Wealth, Poverty and Politics: An International Perspective

Thomas Sowell joins us for a discussion about disparities of income and wealth between and within nations, as part of Equality Month at Libertarianism.org.

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What are some of the geographical factors throughout history that lead to unequal outcomes? Can we tease out a causal direction for something like cultural dishonesty? Is isolation—cultural, geographic, and otherwise—always bad for a society? How does all of this relate to the ongoing income inequality debate in America?

Show Notes and Further Reading

Thomas Sowell’s newest book is Wealth, Poverty, and Politics: Revised and Enlarged Edition (2016).

Sowell mentions J. D. Vance’s Hillbilly Elegy: A Memoir of a Family and Culture in Crisis (2016).

Freedom on Trial is our new courtroom drama that takes viewers into the heart of the everyday issues that arise when an employer’s desire to hire more employees runs into the barrier of minimum wage laws, and when the government’s plans to “solve” income inequality only makes things worse. 

Transcript

Aaron Powell: Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I’m Aaron Powell.

Trevor Burrus: And I’m Trevor Burrus.

Aaron Powell: Joining us today is Dr. Thomas Sowell. He’s a senior fellow at the Hoover Institution at Stanford University. He’s the author of a great many books. His newest is Wealth, Poverty and Politics, revised and enlarged edition.

Trevor Burrus: And incidentally, it is unlikely that either Aaron or I would be working at the Cato Institute if it wasn’t for Dr. Sowell’s work, so this is a particular pleasure for us. So, welcome to Free Thoughts, Dr. Sowell.

Thomas Sowell: Thank you.

Aaron Powell: Let’s start with what the central question you’re setting out to answer in this book is.

Thomas Sowell: I guess the central question could be said to be disparities in income and wealth within nations or between nations. But really the more fundamental question to me is why people ever thought that there wasn’t any realistic possibility of even approximate equality given all things that go into the production of wealth and how all those things vary enormously from one group to another, from one country to another, from one geographic setting to another. And much of the book is going into these kinds of things and then only in the last section do I turn the questions of internal differences in a lot of countries and in commonwealth.

Trevor Burrus: That’s the political implications of the book, which is interesting because there are many books about the wealth and poverty of nations. But some people who would read the book said the first part books like Jared Diamond’s Guns, Germ and Steel, for example, talk about some similar type of issues. But you think the political implications of this are particularly important for many debates that we have today.

Thomas Sowell: Oh, absolutely. More so than in the so-called debate that took place yesterday.

Aaron Powell: One of the things that you mentioned several times in the book that I thought was interesting as worth unpacking is this—we tend to—when people are talking about income inequality or inequality between countries, they tend to say, “Here’s a possible difference, a correlation but then it bleeds into causation.” So, if employers are paying one group less than another group, that must be the cause of the one group having less income than the other or—I’m curious about you say that these factors, you list a lot of them, are maybe real but not determinative.

Thomas Sowell: Yes. I guess the crucial fallacy is in believing that the inequality existed wherever you happened to have kept collecting the statistics. I mean it’s really a very simple fallacy. For example, after discovering that children are raised differently in different groups. There are a fewer and greater numbers of books at home in different groups. Everything that you can measure is measurably different and there have been years prior to the time of birth, the time that a person applies to a job at a particular employer. There had been all kinds of differences. And now if the employer treats everyone exactly alike and, you know, promotes them or demotes them according to the same standards, there will nevertheless be very different outcomes at the employer for reasons that originated years before they ever saw the employer.

Trevor Burrus: It’s interesting because a bunch of progressive friends—your thesis is obviously important to take account, for example, the number of words that someone has heard before they’re 5 years old which is a pretty profound difference. But I have progressive friends who understand this and, therefore, they advocate for extreme progressive policies that get into the home. They understand that the differences go back before the point you measured, before someone is employed. So they think that the government should actually get involved in those places beforehand, which seems to be accepting your thesis but going to a place of big government that is probably undesirable.

Thomas Sowell: It’s fascinating that it doesn’t bother them to—they don’t bother to check what has been the effect of previous government interventions socially, economically and otherwise. We could not make that most obvious way you think of curing a problem.

Aaron Powell: So, a progressive or at least someone who’s more a fan of government intervention to address these problems, could they make the following sort of argument though that you said, “Okay, so let’s take the example of disparities in pay between workers either within a firm or between firms.” And so that’s the point that we choose to measure the inequality maybe because it’s easier to measure it there than it is elsewhere. But it might be because we think that’s the (a) the most important inequality at the given time that, you know, the inequality of how much people make has than profound repercussions for what they can do going forward. But also because we could say that the causal change—so there might be a cause for why they’re getting paid less that at some point in the past like they had access towards education or different styles of upbringing.

But the causation also goes forward into the future, that yes we can’t go back and fix the fact that some people had a worse upbringing in different ways than others, but right now we could say, “Here’s an inequality and if we address this inequality, not only do we address it now,” but we will address it going forward because then those people will be capable of providing the kind of upbringing for their children that will keep them out of these troubles in the future.

Thomas Sowell: I’m always impressed by the ingenuity that can go into these arguments. If it’s just a matter of income, that might make some sense. But when it’s the whole constellation of causes behind the existing inequality, inability to earn income, I don’t know why anyone would think that just by changing one factor, mainly income, you would then cure all these other problems that led to the initial inequality that you’re concerned about. For example, I mentioned in the book, there are people who are quite prosperous, who have very few books in their home, and it is very systematic that you can go back through history when Olmsted was making his trips to the antebellum south. He noticed that there were plantation owners who seldom had many books in their home. It wasn’t that they couldn’t afford books. That was not part of what their culture led them to do.

Meanwhile, in Scotland 100 years earlier, ordinary people, working people, had books and those who couldn’t afford books, there were lending libraries all over Scotland. So, if you throw in a few pennies, borrow a book and read it. The question is do you want the books? Do you see the importance of books? And if you don’t, you can be a millionaire and remain an ignoramus.

Trevor Burrus: Now aside from books, your chapters are—or your sections are divided into different factors that contribute to this inequality that we’ve been talking about of why it would be absurd to expect equal performance amongst these groups. So let’s talk about the first one of those that you discussed, you called geographical factors. What are some of the geographical factors? Do you look at world history that make people have unequal outcomes now?

Thomas Sowell: Oh, my gosh. There’s so many, I don’t know where to start. One of the big factors is that navigable waterways cut the cost of transportation drastically, that is, land transport has always been much more expensive than water transport. And for that reason, cities all around the world, almost every major city in the world is located on a navigable waterway.

Trevor Burrus: Yeah, the navigable waterways, yes. So if your culture grew up, say, in the mountains, which you discussed the kind of mountain people, then you have a detriment. They could run forward several centuries in terms of the performance of your culture just based on access to these kind of waterways.

Thomas Sowell: Absolutely. There’s a wonderful book about a mountain man who came down and went on to Gale, became a lawyer. And, the struggles he had all along the way just from the fact that he came from a culture that was not designed to produce that kind of career and he had so many problems that a person born on the flat lands would never have had.

Trevor Burrus: Yeah. So the world is different in a lot of different places. I said the mountain man that I had read the J.D. Vance book too about mountain people. And, of course, that’s across the world. Mountain people are—one thing you bring up that’s particularly interesting is that they’re prone to feuding not just in the Hatfields and the McCoys but in other places too.

Thomas Sowell: Yes. Thailand, Tibet, Afghanistan, you name it.

Aaron Powell: So obviously the geographical factor has influenced the cultural factors. But are there more cultural factors besides, say, just a propensity for knowledge acquisition or actually using large libraries that can influence wealth?

Thomas Sowell: Oh, many of them. One of them that people seldom give any thought to is honesty that in a society where there is widespread dishonesty, corruption, it can have wonderful natural resources. You can have highly intelligent people and yet they can be poor and backward for centuries because of a high cost of trying to do any kind of business in a country with widespread dishonesty. One of the things I quote in just one example of differences is there have been experiments done where some organization will go out and leave a dozen wallets with money in them and identification in them in various places around the city. And then they will wait and see how many of those wallets come back with the money still in them. In Oslo, for example, 100% of them came back with all the money intact. In Lisbon, only 1 out of 12 came back and that one was brought in by a visitor from the Netherlands.

So, you see there are other ways of measuring it. They measure which UN diplomats in New York paid their parking tickets since all of them are immune to prosecution. Well, over a five-year period, the 24 UN diplomats from Asia ran up thousands of unpaid parking tickets. Canada with the same number of diplomats had no unpaid parking tickets over those whole five-year period. However, you look at any of these things, you find there’s an enormous differences and that means there’s a great difference in the viability of investment in any of these countries because you’re likely to have your investments stolen from you in some of these places but not in others.

Trevor Burrus: Some people might wonder though how persistent culture is because I mean is it really the case that if Egyptians—I mean it is a pretty astounding—because these are all parking tickets that they didn’t even have to pay, right? They were just paying—and so, Canadians do seem pretty nice in this equation, but these are actually Canadian nationals who are working for the UN. Is there any reason to believe that Canadians moving to America or people from Norwegians moving to America three generations later will be more honest?

Thomas Sowell: Well, that’s an interesting question. What’s even more interesting is that that question is never asked in discussing immigration policy. People talk about immigrants in the abstract as if there are no differences. You mentioned about how long this goes on. Back in the middle of the 19th century, John Stuart Mill pointed out the widespread corruption in Russia and said that this will be an enormous handicap in the economic development of that country. 100 years later, all the data indicated that is absolutely so. Once they showed that an oil company in Russia would stock from an oil company in Russia would be worth some small fraction of what the same oil company would be worth in America because the market assumes that the people who run that oil company will loot it from the inside in Russia. So there’s a huge difference in where you’re willing to invest because of that.

Trevor Burrus: The interesting thing there—there’s a touchiness to their culture or discussion which I think is fascinating. You quote David Landes in the beginning of one of the chapters, is that culture in the sense of inner values and attitudes that guide a population frightens scholars. Some people might be feeling uneasy because it sounds like we’re saying that Russians are corrupt and maybe we’re criticizing Russians as a people and this seems to make people uneasy. Is that—It does make people uneasy, but should we not feel that way? Well, I suppose—the question is whether you want to be polite or truthful.

Aaron Powell: Is there a—Can we tease out a causal direction for something like let’s call it cultural dishonesty that—so is it the dishonesty that is causing the inequality or do we know if it’s the inequality that goes on to cause the dishonesty? That, you know, if you grow out without a lot of security, you grow out without a lot of resources, you’re going to be much more willing to steal and otherwise bend the rules than someone who’s a bit more secure.

Thomas Sowell: Well, that’s an interesting thesis. I don’t know of a speck of evidence in favor of it and I know of many places of evidence from around the world about the other way that, for example, when the Japanese were working in California as domestic surgeons and as old gardener, the Japanese gardener once an institution in California. And they had access to people’s homes. Either they or people they know could have burglarized those homes and so forth. They didn’t do it. You could run a long list of other people who didn’t do those things. This notion that you can reduce all bad actions to bad things that many people have done to those who committed those actions just doesn’t stand up. I grew up, you know, in Harlem in 1940s and 1950s and I never heard a gunshot in all that time and I have relatives who grew up in similar low-income black neighborhoods in Washington and I’ve asked them, “Did you ever hear a gunshot when you were growing up?” And the answer was no. Other relatives in North Carolina, I’ve posed the same question and got the same answer. So it’s—no, there was not even free destination to poverty that list bad actions because if that were true, things would have been far worst in terms of violence in places like Harlem in the ‘40s and ‘50s. They went back just the opposite in this case.

Trevor Burros: While we’re discussing, that’s an interesting segue into your discussions of African-American culture which is discussed a lot in different ways. You make a good case that there’s been—and you’ve made in many of your books that there’s been a pronounced change in African-American culture that cannot be attributed to the legacy of slavery most likely to the welfare state. But then, of course, now that’s a very uneasy thesis for a lot of people to make and for a while because it seems like where everyone is blaming the victim is the problem here. And, of course, we also have the issue that there are some bonafide races who might cover up their bonafide races and by blaming black culture. Is that a kind of thing that we should be concerned about when we discuss issues in African-American culture especially in the poverty of African-American cities or neighborhoods?

Thomas Sowell: Well, we know that there are races now, but we also should know that there are a lot more of them in the past and that black communities did not have the crime rate and especially not the murder rate that they have today. So, there are races, they are not omnipotent.

Aaron Powell: Out of curiosity, the other thing that happened in the last ‘60s was the war on drugs, the ramping up of the war on drugs. So is there—can we draw a link between the crime that happens in poor communities and—because so much of it is drug related?

Thomas Sowell: Oh, I suppose one could try that. Incidentally, one of the big complaints about the drug laws is that they distinguished between crack cocaine which was more common in black communities and the other forms, and that there are laws prescribed tougher sentences with crack cocaine. Again, the stacks go completely against the narrative. It was black communities, black members of congress, black leaders of all sorts who insisted that there be stronger sentences for crack cocaine and for other cocaine, and yet many of those same leaders and spokesmen, etc., are saying now that’s white races. It’s a matter of—the black leaders demand that rightly or wrongly.

Trevor Burrus: The other factor that people might get uneasy about when we talk about culture whether it’s with African-Americans or Tamils and Sri Lanka or overseas Chinese as you’ve written about is whether or not you’re bringing up IQ or mental capabilities as you title it, which is of course a huge third rail that people do not like to touch. You have a very good explanation for why the IQ question is a little bit more money than just saying that these cultures have higher IQs.

Thomas Sowell: Well, yes. The argument is for genetic determinism; we could be arguing for other kinds of determinism. For example, there’s one genetic determiner who has calculated the IQs of countries around the world, median IQ, and the per capita, GDP, and he’s found that there’s a correlation. Well, yeah, it’s fine. But correlation is not causation and if you say that due to the race, then you are left with—to answer the question why is it that the same race—in this case, the Chinese—were world leaders for centuries on end? And then the third world countries also for centuries on end. There was some generic change that swept over the Chinese and when this turn-around came of what we know from history is that the Chinese government changed these policies in order to isolate China from the rest of the world. It’s one of the themes of the book. Isolation is highly correlated with poverty no matter where it is, whether it’s isolation in the mountains, social isolation, political isolation, whatever. It’s highly correlated with backwardness. And so if you have people who are world leaders and scientific and technological things for centuries descended after they were isolated to become third-world countries and prey to other countries that took advantage of them.

Aaron Powell: Does this mean that we can be more optimistic going forward with the growth of technologies that allow us to be in constant contact with each other and with people all over the world. I mean the internet, social media, all of that, will that cut back on this problem of isolation?

Thomas Sowell: It might, but it also—I’m not optimistic about fantasy as there’d been too many of them. There’s been too many of them. The internal culture with root depends upon what they do with the social media. If they spend their time watching pornography or organizing riots, then that’s one thing. But people are not the same. They are not going to look at the same opportunities the same way.

Trevor Burrus: So we look at all these factors and in the book you do a very good job of explaining it in many different context how these factors play together. But then when we talk about the political implications of it, that’s when we really see their sort of relevance and people go, “Oh, are we talking about all this history in rivers because it’s very important as we mentioned.” And there’s a cliché that you bring up which I’ve heard a lot in my progressive friends say which is the paradox of poverty and affluent society. Essentially, the idea that why are there even poor people here in America or other affluent societies. What’s wrong with that complaint?

Thomas Sowell: Oh, my gosh. I wanted everything. Exactly if you are physically present where other people are productive does not mean that you are productive. And if you say that that can be cured by simply taking some of what they produce and giving it to you, that’s been tried too and it doesn’t work because what really matters is the human capital and you cannot confiscate human capital. What you can do is try to spread human capital and it’s one of the few things that you can give to others without having any less of it for yourself. So it’s a wonderful thing insofar as people take the presence of groups that do have a lot of human capital and use that as an example to follow. That almost never happens.

The political incentives are to promote resentment of those people who are more productive without more human capital and this is around the world on every inhabited continent. So it’s not peculiar to the United States or any other particular country. And so long as the politicians have incentives to do that and people have desires to believe such things, going in that route is not going to get you anywhere.

Aaron Powell: Isn’t this all a bit fatalistic? So you’ve said that geography matters and can have an impact on culture and culture—so even then if people, even if they move, they’ll still bring their culture with them if they have access to technology, how they use it, whether they use it to better themselves or not is going to be influenced by the behaviors that they learned that we can’t really fix it after the fact by, say, redistribution. Does this—what does this do for us as far as addressing because we all want to see a decrease or in an ideal world an eradication of poverty? And you seem to be saying that those of us who are in a position to give resources, make programs, institute policies are not in any way the cause, the initial cause or the ongoing cause of the poverty of various groups or individuals. So, where do we go from there? Do we just say, “Well, you know, the poor are there. The poor are poor and it’s their fault that they need to figure it out”? And are they capable of figuring out if it’s all ingrained culture that they learned from an early age?

Thomas Sowell: No. The short answer is no. The idea that third party—there’s a limit to what third parties can do. But one of the things they can do is stop making things worse. Look at the case of blacks. Blacks were freed in 1860s. By 1900, most blacks were literate. That doesn’t sound like much of an impressive record unless you realize that people in Romania were not—most people in Romania were not literates decades later and most people in India were not literate until half a century after the people in Romania were literate. So it’s not inevitable. A lot of progress took place.

For example, in the 1940s, the homicide rate among black male declined by 18% and in the 1950s, it declined by another 22%. So, the notion that there’s no progress possible—Whereas, the 1960s, when these terribly bright ideas of all rage were put into effect, that’s when the downward movement of the murder rate reversed itself, skyrocketed by 89% wiping out all the progress of the ‘40s and ‘50s. So the first thing it should be I guess is go way back to the Greek times, you know, “Do no harm.” If people on the left would just stop doing harm, it’s amazing how much other people can do.

In education, most of the great ideas that came—supposedly great ideas that came in the ‘60s have made the education situation worse. But right now in many of the charter schools, the black kids are scoring at levels that other people score in in the affluent suburbs while the black kids in the regular public schools are scoring below the 10th percentile. And in many cases, the charter school and the public school are physically located in the same building. You don’t go around building a lot of separate schools with the charter schools. And so you have kids from the same ghetto neighborhood being educated in the same building and one set of those scoring near the top and the other sets scoring down at the bottom, and it’s not because the people or the kids who went to charter school were cherry-picked. They were selected by lottery. It was pure chance who the charter schools get.

And so there are things that are working, but those things that are working are not in vogue. They don’t minister to the political or ideological or satisfaction of people who are involved in these kinds of things. And, therefore, many people who think that they are friends with blacks are opposed to charter schools, for example, along with many other things that are helpful that they’re opposed to.

Trevor Burrus: Your book seems to have immense ramifications for a word that has become pretty common at least particularly recently and you write about it in the book, which is the word “privilege.” Check your privilege—are you a privileged minority? Or are you a privileged individual? What does the word privilege mean to you and why is it being misused?

Thomas Sowell: Privilege is—the root of it is it’s a private law, but you have your own different set of laws by which you’re allowed to play. But the main thing for me is that privilege exists at the beginning as a precondition for what comes afterwards. But an achievement is what actually done afterwards. They are fundamentally different concepts.

Trevor Burrus: And, therefore—does this affect how we should think about we should be—there are people who achieve and a lot of people would say, “Okay, so, people who have achieved will often say that it’s my hard work that made me achieve,” which tend to be the story you tell yourself. But why should we treat achievement different than understanding that they came from a place that might have been ahead of other people to begin with?

Thomas Sowell: Because one thing an achievement especially in a market economy is not simply a benefit to the person who achieved. If someone becomes a surgeon, yes, that will raise his income, but he will save lives over the course of his career. And so it’s not just a question of him versus somebody else. Society is better off when it has more people who could become surgeons and fewer people who become criminals.

Trevor Burrus: Or even fewer—I mean a lot of surgeons would be good in general, fewer people who—as productivity grows, which you really focused on the idea that productivity is really what we’re talking about in terms of getting people into careers that give back. I mean that’s a—you can’t be productive—there’s a great line when you say like people always blame greed, but just the fact of wanting money doesn’t mean that people will give you money. You have to give back to get it.

Thomas Sowell: That’s right. Among the people that drive me crazy are people on college admissions boards who are talking about how we must feel about this applicant because Applicant A, you see, had all privileges and Applicant B, you know, didn’t have them and, therefore, we must make adjustments as if we are God on judgment day. No. Education institutions do not exist simply to provide benefits to the people who pass through all institutions. Society creates these institutions so that people will come out of them and create benefits for the society at large. And when someone like Jonas Salk went to a public—selected public school in New York, free obviously, and then on to a selected public college that was free in those days, he created a polio vaccine that benefited everybody of every race, color, income level, nationality, all around the world and that’s what the educational institutions pose to produce, people who produce benefits for others, not simply make higher income for themselves.

Aaron Powell: But let me try to push back or at least defend this particular use of privilege from the perspective of the political left because I think a lot of them would say, “Well, no, we recognize the person who becomes a surgeon will become fairly wealthy and does that by saving lives” and we were not upset about the professional athletes who get paid a lot. What we’re upset about is exactly the kind of corruption that you were just talking about, is the non-productive. You know, I think it’s—2 out of 3-year, 7 out of the 10 richest zip codes in the country are located within commuting distance of Washington D.C. and it’s unlikely that those people are getting that money by being productive. They’re in fact privileged in exactly the way that you define privilege which is they’re taking advantage of laws and the system. Likewise, the occupied Wall Street kids were not mad at Steve Jobs. They were mad at Wall Street bankers who were colluding with government to rig the game in their favor. And so maybe what’s going on is they’re seeing the inequality as symptomatic of corruption.

Thomas Sowell: Wait. Rig what game? In what way? It’s so easy to throw these phrases around. What game did they rig? And in what way? The Wall Street people.

Trevor Burrus: Well, I think the theory is they got—Goldman Sachs got, you know, special privileges. There are a lot of exceptions for Goldman Sachs trade in special ways, for example, things like this. The rules of the game are equal even for trading entities.

Aaron Powell: I mean that’s what lobbyists do is they try to change the laws to work in their favor.

Thomas Sowell: Now, in no society that I know of is there no corruption. And, yes, some societies are vastly ritual than others. For to say that corruption must be the reason for the wealth, it goes against all the evidence. Corrupt societies even when they have all kinds of other advantages, rich natural resources and all the rest of it, are seldom prosperous. So, it’s one thing to say that corruption exists. It’s another thing to say that it’s general and still another thing to say that that is the reason for the disparities that we see.

Trevor Burrus: There’s a part in the book that I think is particularly relevant to modern day—well, there’s a really good—in terms of politics in general but maybe what we’re seeing in this selection here, you discussed how politicians treat—and you kind of mentioned this before. Productive minorities and how they kind of rebel rouse in such a way for productive minorities and there’s a part where he says that sometimes a particular skilled and talented demagogue, you say, can froth up a resentment. That’s a pretty common pattern. I mean we might be seeing a particularly skilled demagogue right now.

Thomas Sowell: Yes.

Trevor Burrus: And it’s a worldwide pattern too. This is something that in terms of trying to find out—to get people to focus on their own path in life rather than their belief that other people who are more “privileged” took from them in some way, which is important to do I would say if you want a society to advance.

Thomas Sowell: I think the spread of Marxism around the world is really an incredible phenomenon matched only by very few religions. The speed at which it spreads and the fervor with which it was believed and it’s based on a notion that the rich has gotten richer by exploiting the poor. And if that was so, then you would expect ordinary people in countries run by Marxist to have a higher standard of living than ordinary people in countries run by—where there’s a capitalist economy. And yet in reality, you see the exact opposite. And nevertheless, this doctrine has persisted for 100 years.

Trevor Burrus: Well, you mentioned this as one of your sort of things that these demagogues can tell the productive minorities or maybe other minorities is that the idea that something is not your fault seems pretty attractive to people especially if you see yourself as relatively poor. I mean we see that throughout the world I would say.

Thomas Sowell: Well, I think in a sense it is not people’s fault. People in the mountain, it’s not their fault that they were born in the mountains. They had nothing to say about that. But if you were born in the mountains, the chances of your doing well in the world are reduced enormously. One of the [Indiscernible] pointed out some years ago, once pointed out that you could draw a map across the—a line across the map of Europe and he described how that line would be drawn. And that your life is going to be very different if you were born east or west of that line. And so in that sense, it’s not their fault. When we try to look for fault, we’re ignoring causation which is something entirely different.

Aaron Powell: So this book is—as we said at the beginning you have written an astonishing number of books in your career. So how does this one fit into that overall project? Do you see yourself as having an overall project in the scope of your work? And then how does this book play into that?

Thomas Sowell: I guess I write one book at a time and a very wise lady told me many years ago, “Do not assume that everyone who reads your book has already read your previous books.” And so this book has grown out of research that much of which—or some of which appeared in other books and it’s brought together in a different way now. But there are so many things that’s still at this late date need to be re-examined. I mean just listening to the presidential debate the other night left me aghast. Within the first 15 minutes, both candidates said repeated fallacies that had been refuted decades ago or in some sense—in some cases, centuries ago. So there’s work to be done and I tried to do it. One of the things that we haven’t talked about on the income statistics that I’ve thrown around with such utter recklessness—

Trevor Burrus: That was my next question actually. So, please—

Thomas Sowell: Go ahead. We have to ask it though.

Trevor Burrus: Yeah. What is wrong with income inequality statistics? Because where we talk a lot about the fairness and these statistics on Free Thoughts, so—And you do a very good job of explaining this.

Thomas Sowell: Well, the biggest problem is they refer to particular income brackets as if they contain the same people and they don’t. Most people would stop and think about is very simple. They start out in entry-level jobs and over the years they rise up into higher-paying jobs as they have more experience, training, education, the whole—I mean my first job paid me $2 a day. Fortunately, Stanford University does not pay me $2 a day now. You have statistics that are about brackets rather than people. Let me put it differently. The kind of statistics that are much more rare are the statistics that take a given set of human beings and follow those human beings over time and reach conclusions based on that. The conclusions you reach from those kinds of statistics are the direct opposite of a conclusion that you hear. Some might talk about, for example, how the top 10% or 1% of whatever are getting—over a period of time are getting virtually all of the benefits of the economy.

If you follow those people who are initially in the top 10% and you come back at the end of a decade, you will find that they made less of an improvement in income than the people who are in the bottom 20%, let’s say. But, of course, they are different people that the—most Americans do not stay in the same 20% for more than one decade, much less over a lifetime. And so we’re talking about phantom people when we’re talking about these percentage.

Trevor Burrus: Is there a type of inequality that matters?

Thomas Sowell: Yes.

Trevor Burrus: With all the discussion of inequality, is there one that matters?

Thomas Sowell: Yes. All of them matter. The question is what can you do about it and you can’t define that by arbitrarily assuming things that are demonstratively false.

Aaron Powell: Thank you for listening. We’ve got a cool new release up at Libertarianism.org. It’s quite a bit different from what we usually do. We call it Freedom on Trial. It’s a courtroom drama series about how government affects everyday people. In the first episode, a hardware store owner gets charged for paying his teenage employee less than the minimum wage. Freedom on Trial uses its courtroom setting to discuss issues like income inequality, economic justice, how we can help the poor, and the unintentional effects of government policy. It’s also just a super-entertaining story. You can find it at www.libertarianism.org/freedomontrial.

If you enjoyed today’s show, please take a moment to rate us on iTunes. Free Thoughts is produced by Evan Banks and Mark McDaniel. To learn more, find us on the web at www.libertarianism.org.