't going to do anything they ran amuck I contrast that to with Chicago where I still remember the original Mayor Daley coming on television as saying I have instructed my police in case of riots to shoot to kill it was horror across the country people that didn't notice that there were far fewer deaths in Chicago than there were in places where the mayor came on and depleted with people to behave and said I understand your problems and all that kind of stuff none of which stops riots although Detroit once again economic facts and fallacies although Detroit had the worst of the riots the poverty rate among Detroit's black population was only half of that of blacks nationwide its homeownership rate among blacks was the highest in the country and its unemployment rate was 3.4 percent lower than among whites nationwide Detroit did not have a massive riot because it was an economic disaster area it became an economic disaster area after the riots yes so again what what what causes these riots once they get started the governor does the wrong thing yes but what starts them Oh anything can start a riot the question is how do you stop them and uh James Q Wilson once said they'll the only thing we'll stop the riot a riot is overwhelming force on the scene but you see that the way way if you put overwhelming force on the scene that will that will indeed stop the riot cold but then the next day of newspapers will say why was why did the police over react I mean it was just a little disturbance and here come these tons of cops right right um here's it once again race in culture economic facts and fallacies race is used as a sorting device for decision-making even by people who are not racists thus employers may be reluctant to hire young black males because these employers are aware of what a high proportion of them have been arrested or imprisoned even if the employers have no antipathy to black people as such and readily hire older blacks or black females close quote are you saying that discrimination even on the basis of race you're saying it can be rational do you want to suggest that it can be acceptable well that's a different question yes i but i but i but i do notice that among a group of above employers who routinely check every one for prison records the hiring of young black males is greater than employers in general whereas once they realize if they find somebody whose record is clean they'll take him yes all right segment for facts and fallacies popery there are too many in 30 of the income inequality ok listen to paul krugman your favorite economist didn't I hear you say no no not not not not unless I was absolutely on LSD or my mind is gone completely alright Paul Crewe had been writing in the New York in his New York Times blog quote since the late 1970s the America I knew has unraveled you might be a believer take that we're no longer middle class society in which the benefits of economic growth are widely shared between 1979 and 2005 the real income of the median household rose only 13% but the income of the richest one-tenth of one percent of Americans rose 296 percent close quote the rich are not only getting richer they're becoming dramatically richer while everybody else is treading water I love it well if that what all I happen here is the word household income and I know we're not serious why because households differ over time in size they differ from one group to another in size and they differ from one income level to another in size for example in the bottom 20% of households there are 39 million people in the top 20% of households there are 64 million people over time the house households have been declining in size so if you had a household in which at some point in the past there were three working adults right and now the household has only two working adults and the family is making the same money they always made that is not stagnation that is a 50% increase in per capita income which may be why one of the adults goes off on establishing his own house oh you can afford to so household incomes other nots as if you're serious you look at per capita income because per-capita means one person and it always means one person it doesn't mean one person in 1980 another and one and a half persons in 1930 and so it always means one person so if you're looking for a legitimate comparison that's what you do if you're looking to score political points you go to household income and family income and voila you have your political points all right on per capita income house the country doing I haven't checked the latest figure I'm sure I know that in terms of real per-capita income the average income today will buy less than it could last year I said I don't usually make predictions but I suspect you will buy less next year all right uh-huh we'll come to the pessimism of dr. Thomas soul in soon enough income inequality and women economic facts and fallacies given the numerous factors that impact the incomes and employment of women differently from the way they impact the incomes and employment of men it can hardly be surprising that there have been substantial income differences between the sexes okay not quite as outrageous as you often are here it comes nor can all these differences be assumed to be negative on net balance for women close quote Tom you look at the difference in income between men hire women lower and you suggest that on average women may actually be better off or many women may be better off you have to explain yourself well yeah if you're making comparisons again you have to have you can't compare apples and oranges when I was doing research for that particular chapter I remember being amazed that there was a large difference in income between young male physicians and young female physicians until I dug into the data and discovered that young male physicians work more than 500 hours a year more than young female physicians if you work 500 extra hours chances are you'll get paid more and if you actually go through many of the other differences you find all kinds of explanations of that sort all right last item in the potpourri the University in contemporary America now don't get misty-eyed economic facts and fallacies quote in general the way that higher education is financed including the non profit status of most academic institutions gives decision makers in academia far greater latitude in deciding what to do then is the case in enterprises who's a survival depends on accommodating both those who receive their goods and services and those who supply the money it is therefore not very surprising that many of the decisions made in the academic world serve the interests of those who make the decisions close quote you've been an academic virtually all your professional life let's just begin with the baseline question if you had it to do over again would you do it differently if I had oh I thought about that a lot have you really yes because when I thought I would be asking you a question that would catch you by surprise hard to do with you Tom my during my first month is an undergraduate at Harvard I received a letter forwarded from Washington offered me a job as a photographer and I wasn't thought if I could go back to that time would I in fact drop out of Harvard and go take the job or would I continue slogging on and I'd probably drop drop out and go take the job would you really yes so academia there's a kind of there's a corrupting influence here they get money to a large extent from government all the student loans all of it with the government is redistributing income from ordinary working Joes to fancy professors fundamentally is what's going on and has been going on for decades correct yeah and on the question of the students and to the student who riot when when women not enough of the taxpayers money is given to them has academia in America become I don't even know quite how to ask the question has it become more irresponsible did it reach a low point in the 60s and it's been recovering since how do you think of it in those terms while they I think it was a break point in the 60s I'm not sure it's recovered I know in the 70s there was a lot of self-congratulation that we no longer have violence on campus yes the campus was quiet but it was the quiet of surrender because people who would cause people to riot we're not invited on campus people who would antagonize the students by their viewpoints we're not hiatus professors one of the reasons why a few years ago when the think tanks of the world were ranked and I Hoover was ranked number one but most of the leading think tanks and as rankings were conservative think tanks and I think there's a very simple reason for it the kinds of top scholars who would normally be in academia we're not in academia and this is one of the places they could go and work with the kind of freedom that academic tenure is supposed to provide but doesn't segment five the prospect for the future you begin economic facts and fallacies with two quotations one is the frontispiece for the whole book and the other heads the first chapter john adams your first quotation facts are stubborn things and whatever may be our wishes they cannot alter the state of facts and evidence second quotation economist Henry's Roe's Oski quote never underestimate the difficulty of changing false beliefs by facts close quote now here's what throws me Tom that first quotation John Adams is a fundamentally optimistic quotation John Adams is of course a Democrat he helps to found a country and in all his writing all his life he has this basic faith that people exposed to the facts and the evidence will come around and assimilate those facts and evidence and make decisions based on them the second quotation couldn't be more pessimistic never underestimate the difficulty of changing false beliefs by facts so on the scale of optimistic John Adams too pessimistic henry rosovsky where's Tom soul I'm right there with henry rosovsky or perhaps a little jew is right oh come on you were supposed to say you're right in the middle your way over here really yeah I think that we're raising whole generations who regard facts is more or less optional you have kids in the elementary school who are being urged to take stands on political issues to write letters to congressmen and presidents about nuclear energy you know you know that I need you're not a decade-old and they're and they're being thrown these kinds of questions that could absorb the lifetime of a very brilliant and learning man and they're and they're they're being taught that it's important to have views and they're not being taught that it's important to know what you're talking about it's important to hear the opposite viewpoint and more important to learn how to distinguish whether Y viewpoint a and viewpoint B are different and which one has the most evidence or logic behind it they disregard that they hear something and they hear some rhetoric and they run with it tongue you saw the election of Barack Obama as a triumph of sheer vacuous hopefulness over seriousness and realism is that fair yes all right since then he's elected in November 2008 we've seen the emergence of the Tea Party the recapturing of the House of Representatives by a large Republican majority just days ago Congressman Paul Ryan if Wisconsin puts forward a budget proposal but I think you consider serious and far-reaching have these events let's put it this way has the reaction to Barack Obama encouraged you about the state of the United States I always believed that there have been pockets of sanity but there is it is by no means a foregone conclusion that he will not be reelected next year mmm pockets of sanity is the best we can hope for well it's the best we've seen thus far now you know I'm always happy to see some miracle some knight in shining armor right riding out of the wilderness Tom one of the most you write a lot about race and economic facts and fallacies and we've gone through that in this discussion and frankly it's heartbreaking yes we think we've made progress AHA and the reverse is true in many ways we may make progress in some respects we've had painful retrogression I think I think in terms of education there's no question in my mind that kids who grew up where I grew up in Harlem don't get nearly the education that I got when I was growing up there okay so let me put this question to you with regard to race John you remember John Rawls and his famous veil of ignorance oh yeah but if you if all you so let's just say that you're african-american child about to be born do you choose 1930 1930s America the year in which you were born or do you choose America in 2011 I'm afraid that if you know if you're not born in the south you would get if you were you would you at you would show you and you would choose in the 1930s you know in the 1940s New York had one of the finest public education systems in the country I was and I came up from Charlotte North Carolina where kids from Charlotte old were you when you came up nine nine years old okay so kids were routinely put back a year when they can't move from Charlotte to New York the latest information I have on education is that among the major cities in the country Charlotte is now number one New York is way down the list dr. Thomas ole appearing on this program just over two years ago quote there is such a thing as a point of no return if Obama won the White House you said he would pursue disastrous economic policies I suppose you think he's done just that oh yes I I'm one of the few people who's not disappointed in it you know now this I it this should be depressing but I find myself laughing over and over again as I say it's either that or tears yet the economic policies you said a little over two years ago quote will pale by comparison to what they will do in permitting countries to acquire nuclear weapons once that happens we're at the point of no return close quote that hasn't happened as far as we know Iran still doesn't have nuclear weapons just give me your general view of the state of the country right now let's start with foreign policy since that's what you focused on a couple of years ago well you know Theodore Roosevelt said his foreign policy was to speak loudly and carry a little stick Obama's foreign policy and Libya has been to speak loudly and carry a little stick I'm sorry either way where he speaks softly and carry a big stick Obama speaks loudly and carries a little stick and we see the disaster that's starting to unfold in Libya as a result uh with regard to economic policy oh my gosh i mean george w bush in eight years ran up a record-breaking addition to the national debt obama has topped that in just two years and a no sign of it's coming down and no sign of it's coming down mmm i think we're out of time i feel it tremendous impulse to try to find some question that will permit you to end on a sunny upbeat note ask me how old I am how old are you Tom I am 80 years old and that means that I may well not be spirit seeing where all this is going to leave Tom soul I'll cry after the cameras stopped rolling dr. Thomas soul author many books but most recently this revised edition of economic facts and fallacies Tom thank you thank you I'm Peter Robinson for uncommon knowledge thanks for joining us

Channel: HooverInstitution

Views: 349,299

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Keywords: HooverInstitutionUK, Affordable housing, government intervention, economics, slavery, race, racism, discrimination, welfare, social programs, welfare state, income, equality

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Length: 33min 37sec (2017 seconds)

Published: Thu May 19 2011