comparative advantage. With trade, manufacturers produce goods where the opportunity cost is lowest, so

total production increases, benefiting both trading parties.

2.3 Confronting Objections to the Economic Approach

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Analyze arguments against economic approaches to decision-making

•

Interpret a tradeoff diagram

• Contrast normative statements and positive statements

It is one thing to understand the economic approach to decision-making and another thing to feel comfortable

applying it. The sources of discomfort typically fall into two categories: that people do not act in the way that

fits the economic way of thinking, and that even if people did act that way, they should try not to. Let’s consider

these arguments in turn.

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2.3 • Confronting Objections to the Economic Approach 39

First Objection: People, Firms, and Society Do Not Act Like This
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