Applied Economics: Thinking Beyond Stage One

Introduction 

In this book, Sowell explains the rationale for economic policy decision-making and the resulting economic reverberations of the various policy choices. The book is a chapter by chapter exploration of economic policy effects on medical care and housing as well as the impact of immigration and discrimination policy on economies. 1 The book, which covers numerous issues is comprised of eight chapters. 

Chapter One 

This chapter begins by differentiating between politics and economics through a discussion of political and economic decision-making . The chapter looks at and distinguishes economic decision making both by voters and politicians. In this regard, the individuals occupying these two different segments of political decision making are seen to be influenced by the amount of time it takes for the effects of the decisions made to materialize. 2 The chapter then proceeds to give a description of the concept of ‘stage one thinking’ and “do something policies .” The author explains that the former is that which focuses on the initial effects. This is as opposed to the ripple effects or the economic reverberations of the policy decisions. On the other hand, the latter entails the policies in response to the demands to do something in a bid to solve economic problems regardless of the economic consequences. Examples, in this case, include President Nixon’s wage and price controls which had immediate consequences that were favorable but resulted in numerous unfavorable ripple effects later on. 3 The chapter ends by examining the often ignored repercussions of economic decisions in the long run which ought to be explored . Finally, the controversial subject of political incentives is highlighted . 

Chapter Three 

The third chapter explores the issues surrounding the economics of medical care which include the price controls on medical care. It also features a description of the qualitative and quantitative consequences, black markets and opting out. The subjects of third party payments, medical malpractice insurance, pharmaceutical drugs and organ transplants are discussed using economic perspectives. 4 A summary of the chapter is also included . 

Chapter Four 

This chapter is a concise account of the economics of housing. It involves a discussion of housing prices under the topics of price disparities, land use restrictions, affordable housing, human consequences and rent control. These are highlighted in light of the different types of housing including apartments and condominiums. 5 At the end of the chapter, there is a discussion of the subject of housing reforms that tackles the interrelated topics of slum clearance also referred to as urban renewal. Segregation, both ethnic and racial is explored, and lastly, a summary of the chapter is included . 

Chapters Six and Seven 

Chapters six and seven give detailed accounts of the economic consequences of immigration and discrimination policies. The economics of immigration are then discussed under the subjects of history and the economics involved. The other topics covered include the different types of immigrants, income differences, the economic benefits to recipient countries and the costs involved. 6 The economics of discrimination are discussed under the subjects of prejudice, bias, and discrimination. Various terms are also defined and explained. These include variations in cost; empirical evidence where views on life chances and comparability are explained ; and anti-discrimination laws where legal definitions and economic consequences are explained . 7 

Chapter Eight 

This chapter deals with the economic development of nations with a close look at numerous subjects. The topics covered include differences in development; geography, where navigable water and climate are discussed as important factors to be put into consideration; population; and the influence of foreign investment including both private and foreign aid. 8 

Evaluation of the book based on economic thinking and Christian ethical principles 

Sowell does an excellent job in drawing a distinction between politics and economics. In this regard, he begins with a discussion of drivers for economic versus political decision making and the conflicting nature of the two. He argues that the discourse on the relationship between economic decisions and political adventure has its roots in morality, philosophy and the concept of right and wrong. On the other hand, governments play a central role in resource allocation and in most cases voters and politicians behave mainly out of self-interest when making individual decisions rather than a commonly held view of maximizing benefits. 9 Likewise, public policy relating to economic regulation, monopoly, market protection, corruption, distribution, the independence of institutions, economic development, and economic growth all depend on the existing political leanings. Unfortunately, the inherent selfishness of human beings will always come to the fore during tough political contests to distort the outcomes of rational economic decision making. Embracing Christian ethical principles based on the life and teachings of Jesus Christ is one of the corrective strategies for this inherent human weakness. However, this is a conscious and deliberate choice and is rarely accidental. The claim to be a Christian is an invitation to be evaluated based on Christian principles. Nevertheless, the interaction with political ideologies is almost often inevitable, and this results in the misinterpretation of the well-meaning and over- arching principles. As a result, there is a need for the separation of state and religion. 

In chapter three, the book focuses mostly on the economics of medical care. However, not much is discussed concerning the morality, ethical, and religious considerations, which have far-reaching economic and political reverberations. Some of the untouched issues include the subject of abortion and abortion rights; health insurance for women and the economically marginalized; birth control and contraception; discriminative policies and the perpetual besiegement of legislative frameworks meant to shelter minorities; and lastly the business ethics of health insurance and pharmaceutical companies. These topics have the potential to generate controversy and protracted debate amongst various segments of the society. They are also likely to bring into question the religious values which eventually impact decision making both politically and economically. The chapter correctly identifies and discusses numerous subjects of interest. However, those discussed are broadly of concern to regulators and service providers. The chapter thus focuses less on the consumer. In contrast, the chapter on the economics of housing is well balanced because it lays out the salient issues of housing as well as the human aspects. The chapter, however, fails to mention the environmental costs and aspects of human settlement and how this affects decision making at both the political and economic levels. The need to take care of the environment is not only vital for the preservation of life but is also one of the cardinal Christian principles. In this case, human beings are called upon to care for God’s creation and to be good stewards of nature and its resources. 

The chapters on immigration and discrimination, on the other hand, explain the history and economic effects of the two. However, no account is given of their economic effect on the immigrants’ countries of origin. Likewise, the impact on the economic condition of immigrants and those subjected to discrimination is not highlighted . The same goes for the political consequences of the two vices. The chapter on economic development details the key factors that have been associated with development, both positive and negative . However, not much is said about the human cost of either and their political reverberations. Also, the chapter deals mostly with the physical factors and the flow of factors of production which include capital and labor . Moreover, the chapter features the exclusion of other vital drivers such as international relations, political ideology, and even the religious perspective. 

Application of the readings to the current public policy shortcomings 

Policy makers can primarily apply the principles and concepts laid out in this book at the basic level. However, at the more advanced level and when faced with immigration resulting from failed leadership owing to numerous factors, more comprehensive and critical literature should be consulted. Based on the context, this textbook is more useful for under-developed economies and societies seeking to establish strong policy frameworks and structures in housing and medical care. It is also applicable to those that aim to foster inclusivity. 

Bibliography 

Besley, Timothy, Rohini Pande, and Vijayendra Rao. "Just rewards? Local politics and public resource allocation in South India." The World Bank Economic Review 26, no. 2 (2012): 191-216. 

Sowell, Thomas. Applied Economics: Thinking Beyond Stage One . 2nd ed. New York: Basic Books, Inc., 2009. ISBN: 9780465003457.