A Wide-Ranging Book for Non-Economists and Economists.

• Author: Henderson, David R.

The Economist's View of the World

By Steven E. Rhoads

312 pp.; Cambridge

University Press, 2021

In the late 1980s, I wrote a fan letter to University of Virginia professor Steven Rhoads about his 1985 book The Economist's View of the World. I had used it with great success in a master's-level economics course at the Naval Postgraduate School. Among other things, I wrote, "I still think it's one of the top ten economics books of the last 50 years." Rhoads quoted my letter in the 35th anniversary edition of the book, published last year. How does the 2021 edition measure up? I still think it's one of the top 10 big-picture economics books of the last 50 years.

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.

Opportunity cost I The first few chapters of this edition track those in the 1985 edition, but with updated examples. On opportunity cost, for example, he notes that people who are polled about various policies think very differently about them if they are reminded that policies have costs. For example, 48% of Americans polled think that a universal basic income is a good idea, but 54% of that 48% would not be willing to pay higher taxes to fund it. And 77% of people polled "favor a provision of the Affordable Care Act that requires insurance companies to cover anyone who applies for insurance, even if they have pre-existing medical conditions," but that support drops to 40% if the provision would result in their paying higher taxes. People are supportive of all sorts of government programs --until it comes to paying for them.

In the chapter, Rhoads uses transit to demonstrate politicians' frequent failure to weigh costs against benefits when policymaking. He quotes Brookings Institution transportation economist Clifford Winston's statement that "cost-effectiveness analyses suggest improvements in bus service generally cost about $1 to $10 per transit trip while rail construction typically costs around $10 to $100 per new trip."

Marginalism / One of the first principles I taught my students in my economics courses was the power of "thinking on...