A Missing Textbook Diagram
For intro econ, intermediate microeconomics, public policy, and more
While I was touring San Francisco, the following diagram popped into my head. Obvious once you think about it, and ChatGPT says there are plenty of precursors, especially in business classes. But I don’t recall seeing anything like this in any intro, intermediate micro, or public policy textbook. And I think it would make a good addition.
P.S. You could expand the diagram to include “Sky High” and “Rock Bottom” entries, which would be helpful for explaining why my favorite policy reforms remain prudent even if all of my critics’ complaints are true. Sky High Benefits trump even High Costs.
If we’re talking about government action, the costs are borne by someone else and the benefits are imaginary. That diagram would give me agita.
2 X 2 diagrams are useful and clarifying and encountered for lots of choice scenarios; Pascal's wager and the Prisoners' dilemma are examples. In the case of CBA, the big question is "whose costs and benefits are we talking about." If the answer is "social costs and benefits," unless the gap is completely large and obvious to just about everyone, the notion of CBA is more misleading than helpful.