Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, June 16, 2005

Trade-offs, by Harold Winter

About two weeks ago, I received a copy of Tradeoffs, an Introduction to Economic Reasoning and Social Issues, by Harold Winter, in the mail. After briefly looking through the book, I thought to myself, "This looks interesting. I'll have to read it and post a review about it to The Eclectic Econoclast blog."

Two days later, Craig Newmark posted a comprehensive review of the book to his blog, Newmark's Door. It appears that Craig is a much faster reader than I am [and/or the US Postal system is faster than Canada Post; and/or Craig's copy was sent before mine was, which is likely (see below)]. Be sure to read Craig's review, along with the write-ups at Here are some disjointed thoughts I would like to add to those reviews.

I have a strong bias in favour of this book. It emphasizes the concepts of opportunity costs and scarcity, which lie at the heart of economics. As I tell my intro students (and remind my other students)

Limited resources + Unlimited Wants = Scarcity; and scarcity necessitates choice [i.e. trade-offs].
One of my favourite concepts in the economic analysis of law is the distinction between property rules and liability rules. I love teaching the classic article on this distinction, by Calabresi and Melamed. Trade-offs does a great job of explaining this material, without a lot of tedious detail or introductory build-up, on pages 72-73. The entire section from page 68 - 78 provides a very nice, intuitive introduction to the economic analysis of property and tort law.

I also like the coverage of health, law, and economics, provided at page 95ff. Here, Winter does a superb job of explaining the impossibility of providing the very best health care possible for everyone -- because of scarcity. This section is so good you might even think he has some familiarity with the Canadian health system, and by golly he does: he was raised in Montreal.

His discussion of the economics of product liability and foreseeable misuse (p108) is excellent, and I loved his coverage of the 2003 blackout (p.107ff):

Before too long... the experts were called in to discuss the solution to the problem, even before anyone knew precisely what the problem was.

... [H]ad I been asked for my professional opinion during the early hours of the blackout, ... I would have raised only one question: What is the optimal blackout rate?
Terrific!! This man is a true economist!

Now for the real reasons for my biases in favour of this book. First, Winter uses hockey to illustrate the Sam Peltzman seat-belt risk-compensation theorem by quoting Don Cherry. Back in the 70s, Cherry argued that requiring hockey players to wear helmets would lead to rougher play and more concussions; he was right (pp 89-90).

Second, in the introduction he relates how, after he explained the trade-offs in health economics to his mother, she looked at him in disbelief and said, "You're a monster." Very amusing, but too true about how non-economists perceive our analyses. [When I asked him about this in e-mail, he said his mother no longer sees him as a monster; in fact, she seems to be a strong convert.]

Finally, and I quote (p88),
I was home during Christmas break one year, after just completing the first half of an economics and law course. That course greatly affected the way I thought about economics.
I was his professor in that course, along with Stan Liebowitz. Damn, that really warms the heart.
Craig Newmark probably received his copy of the book sooner than I did because his came from the University of Chicago Press, but mine was sent to me by Harold Winter, with a very nice note inside the cover. It was almost enough to make me skip writing the next paragraph...

My major complaint about the book is that The University of Chicago Press did not do its job. The references at the ends of the chapters appear to be end-notes, not references, but they are not numbered and are not linked to specific portions of the text (and why does anyone use end-notes these days? They're a real pain). Also, the grammar, style, and exposition need a good copy editor. I fully expect this book to be popular enough that it will eventually go into a second edition, and these flaws will be corrected then.

Despite these drawbacks, the book is a keeper; it is a good read and a good exposition of the applications of fundamental economics to important policy questions. Other reviewers must see it as a keeper, too --- as of this writing there are no used copies available on e-bay or Amazon!
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