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.
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.