Correlation between the two readings
The two economics books “The New World of Economics” and “Freaknomics” encompasses a correlation in terms of examining the important principles in economics. The only difference that can be observed between the two books is the method of explaining the key concepts in economics. However, correlations are more prominent despite the difference in approach. Freakonomics explains about incentives where people respond to the idea of it whether in a form of moral, social or monetary incentive. For example, in the book, a person is likely to trade something of value in return for an equal value plus an incentive. People will pay higher sin tax for cigarettes in order to keep the product flowing in the market. This is the concept where the sin tax is being paid in exchange for a continuous supply and the incentive for the consumers is to continuously experience smoking.
Such idea correlates to the concept explained in the first chapter of “New Worlds of Economics”. The first chapter talks about the meaning of economics by identifying the key concepts such as thinking about value, people, and rationality. People see value as a trade of for items or services in equal proportion. For example, one person will buy a gallon of milk for $2, the amount is the equal value placed in exchange for a certain volume of milk. The same can be said about the rest of products or services offered in the market where each unit of measure is equal to the amount of the article being traded. The correlation of the concept of value to that of sin tax in exchange for pleasure of smoking is the conveyance of how economics create the exchange opportunity. Value is not limited to monetary form or articles for that matter, people trade in exchange for moral and social value.
The first chapter of “Freakonomics” explains that cheating and other manifestation of consumer behavior depends on the consumer’s goal of maximizing utility. In order to achieve maximized utility, some people would go as far as cheating. This explains the concept of people in economics under the lenses of moral and social principles, which correlates to the concepts explained in the first chapter of “New Worlds of Economics”. People and rationality was also explored in the book’s chapter, which encompasses how moral and social behavior affect rationality among consumers. It was mentioned earlier that cheating is a way of maximizing utility; the method delivers the goal of maximized utility at the expense of moral integrity. The exchange in this situation could be maximization of profitability in exchange for moral value.
In the second chapter of “Freakonomics,” information was described as an important aspect of economics where the exposition of such may lead to devaluation. The basic economic concepts explored in the chapter are information value, technology change, and competition and efficiency. Information can be attributed to the model of supply and demand where the quantity and price of the goods and services are dependent of the supplier and buyer interaction. In relation to the concepts explained in the first chapter of “New Worlds of Economics,” supply and demand is synonymous to demand, margin of cost, and markets. For example, if the supply of oil is low, it affects the global price of crude, which is likely to increase particularly when the demand remains high. The margin of cost serves as the marker of profitability and loss amidst the movement in price due to the interaction between demand and supply. The book explains the real world application of the demand and supply while the other book chapter suggests the interaction between demand and supply. The most apparent correlation between the two readings is the presentation of the concepts in economics that compliments one another.