Oha1 Amanda Oha PPOG 502 Dr. Stewart Book Review: Common Sense Economics The book, Common Sense Economics written by James D. Gwartney, Ricahrd L.Stroup, Dwight R. Lee, and Tawni Ferrarini, gives a simple insight for reader into the inner workings economics in a common sense terms. The main point of the book is that to have economic success comes from low interference from the government, the motivation of individuals, and competitive markets. In the beginning of the book, the authors of the book started to breakdown this message of economics by explaining to the readers the twelve key elements of economics. 1. Incentives matters 2. There is no such thing as free lunch 3. Decisions are made at the margin 4. …show more content…
They explained that: “Changes in incentives influence human behavior in predictable ways”. The main point of this concept is that the more attractive an option is the more likely an individual to choose it. Another point that they also focused on was the fact that if a particular product more costly, the more unappealing it will become to the consumer. They used examples such as employees will worker harder if they feel that they will be greatly rewarded or a student will study material that they feel will be on an Oha3 exam. This concept also can be correlated with political process as well. It is explained that citizens will vote for candidates will benefit them in their own personal lives. The second important concept was “There is no such thing as a free lunch”. This concept is built based upon human desire for good being unlimited and the limited resources to match that could not possible match those resources. This is relates to the theme of opportunity costs. This means that the choice of one thing, but you must sacrifice the opportunity to do another thing. There are opportunity costs with producers with the cost of outputting quality goods and adhering to regulations put on by the government. The next concept is “Decisions are made at the margin” this meant that individuals wanted to get the most out their resources. You want to have most benefits out your actions. One thing that the authors put emphasis on is the fact that all
In chapter one, Levitt talks about incentives and how it's an important role in economics. This is something most of us learn at some point in our lives if not at a very young age.
With the recent developments in the economy there could have not been a better time to
“An incentive is a bullet, a key: an often tiny object with astonishing power to change anything”(Levitt 20). What professor Steven D. Levitt (a professor of economics at the University of Chicago’s dictum here is that the incentive has a lot of power in this world). And that the metaphor of comparing “incentives”to a bullet really speaks wonders to their strengths. They can change almost any situation by motivating someone to do something in a business situation, all the way to education fields. After many years of college, business and economics students are being taught how to be greedy in college. It is only a matter of time before greed is too powerful. Incentives and greed both have favorable and critical effects on individuals and the populace, but when connected together both can have dangerous effects on future selections.
As long as the marginal benefit of an activity exceeds the marginal cost, people are better off doing more of it. But as soon as the marginal cost exceeds the marginal benefit, they suddenly become better off doing less of that specific activity. This can be used when deciding how many employees a company should have. To produce the profit-maximizing level of output and hire the optimal number of workers, and other resources, producers must compare the marginal benefits and marginal costs of producing a little more with the marginal benefits and marginal costs of producing a little less. You can decide how many workers to hire for a profit-maximizing car company by
When explaining economics instead of using large over-complicated words, the authors simply state that “economics is, at root, the study of incentives.” Rather than utilizing economist argot, Levitt and Dubner describe economics in a way that makes it easier to understand and put into perspective. As the passage continues, the authors provide the audience with many relatable examples such as “if you break curfew you are grounded.” People respond to incentives, it’s the way our society works, “an incentive is simply a means of urging people to do more of a good thing and less of a bad thing.” Like Levitt and Dubner previously stated, economics is the study of incentives and how it affects society and their decision making
Stephen J. Dubner and Steven Levitt in a passage from the book, Freakonomics, published in 2005, addresses the topic of incentives, and that people will do anything they possibly can to get what they desire. The authors support their claim through the use of diction, first by enumeratio, where the authors include details of a real life incident to influence the reader that their opinion is true; secondly by hyperbole, where the authors exaggerate a point to make their views more agreeable; and thirdly by epizeuxis, where the authors repeat the word ‘incentive’ to emphasize their point. The authors’ overall purpose is to influence the reader that people will do whatever they can to get what they want. Stephen J. Dubner and Steven Levitt create
There is not one common theme in Freakonomics, instead the book is structured around four essential ideas: incentives are the basis of modern life, conventional wisdom is often wrong, dramatic effects often have
The first principle in individual decision-making is facing a trade-off. In order for individuals to accomplish their goals or to obtain something they desire, there is usually something that must be given up or traded to accomplish that. In Chapter 1 Principles of Economics, efficiency vs. equity is discussed which helps further explain this principle. Society is always desiring to
In the book Freakonomics, Steven Levitt and Stephen Dubner note “An incentive is a bullet, a lever, a key: an often-tiny object with astonishing power to change a situation” (16). This is to showcase the amount of power an incentive can have over a person or a situation; either good or bad. Humans are found to use incentives when it comes to making daily decisions. Often, people need motives to proceed with their plans. Some tend to make either moral, social, or economic incentive. The moral incentive is about self-respect; keeping in check with what was taught to believe is right and wrong. The social incentive is how the public views the person; wanting to look good in front others. Economic incentive, however, would relate to monetary benefit. While all three incentives can affect people’s decisions, economic
Part one begins with the basic postulate of economics: incentives matter. The authors explain in easy to understand
The Core Econ textbook provides a very clear overview of the microeconomics concepts. Some ideas that were introduced by the textbook are very interesting and somewhat relevant to real world, but do not completely explain real life phenomenons. On the other hand, it also introduced many ideas that allowed me to perceive certain topics in a different light.
Firstly, our example illustrates how people respond to incentive. In economics, an incentive is defined as any factor that provides a motive for a particular course of action. This example is exemplified in our first customer. Perhaps, the promotion encourages her to purchase an extra bottle of X shampoo now instead of later. By doing so, the BOGO 1.5 promotion can be classified as an incentive which ensures her decision. As she rationalizes her decision to purchase an extra shampoo, she demonstrates that everyone do respond to incentives. In contrast, the promotion does not have the effect on the second consumer because it does not provide incentive therefore not applicable to him and his choice as a consumer.
Incentives are seen everywhere in daily life and they appear in a variety of ways. Whether a person is making a choice between what to eat for lunch or when to go to bed, they are being influence by incentives. For example, images of an appealing lunch meal in a TV commercial may make someone choose Subway over Mcdonalds. However, the same thought process can motivate someone to prefer a meal at McDonalds because of the company’s constant promotion of their “dollar menu” (Mcdonalds, 2013). Either of these incentives can appeal to a person, depending on what they are motivated by, in this case, either health or money.
Chapter 1 is about how economists think, and why they think that way. In my opinion the most important concepts to convey are: