In the last 20 years, there have been a lot of good economics books in niche areas such as housing, health care, immigration, and business economics, to name just four. But Rhoads’ book is special for two reasons. First, it gently teaches readers the basic concepts of economics, such as opportunity cost, marginalism, and incentives. It then applies those concepts to a wide range of government policies, showing how economists think about them and why many of them — and not just the libertarian ones — believe so many government policies are destructive. Rhoads, a political scientist, shows economics and economists at their best. Second, it challenges economists about their views on preferences and on the workings of the political system. His discussion here is better than in the 1985 edition. I was stunned, for example, by his quotes from economists I have respected about how people’s preferences should inform government policy.
This is the second paragraph of David R. Henderson, “A Wide-Ranging Book for Non-Economists and Economists,” Regulation, Spring 2022.
Another excerpt:
The chapter on incentives is as good as the ones on opportunity cost and marginalism. Rhoads points out that taxes on pollution or a system of tradable emissions permits would lead to a given reduction of pollution at least cost. With a tax on each unit of pollution, polluters that can reduce emissions for a cost less than the tax will do so; those whose cost of reducing pollution exceeds the tax will keep polluting. If the resulting level of pollution is deemed to be too high, the tax can be increased until the desired emission level is reached. Tradable permits lead to the same result: those that have a high cost of reducing pollution will buy permits from those that can reduce pollution at a low cost. To the charge that such a system gives people “licenses to pollute,” Rhoads answers the way economists would respond: allowing any amount of pollution implicitly gives polluters a license to pollute up to the limit.
Read the whole thing, especially if you wish me to respond to your comments.
READER COMMENTS
John Alcorn
Mar 26 2022 at 6:25pm
Re: “While economists often criticize the political system from a public choice viewpoint, arguing that politicians are following their narrow self‐interest (I’ve done so myself), Rhoads points out that many of us are abysmally ignorant of how politicians actually deliberate on issues. He notes that James Madison argued that politicians should deliberate and not just cater to their constituents’ wishes.”
Many economists do study the median-voter theorem; deliberation & logrolling among elected representatives; and other principal-agent issues in democracy.
We are quick to condemn narrow self-interest in politicians. But we shouldn’t let the best be the enemy of the good. Regrettably, motives much worse than self-interest — for example, negative passions, such as hatred, envy, bias — sometimes move politicians. Moreover, self-interest of politicians may be benign, if politicians have electoral incentives to honor the preferences of the median voter, and if the median voter is decent and either tolerably well-informed or wise in deference.
If deliberative democracy is the ideal, then let’s experiment also with Thomas Jefferson’s grass-roots version, and not just James Madison’s parliamentary version. Jefferson proposed deliberative democracy on the model of citizen juries. A modern Jeffersonian would experiment with sortition + expert witness + deliberation. Random, representative samples of citizens would constitute deliberative juries to consider a specific issue or policy. Then they would hear and query a range of field experts, perhaps randomly selected, as well as interest groups and advocates, in order to become tolerably well-informed. Finally, they would engage in normative deliberation about the issue or policy under consideration. Parallel and nested juries could serve as checks and balances.
Philo
Mar 26 2022 at 7:55pm
Why would economists give less to charity than members of other professions (as Rhoads remarks)? I doubt that they are worse people, more selfish than other professionals. My suggestion is that economists view most charities as wasteful, and as creating bad incentives for potential recipients. On the other hand, they believe that ordinary commercial activity has great potential for doing good for mankind. Private investment that adds to the stock of capital and uncovers new and better ways of satisfying consumer wants is more likely to do good than is institutionalized charitable giving. (Private charity in a situation known in detail to the giver is less likely to be wasteful and misguided.)
David Henderson
Mar 27 2022 at 11:24am
Really good point. I wish I had made it in the review.
Thomas Lee Hutcheson
Mar 27 2022 at 8:55am
The excerpted explanation of a carbon tax is well done. I wonder why is is not persuasive to more of the writers and commentators on this blog. So far as I can tell only Scott Summers agrees.
Jon Murphy
Mar 27 2022 at 10:59am
As a theoretical matter, I do agree. As a practical matter, I disagree. I find most arguments for carbon taxes are question begging and/or incomplete.
David Henderson
Mar 27 2022 at 11:26am
You wrote:
Thank you.
You wrote:
It should be totally persuasive if the least-cost solution to global warming is a reduction in carbon usage. But we don’t know that that’s the least-cost solution. Geo-engineering could be much cheaper.
Todd Kreider
Mar 27 2022 at 3:45pm
A carbon tax at a level people are willing to accept wouldn’t change the estimates of the average global temperature in 2100 at all.
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