Book Review: Markets and Minorities by Thomas Sowell


(Basic Books, Inc., 10 East 53rd Street, New York, N.Y. 10022) 1981 • 141 pages • $12.95 cloth, $5.95 paperback

Thomas Sowell demonstrates that many of the things we “know” about ethnicity and economic status are not so. Variables commonly thought of as decisive, skin color, for example, prove on examination to be far from determinative. Orientals and black West Indians are more economically successful than are some white groups. Commonly overlooked variables, such as fertility, socialization, and attitudinal and behavioral disposition, have a significant impact on incomes and occupations.

Sowell presents some revealing facts: The incomes of ethnic minorities differ so widely within the group as to call into question the meaningfulness of comparisons based on national averages; discrimination cannot account for the incomes of minorities who earn more than the national average; the lower earnings of some groups are not necessarily explainable by discrimination since other factors may be determinative.

With respect to the application of this analytical process, Dr. Sowell outlines his methodology:

In applying the general logic of decision-making to particular social processes, we will examine the peculiarities of those processes but will treat human beings as similar, whether they are in politics or business or the schools . . . We will also avoid making “the market” an automatic producer of certain results, but will instead consider what kinds of markets are being analyzed, and what incentives and constraints exist in such markets. The whole emphasis will be on the specific characteristics of particular decision-making processes—not on a vague figure of speech called “society.”

Sowell examines the operation of incentives and constraints as influenced, for example, by intergroup differences, job markets, consumer markets, and government regulation. Groups with strong family and community ties—such as Chinese, Japanese, and Jews—have been prominent as entrepreneurs, setting up businesses drawn from resources within the ethnic community. Jews often started as pushcart peddlers, Chinese as operators of laundries. Blacks, Sowell observes, have seldom set up independent businesses, but the subsets of Blacks who have (Black West Indians, Black Muslims, and followers of Father Divine’s religious sect) contrast sharply with the massive failures in the prosperous 1960s and 1970s of Black businesses financed by the federal government in programs created by “experts” and often receiving preferential treatment by banks and private and governmental purchasers.

Dr. Sowell calls attention to the fact that some of the most dramatic rises from poverty to affluence in the United States have taken place among groups who did not follow the political route to economic advancement, i.e., the Chinese, Japanese, and generally, the Jews. The most politically successful American ethnic group—the Irish—were the slowest rising of the nineteenth- century European immigrant groups.

Dr. Sowell also calls attention to the important role of the values people cherish; the behavior pattern of group is a crucial variable in both racial and non-racial contexts. He quotes the rueful conclusion of reformer Jacob Riis that some people “carry their slums with them wherever they go.” Dr. Sowell believes there is no compelling reason to believe that government activity has benefited ethnic minorities on net balance, even when that has been its purpose. Furthermore, the fickleness of government policy suggests that determining its purpose over some meaningful span of time is not easy, since “whatever the merits or demerits of government policies (relating to minorities), nothing seems surer from history than that those policies will change.”

Contrasting the results of voluntary economic transactions (“the market”) with governmental intervention which forces, penalizes, or subsidizes decisions different from those which the transactors would have preferred, he finds numerous instances where even well-intentioned interventions have thwarted the efforts of ethnic groups to advance. As Dr. Sowell points out, economic analysis does not make human beings better or more moral, but it does offer insight into the way different economic institutions affect the well-being of human beings as they are.

Dr. Sowell is without question one of the leading economists in the United States. When he writes or speaks he is worth heeding. Milton Friedman describes Markets and Minorities as a breath of fresh air on a topic which is often prejudiced by unreasoning emotion. Sowell’s book deserves to become a classic in the literature on the economic and social problems of minorities. If it does not so become, it will not be due to any deficiency of analysis or presentation.


October 1982

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December 2014

Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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