Thomas Sowell on Social Justice Fallacies: Racial Fallacies

Thomas Sowell on Social Justice Fallacies (full series)
“Equal Chances” Fallacy | Racial Fallacies
Knowledge Fallacies | Affirmative Action

Racial Fallacies

Hogberg In chapter two you look at racial fallacies. You note that while progressives of today abhor racism, progressives of the early 20th century believed some races, particularly blacks, were genetically inferior. Yet despite that you claim that progressives of both eras are eerily similar. How so?

Sowell: They all believe in a big role for government. They believe that elites like themselves should be preempting other people’s decisions through the power of government. They are very resistant to any kind of facts that go contrary to what they believe. One of their patterns is that they almost never respond to an argument with a counterargument. They respond with ad hominem attacks.

Hogberg: In chapter three you say that people are not chess pieces. What exactly do you mean?

Sowell: Well, I’m taking that from a statement by Adam Smith in the 18th century, that abstract theorists—John Rawls being a classic example—they argue as if they can move people around in society much the same way that the hand moves pieces on a chessboard. You can see the results of that assumption in many things. For example, in the notion that if the government raises the tax rate, they’ll collect more taxes. If people were just inert chess pieces, that would be true. But since they react to what the government does, sometimes raising the tax rate lowers tax revenue.

It applies to government policy in general. During the Great Depression, both Hoover and FDR believed that the government should promote higher prices for labor, for capital, for farm products, and so forth. And therefore, workers and farmers and businessmen would all have higher incomes, and that would create additional demand needed to get out of the Depression. That would be true if people were inert chess pieces. But they’re not. And of course, raise the price of labor, employers demand less labor. When you raise the price of food, people buy less food. They raised all these prices, and it did nothing to end the Depression.

Hogberg: Could you expand a little bit on the tax cuts example?

Sowell: Yes. Some years ago, the politicians in Maryland decided they were going to raise more revenue by increasing the taxes on people who had an income of a million dollars a year or more. But after they did this, the number of people with incomes of a million dollars or more in Maryland went down. Because rich people were not chess pieces, they moved out of Maryland. Instead of getting $100 million in new tax revenue like they predicted, Maryland got $200 million less in revenue.

The classic example was back in the 1920s. During the Woodrow Wilson Administration income taxes quickly went up to 73 percent, particularly in trying to finance World War I. But in the next administration, the Secretary of the Treasury, Andrew Mellon, called for a tax rate reduction. He realized that if you kept the top rate at 73 percent, people were just going to avoid the tax by putting their money into tax-exempt securities and the Treasury would take in less revenue. Tax-exempt securities usually don’t pay a rate of return as high as other deposits. But when you bring the tax rate down to 25 percent, then it pays people to take their money out of the tax-exempt securities and put them in investments that pay a bigger rate of return, even after taxes had been deducted. After Mellon succeeded in getting the rate lowered from 73 percent to 25 percent, the government collected far more taxes, especially from high-income people. And as I mentioned in the book, 25 percent of something is larger than 73 percent of nothing.

In the next installment, the Left believes that believe that the most consequential knowledge is concentrated in people like themselves.