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Arguing with Zombies: Economics, Politics, and the Fight for a Better Future Book Summary preview
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Synopsis

"Zombie ideas" simply refuse to die despite mountains of evidence to disprove them. How do you fight them? Paul Krugman, Nobel Prize winner in Economic Sciences, is the best person to shoot "zombie ideas" down.

In Arguing with Zombies: Economics, Politics, and the Fight for a Better Future, Krugman comprehensively debunks the simple economics behind some of the most compelling and controversial issues of our time: universal healthcare, tax cuts, social security and social inequality, so you can understand the economic dialogue in the United States and around the globe and make better-calculated financial and ethical decisions.

Questions and answers

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The themes in "Arguing with Zombies" are highly relevant to contemporary issues and debates in economics and politics. The book addresses key topics such as universal healthcare, tax cuts, social security, and social inequality. These are all pressing issues in today's economic and political discourse, not just in the United States but globally. The author, Paul Krugman, uses his expertise in economics to debunk common misconceptions and "zombie ideas" related to these topics, providing readers with a better understanding of the economic dialogue and enabling them to make more informed financial and ethical decisions.

The potential for the ideas in "Arguing with Zombies" to be implemented in real-world scenarios is significant. The book discusses various economic issues such as universal healthcare, tax cuts, social security, and social inequality. These are real-world issues that many countries, including the United States, are grappling with. The solutions and arguments presented by Paul Krugman, a Nobel Prize winner in Economic Sciences, could be used to inform policy decisions and public debates. However, the implementation would depend on various factors including political will, public support, and economic conditions.

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Top 20 insights

  1. Public intellectuals must be honest about dishonesty. Many pundits just lay out evidence to confront bad-faith arguments and stop there. Krugman says that journalists must also inform the public that the arguments are made in bad faith.
  2. How social security works is quite simple. The government uses a payroll earnings tax to fund the safety net, just like gasoline taxes fund highway maintenance. Unlike investment account-based corporate pensions that give uncertain returns, social security offers a stable, guaranteed income for retirees.
  3. While many think that governments have bloated bureaucracies and the private sector delivers efficiency, the opposite is actually true for social security. Privatization would significantly increase management fees to be paid to investment companies and reduce net returns by over 25%. In contrast, the government spends less than 1% of social security revenues on overheads.
  4. Privatized social security would also cause widespread poverty among the elderly unless the government stepped in. In Great Britain and Chile – countries with privatized social security – the government is still forced to intervene to plug the gap.
  5. Unlike most other sectors, competition and choice lead to higher costs and lower quality in healthcare. Government health insurance schemes like Medicare and Medicaid are far cheaper and involve less red tape than private insurance.
  6. The United States, which has the highest private sector involvement in healthcare among developed nations, fares worse than other advanced countries in terms of quality, access to needed care and health outcomes. The UK, which spends only 40% of the American spend per-person, has better health outcomes. Thus, a universal health care model would save thousands of lives every year and be far cheaper.
  7. The Veterans Health Administration (VHA) is an excellent model for universal and integrated healthcare. As it covers every veteran, VHA doesn't employ a bloated bureaucracy to check coverage. Since it offers end-to-end medical care, it has incentives to reduce treatment costs and invest in preventive care to lower long-term costs. VHA's scale allows it to bargain for cheaper drug prices.
  8. Before the Affordable Care Act (ACA), healthcare in America was covered by a patchwork of government and private insurance schemes. Medicaid covered much of the underprivileged, while Medicare took care of senior citizens. Companies offered insurance to working professionals. However, many groups, like the young unemployed, were left out.
  9. Health economics shows that it is cheaper and more efficient for America to offer universal health coverage for all citizens. However, it would be difficult to convince nearly 150 million Americans to give up their current coverage to migrate to the new model. So the ACA decided to leave employer insurance untouched and extended coverage to the uninsured through regulation and subsidies.
  10. The ACA provides healthcare to tens of millions of Americans and leaves the existing system intact. It has three components. First, insurers must offer the same plans at the same cost to every citizen irrespective of medical history. Second, individuals must sign up for a minimum level of health insurance. Finally, the government offers subsidies up to 100% to reduce costs for the underprivileged.
  11. Contrary to dire predictions, the ACA has been a great success. Signups have exceeded expectations, and there has been a sharp reduction in the number of uninsured. The average net premium was only $82 per month in 2014 and the vast majority of Americans have expressed satisfaction with the coverage.
  12. The 2008 global financial crisis led to soaring government deficits. Many policymakers demanded austerity measures to balance the budget when they should have focused on unemployment instead. They warned that increased borrowing would lead to investor pullout from government bonds, while austerity measures would increase investor confidence and lead the economic recovery.
  13. Austerity measures lead to a sharp rise in unemployment. Proponents argued that this was due to the "skills gap." However, multiple studies found no evidence that the "skills gap" causes unemployment.
  14. The doctrine that tax cuts for the wealthy are the secret of prosperity refuses to go away despite solid evidence. Bill Clinton raised taxes and it resulted in a huge economic expansion while George W. Bush's tax cuts led to lackluster growth. Many polls show that American voters want the rich to pay higher taxes.
  15. In the 1950s, the top income bracket's tax rate was 91%, and taxes on corporate profits were much higher. One-third of American workers were union members. Contrary to the tax cut theory, this period was marked by widely shared economic growth. The median income doubled between 1947 to 1973 – something that has not happened ever since.
  16. The optimal tax rate depends on Diminishing Marginal Utility, the idea that a dollar is worth lesser to those with higher incomes. Tax rates must raise the maximum possible revenue and preserve the incentive to generate wealth. The optimal tax must be above 70%, according to the Nobel Prize in Economic Sciences laureate, Peter Diamond and other experts.
  17. Business investments are far more sensitive to market demand than tax rates. Few investments become viable because the profit tax rate drops from 35% to 21%. Corporations mostly leverage tax cuts to buy back their stock; instead, they should expand capacity and create jobs.
  18. Between 1947 and 1973, incomes of all groups roughly rose at the same rate. But from 1977 and 1989, a stunning 70% of the rise in family incomes went to the top 1%. Today, CEOs are paid 300 times more than ordinary workers.
  19. Inequality in the U.S. isn't due to education, Krugman says. The real earnings of college graduates fell 5% between 2000 and 2004. Between 1972 and 2001, incomes at the 90 percentile rose at just 1% per year while incomes at the 99 percentile rose at 87% per year. Inequality is due to the rise of oligarchy.
  20. Automation is not the cause of inequality either. Until the 1970s, labor productivity rise resulted in the rise of wages for most workers. But over the last 50 years, the federal minimum wage adjusted for inflation has fallen more than 30% while labor productivity has increased by 150%. The critical factor in wage stagnation is the reduction in worker bargaining power due to the decline of unions.

Summary

"Zombie ideas" are ideas that should have been killed a long time ago by compelling research that testifies against them, but live on infecting one brain after another. We deal with them every day: from the tax cut "zombie scheme" to the healthcare one. Krugman, however, shows us how to take "zombie ideas" head-on, so we don't have to put up with them anymore.

Questions and answers

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The book "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future" by Paul Krugman uses various case studies to illustrate the concept of "zombie ideas". These are ideas that, despite being disproven by compelling research, continue to persist and influence people's thinking. For instance, the book discusses the "zombie scheme" of tax cuts, which despite evidence to the contrary, continues to be propagated as a means to stimulate economic growth. Another example is the idea of healthcare reform, which despite numerous studies showing its benefits, continues to be opposed by certain groups. These "zombie ideas" have broader implications as they shape public policy and societal attitudes, often to the detriment of progress and development.

A startup can use the concept of "zombie ideas" to grow and develop by identifying such ideas in their industry or business model. These are ideas that have been disproven or outdated, yet continue to persist. By recognizing these "zombie ideas", startups can avoid falling into the trap of following ineffective strategies or practices. Instead, they can focus on innovative and proven methods to drive growth and development. Furthermore, by actively debunking these "zombie ideas" within their industry, startups can position themselves as thought leaders and gain a competitive edge.

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Social security

In the early 2000s, there was a significant policy debate on revamping America's social security by introducing privatization. Social security had stayed nearly unchanged over 70 years. During this time, corporate pensions shifted from a system that paid a fixed amount every month to defined contribution plans that put money into investment accounts. Many policy analysts argued for a similar approach to social security. However, the riskiness of private retirement plans meant that it became even more critical for people to have a stable, guaranteed income in case these investments went sour. First, privatization would dissipate a significant percentage of worker contributions in fees to investment companies. Second, it would leave many retirees in poverty.

Questions and answers

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In 'Arguing with Zombies', Paul Krugman presents a strong argument against the privatization of social security. He highlights the risks associated with private retirement plans and emphasizes the importance of a stable, guaranteed income for retirees. He argues that privatization would lead to a significant percentage of worker contributions being lost to investment company fees and could potentially leave many retirees in poverty. These ideas challenge the popular notion of privatizing social security and present a fresh perspective on the issue.

A company dealing with pension plans can apply the ideas discussed in "Arguing with Zombies" by considering the risks and benefits of privatization. The book discusses the debate on privatizing social security and the shift from fixed amount pensions to defined contribution plans. It highlights the risks of private retirement plans, such as the potential for high fees and the possibility of leaving retirees in poverty. Therefore, a company could use these insights to evaluate their own pension plans and consider whether they are providing a stable, guaranteed income for retirees.

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The economics of social security

In an ideal world, young workers make a realistic projection of their life expectancy and invest in the right market instruments after understanding the tradeoffs. However, in the real world, many Americans save much less than required for retirement and invest poorly. It is unfair to expect everyone to be expert investors. The economy is supposed to work for people. Social security is an excellent example of what works with low operating costs and minimal bureaucracy.

Questions and answers

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The case study on social security in "Arguing with Zombies" highlights the importance of social security as a safety net for individuals who may not have the knowledge or resources to invest adequately for their retirement. It underscores the role of the economy in serving the people, rather than expecting individuals to be expert investors. The broader implications could include the need for more robust social security systems, the importance of financial literacy, and the role of government in ensuring economic security for its citizens.

The idea of social security challenges existing paradigms in economics and politics by shifting the responsibility of retirement savings from individuals to the state. Economically, it questions the assumption that individuals are the best judges of their investment and savings needs. Politically, it introduces the concept of collective responsibility and welfare, challenging the idea of individualism. It also brings into focus the role of the state in ensuring the economic security of its citizens.

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The economics of social security is not too complicated: over 99% of social security's revenues go toward benefits and less than 1% for overhead. In countries with privatized systems, the fees are far higher. In Britain, alarm over large fees charged by investment companies led to government regulators imposing a "charge cap." A system with British-level management fees will reduce net returns by over a quarter while increasing risks. Worse, in countries with privatized systems like Britain and Chile, government spending is still necessary to avoid widespread poverty among the elderly.

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Yes, there are examples of countries that have successfully implemented the practices of social security economics. One such example is the United States, where over 99% of social security's revenues go toward benefits and less than 1% for overhead. This is in contrast to countries with privatized systems, such as Britain and Chile, where management fees are higher and government spending is still necessary to avoid widespread poverty among the elderly.

The theme of social security in 'Arguing with Zombies: Economics, Politics, and the Fight for a Better Future' is highly relevant to contemporary issues and debates. The book discusses the economics of social security and compares it with privatized systems in countries like Britain and Chile. It highlights the inefficiencies and risks associated with privatized systems, such as high management fees and the necessity of government spending to prevent poverty among the elderly. These discussions are pertinent to ongoing debates about the sustainability and effectiveness of different social security systems.

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Such reforms hurt everyone. However, the politics of privatization depend on convincing everyone that there is a social security crisis. Calling for cuts in social security has long been seen as a "badge of seriousness" among policymakers. But real seriousness is based on what works and what doesn't. Social security works well and privatized security works very poorly.

Questions and answers

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'Arguing with Zombies: Economics, Politics, and the Fight for a Better Future' by Paul Krugman discusses the relevance of its themes to contemporary issues and debates such as social security and social inequality by debunking the economic myths that often cloud these discussions. The book argues against the privatization of social security, stating that it hurts everyone and is based on the false premise of a social security crisis. It emphasizes that real seriousness in policy making should be based on what works and what doesn't, and according to Krugman, social security works well while privatized security works very poorly.

Zombie ideas" is a term used by Paul Krugman in his book "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future". These are ideas that, despite being debunked with substantial evidence, continue to persist in political and economic discourse. They are called "zombie ideas" because they refuse to die. An example of a "zombie idea" could be the notion that privatizing social security is beneficial, despite evidence to the contrary.

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Universal healthcare

There are certain things that governments do better than the private sector. Public goods, like air traffic control and national defense, which cannot be produced without making it available for everyone, are classic examples because firms have no incentive to produce them. The government also does a better job offering pensions and state-funded health insurance. Medicare and Medicaid are substantially cheaper, more efficient and even involve less bureaucracy than private insurance.

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The lessons from "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future" can be applied in today's business environment in several ways. Firstly, it teaches us to challenge "zombie ideas", or ideas that refuse to die despite evidence against them. This can be applied in business by encouraging critical thinking and evidence-based decision making. Secondly, the book highlights the importance of public goods and government intervention in certain sectors, which can inform business strategies in these areas. For example, businesses can collaborate with government for public goods delivery or leverage government programs for their benefit. Lastly, the book's emphasis on the efficiency of state-funded programs like Medicare and Medicaid can inspire businesses to seek similar efficiency in their operations.

Arguing with Zombies: Economics, Politics, and the Fight for a Better Future" by Paul Krugman has influenced corporate strategies and business models by challenging the "zombie ideas" that often drive them. The book encourages businesses to critically evaluate the economic theories they operate under and consider the role of government in providing public goods and services. It has led some corporations to rethink their strategies, particularly in relation to social responsibility, sustainability, and the role of government regulation.

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The U.S. healthcare is unique in the extent to which it depends on private players. The country spends far more on healthcare than other countries and ranks near the bottom among industrial countries in healthcare indicators like life expectancy and infant mortality. In healthcare, competition and personal choice do lead to higher costs and lower quality. The U.S. has the most privatized healthcare system among advanced countries – the highest costs with the worst results.

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The themes of "Arguing with Zombies" are highly relevant to contemporary debates on healthcare and social inequality. The book, written by Nobel laureate Paul Krugman, debunks economic misconceptions that persist in political discourse, often referred to as "zombie ideas". One of these misconceptions is the belief that privatization leads to better healthcare outcomes. The U.S., with its highly privatized healthcare system, spends more on healthcare than other countries but has worse results, indicating that privatization may not be the solution. This directly ties into debates on social inequality, as the high costs of healthcare can exacerbate economic disparities. Thus, the book's themes provide valuable insights for these debates.

The theories presented in "Arguing with Zombies" challenge the existing paradigms in the field of healthcare by questioning the effectiveness of a privatized healthcare system. The book argues that despite the U.S. spending more on healthcare than other countries, it ranks near the bottom among industrial countries in healthcare indicators like life expectancy and infant mortality. This suggests that competition and personal choice in healthcare can lead to higher costs and lower quality. Thus, the book challenges the paradigm that privatization leads to better results.

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Study the veterans

The success of the VHA has been one of the best-kept secrets in American policy. While the organization had a tarnished reputation in the late 80s, reforms in the mid-90s transformed the system, making it a public health delivery model. In 2005, surveys showed that customer satisfaction with the veterans' healthcare system exceeded private healthcare centers six years in a row. While delivering high-quality care, the VHA has avoided much of the enormous cost surge in U.S. medicine.

Questions and answers

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A small healthcare business can use the VHA's model to grow by implementing similar reforms that transformed the VHA. This includes focusing on customer satisfaction, delivering high-quality care, and controlling costs. The business can also learn from the VHA's public health delivery model, which has been successful in providing care to veterans. It's important to note that the specific strategies would depend on the context and resources of the small healthcare business.

The VHA's success story is highly relevant to contemporary debates on healthcare reform. It serves as a model of a public health delivery system that has managed to deliver high-quality care while avoiding the enormous cost surge in U.S. medicine. This is particularly significant in the current context where cost and quality of healthcare are major points of discussion. The transformation of the VHA from a tarnished reputation to a system that exceeded customer satisfaction in comparison to private healthcare centers, demonstrates the potential of well-implemented reforms.

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The recipe for its success is the universal and integrated healthcare system. Because it covers all veterans, VHA doesn't have to employ a vast bureaucracy to check patient coverage and demand insurance from employers. It covers end-to-end medical care and has taken the lead in innovations to reduce costs and deliver effective treatment. The VHA can bargain better and pay lower costs of drugs than other suppliers. Finally, because the VHA has a lifetime relationship with its patients, it has the incentive to invest in preventive care and effective disease management to reduce long-term costs and maximize its resources. Unlike the rest of the medical sector, it can pursue quality healthcare without viability being a threat.

Questions and answers

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In 'Arguing with Zombies', Paul Krugman presents several innovative ideas. One of the most surprising is the concept of 'zombie ideas'. These are ideas that, despite being disproven by evidence, continue to influence political policy and public opinion. Krugman uses this concept to debunk common misconceptions about economics and politics. Another innovative idea is the advocacy for a universal and integrated healthcare system, as exemplified by the Veterans Health Administration (VHA). The VHA's success is attributed to its end-to-end medical care, cost-effective innovations, and emphasis on preventive care and effective disease management. These ideas challenge conventional wisdom and provide fresh perspectives on controversial issues.

The theme of "zombie ideas" in "Arguing with Zombies" is highly relevant to contemporary debates on social inequality and universal healthcare. In the book, "zombie ideas" are defined as ideas that refuse to die despite being disproven by evidence. In the context of social inequality and universal healthcare, these "zombie ideas" could be misconceptions or outdated beliefs that hinder the progress towards a more equitable society and a universal healthcare system. For instance, the idea that universal healthcare is unaffordable or inefficient is a "zombie idea" that has been debunked by numerous studies and real-world examples, yet it continues to influence policy debates.

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Imperfect but good enough

The economics of healthcare showed that it was possible to extend Medicare-like coverage to every American, as most advanced countries do. However, the difficulty was convincing over 150 million Americans to give up their existing insurance to make the switch happen. Therefore, policymakers and politicians converged on the second-best approach that was politically feasible. They left employer insurance untouched but used regulation and subsidies to extend coverage to the uninsured.

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In 'Arguing with Zombies: Economics, Politics, and the Fight for a Better Future', Paul Krugman presents the innovative idea of extending Medicare-like coverage to all Americans, similar to what most advanced countries do. However, he acknowledges the challenge of convincing over 150 million Americans to give up their existing insurance. Therefore, he suggests a politically feasible approach: leaving employer insurance untouched but using regulation and subsidies to extend coverage to the uninsured. This idea is innovative as it proposes a compromise between the current system and universal healthcare, aiming to provide coverage for all without disrupting those satisfied with their current insurance.

The book "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future" by Paul Krugman has influenced corporate strategies and business models in the healthcare sector by challenging the "zombie ideas" that often hinder progress. It has encouraged healthcare companies to rethink their strategies and consider more inclusive models that extend coverage to the uninsured. However, the book's influence is more on the policy level, advocating for a Medicare-like coverage for all Americans. The impact on corporate strategies would be indirect, as companies need to adapt to these potential policy changes.

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Before the ACA, American healthcare was a quilt of different schemes with Medicare covering senior citizens and Medicaid covering many of the underprivileged. Both these were government programs that directly paid bills. Many working professionals got insurance through their employers. However, many groups, like young professionals whose jobs didn't offer insurance and who were not qualified for Medicaid, were left out. The ACA deliberately left as much of the existing healthcare system in place as possible. It was incomplete and imperfect legislation when compared to the universal healthcare model. But the act provided essential healthcare to tens of millions of Americans.

Questions and answers

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The lessons from "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future" can be applied in today's business environment in several ways. Firstly, the book teaches us to challenge "zombie ideas", or ideas that refuse to die despite evidence against them. In a business context, this could mean challenging outdated business practices or strategies that are no longer effective. Secondly, the book's discussion on healthcare systems, particularly the ACA, can provide insights into how businesses can navigate and adapt to changes in government policies and regulations. Lastly, the book's emphasis on evidence-based decision making can be applied in business strategy and decision making, encouraging businesses to make decisions based on data and evidence rather than assumptions or popular opinion.

A small business can use the key topics or framework covered in "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future" to grow by understanding and applying the economic principles discussed in the book. These include debunking economic myths, understanding the role of government in the economy, and the importance of providing essential services to all citizens. By applying these principles, a small business can make informed decisions that contribute to its growth and sustainability.

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The ACA rests on three legs. First, it requires insurers to offer the same plans at the same price to everyone regardless of their medical history. However, this leads to people signing up only when they get sick. To address this, the second pillar is a mandate for individuals to sign up for a minimum level of health insurance. The final leg is subsidies that limit the cost for those with lower incomes up to a 100% subsidy for the most underprivileged. Without even one of these three pillars, the program can't work.

Questions and answers

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In the Affordable Care Act (ACA), subsidies play a crucial role as one of its three main components. They are designed to limit the cost of health insurance for those with lower incomes. The subsidies can go up to a 100% for the most underprivileged individuals. Without these subsidies, the ACA would not be able to function effectively as they ensure that health insurance is affordable for all, regardless of income level.

The Affordable Care Act (ACA) addresses the issue of people signing up for health insurance only when they get sick through a three-pronged approach. First, it mandates insurers to offer the same plans at the same price to everyone, regardless of their medical history. This is to prevent discrimination against individuals with pre-existing conditions. Second, it requires individuals to sign up for a minimum level of health insurance. This mandate is designed to ensure that people maintain continuous coverage, rather than waiting until they get sick to purchase insurance. Lastly, the ACA provides subsidies to make insurance more affordable for those with lower incomes, with up to a 100% subsidy for the most underprivileged. This helps to ensure that cost is not a barrier to obtaining health insurance.

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While many predicted disaster when the ACA was passed, none of the predictions have come true. There was a sharp reduction in the number of uninsured Americans within a year. The decline in uninsured residents has been three times higher in states that allowed Medicaid-expansion than in states that rejected it. In 2015, ACA cost 20% lesser than expected, according to the Congressional Budget Office (CBO).

Questions and answers

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States might face several obstacles when implementing the ACA. One potential obstacle could be political opposition or lack of support from the state's government. This could be overcome by educating the public and policymakers about the benefits of the ACA, and garnering public support. Another obstacle could be logistical challenges in implementing the new policies and systems required by the ACA. States could overcome this by seeking guidance from the federal government or from other states that have successfully implemented the ACA. Lastly, states might face financial constraints. To overcome this, they could leverage federal funding available for ACA implementation, or reallocate state funds.

Yes, there are examples of states that have successfully implemented the Affordable Care Act (ACA) and seen a reduction in uninsured residents. The decline in uninsured residents has been three times higher in states that allowed Medicaid-expansion than in states that rejected it. However, the specific states are not mentioned in the content provided.

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Austerity

After the global financial crisis of 2008, government deficits soared as revenues plunged, and spending on unemployment benefits naturally increased. This spending was a good thing because government spending would limit the damage in a vicious contraction.

Bond vigilantes and confidence fairies

However, many policymakers urged the government to balance the budget and endure "austerity." Greece's genuine budget crisis was widely used as an example, even though the situation in advanced economies didn't resemble Greece in any manner. Policymakers decided to pivot from reducing unemployment to fiscal austerity through spending cuts. This seemingly hardheaded realist argument was not based on sound economics but instead on what Krugman humorously calls the "invisible bond vigilante" and the "confidence fairy."

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Some key takeaways from Krugman's book that are actionable for economists or policymakers include:

1. The importance of debunking "zombie ideas" in economics, which are theories that have been disproven by evidence but continue to influence policy decisions.

2. The need for policymakers to focus on reducing unemployment rather than prioritizing fiscal austerity through spending cuts.

3. The danger of relying on unsound economic theories, such as the "invisible bond vigilante" and the "confidence fairy", to guide policy decisions.

These insights can guide economists and policymakers in making decisions based on evidence and sound economic theory, rather than on disproven ideas.

A startup can use the concept of "zombie ideas" by identifying and discarding any persistent but unproductive ideas or strategies that are not contributing to its growth. This allows the startup to focus on innovative and effective strategies. The concept of "austerity" can be applied by practicing financial discipline, reducing unnecessary expenses, and focusing on lean operations. This can help the startup to survive in tough economic conditions and allocate resources more efficiently.

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Bond vigilantes are investors who withdraw from government bonds because they think governments run the risk of defaulting on their dues. Every few months, policymakers claimed that any further stimulus spending would lead to investor pullout. They called for more austerity measures instead. Pundits argued that austerity would not cause stagnation as the confidence fairy would take care of everything. Austerity measures would create investor confidence leading to economic recovery. Unfortunately, buying these "fairytales" have caused much suffering to millions of Americans.

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A company in a traditional sector like manufacturing can apply the economic approaches discussed in "Arguing with Zombies" by critically examining and challenging prevailing economic ideas that may not be beneficial. For instance, they can question the idea of austerity measures and instead advocate for stimulus spending that could lead to economic recovery. They can also be wary of economic "fairytales" that promise recovery without substantial evidence. By doing so, they can make informed decisions that are beneficial to their company and the economy as a whole.

The ideas presented in 'Arguing with Zombies' have significant potential for real-world economic scenarios. The book challenges the notion of austerity measures and argues for more government spending during economic downturns. This idea can be implemented in real-world scenarios where economies are struggling. However, the implementation would require policymakers to overcome the fear of bond vigilantes and to disregard the myth of the confidence fairy. It would also require a shift in economic thinking and policy making, moving away from austerity measures towards more proactive government spending.

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There was a significant spike in mass unemployment due to austerity measures. However, the proponents of austerity explained this away using the "skills gap" theory, saying that Americans did not have the skills required for available jobs. Multiple studies have found no evidence that inadequate worker skills cause high unemployment, but the "skills gap" zombie idea refuses to die, distracting focus from the central problem of bad fiscal policy.

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The lessons from "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future" can be applied in today's business environment in several ways. Firstly, it teaches us to critically evaluate economic theories and policies, such as the "skills gap" theory, and not accept them at face value. This can help businesses make more informed decisions. Secondly, it emphasizes the importance of good fiscal policy in creating a conducive business environment. Businesses can use this knowledge to advocate for sound economic policies. Lastly, it highlights the dangers of "zombie ideas" that refuse to die despite evidence against them. Businesses need to be aware of these and strive to base their strategies on evidence-based ideas.

A small business can use the concept of "zombie ideas" to identify and challenge prevailing beliefs or theories that may be hindering its growth and development. These could be internal assumptions about the business's capabilities, market trends, or customer behavior. By questioning these "zombie ideas", the business can uncover new opportunities for innovation and growth. It's also important to foster a culture that encourages questioning and critical thinking to prevent the formation of new "zombie ideas".

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Tax cuts

Few doctrines have been so thoroughly tested and disproved as the claim that tax cuts for the wealthy are the secret of prosperity. It was tested when Bill Clinton raised taxes and presided over a substantial economic expansion and when George W. Bush's tax cuts resulted in lackluster growth followed by a collapse. Finally, when Barack Obama allowed Bush-era tax cuts to expire, the economy absorbed it quite well. Polls consistently show that voters want the rich to pay more, not fewer taxes. But all it takes is a few billionaires who are willing to spend a fraction of their wealth to foster this "zombie idea.'

Questions and answers

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'Arguing with Zombies' by Paul Krugman challenges existing paradigms in economics and politics by debunking the widely held belief that tax cuts for the wealthy lead to economic prosperity. Krugman uses historical evidence to disprove this theory, citing instances where tax cuts for the rich did not result in economic growth and where tax increases did not hinder economic expansion. He refers to these disproven theories as 'zombie ideas' that refuse to die despite evidence against them. The book serves as a critique of these entrenched ideas and advocates for a more equitable economic policy.

The lessons from "Arguing with Zombies" can be applied to current economic debates by recognizing and challenging "zombie ideas". These are ideas that have been disproven by evidence but continue to influence policy and public opinion. For example, the idea that tax cuts for the wealthy lead to economic prosperity is a "zombie idea" that has been disproven by historical evidence. By recognizing these ideas and challenging them with evidence, we can contribute to more informed and effective economic debates.

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Both high taxes and growth

In the 1950s, those in the top income bracket faced a marginal tax rate of 91%, and taxes on corporate profits were nearly twice as large relative to national income as in recent years. In 1960, the top 0.01% of Americans paid an effective federal tax rate of 70%. Between 1920 and 1950, the real income of the wealthiest Americans fell sharply in absolute terms. Contrary to the "zombie idea," this period was marked by spectacular economic growth that was widely shared. There was a doubling of median income between 1947 to 1973 that has not been matched to date.

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In his book 'Arguing with Zombies: Economics, Politics, and the Fight for a Better Future', Paul Krugman provides insights into the relationship between tax rates and economic growth in the 1950s and 1960s. He points out that during this period, those in the top income bracket faced a marginal tax rate of 91%, and taxes on corporate profits were nearly twice as large relative to national income as in recent years. Despite these high tax rates, this period was marked by spectacular economic growth that was widely shared. There was a doubling of median income between 1947 to 1973 that has not been matched to date. This contradicts the 'zombie idea' that high tax rates stifle economic growth.

Paul Krugman debunks the "zombie idea" of economic growth in relation to tax rates by providing historical evidence. He points out that in the 1950s, the top income bracket faced a marginal tax rate of 91%, and taxes on corporate profits were nearly twice as large relative to national income as in recent years. Despite these high tax rates, this period was marked by spectacular economic growth that was widely shared. There was a doubling of median income between 1947 to 1973 that has not been matched to date. This contradicts the "zombie idea" that high tax rates hinder economic growth.

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The optimal tax rate

Experts like Nobel Prize in Economic Sciences Laureate Peter Diamond, in collaboration with Emmanuel Saez, have estimated the optimal tax rate to be 73%. These rates are based on Diminishing Marginal Utility, the idea that a dollar is worth less to those with very high incomes compared to those with far lower incomes. Therefore, a policy that makes the rich a bit poorer will impact very few people and will barely affect their life satisfaction. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue while still preserving the incentive to generate wealth.

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1. Understand the concept of "Zombie ideas" - These are ideas that refuse to die despite evidence against them. Entrepreneurs and managers should be aware of such ideas in their field and work to debunk them.

2. The principle of Diminishing Marginal Utility - This principle suggests that a dollar is worth less to those with very high incomes compared to those with lower incomes. This can be applied in pricing strategies or in understanding consumer behavior.

3. The optimal tax rate - The book suggests an optimal tax rate of 73% for people with very high incomes. While this may not directly apply to entrepreneurs or managers, it's an important concept to understand in the broader economic context.

The book 'Arguing with Zombies: Economics, Politics, and the Fight for a Better Future' does not directly discuss how the concept of 'Diminishing Marginal Utility' has influenced corporate strategies or business models. However, it does discuss the concept in the context of optimal tax rates. The idea is that a dollar is worth less to those with very high incomes compared to those with far lower incomes. This principle can indirectly influence corporate strategies or business models, particularly in terms of pricing and revenue generation. For instance, businesses may implement tiered pricing strategies, recognizing that higher-income customers may be willing to pay more for premium services or products.

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Business decisions do not depend on tax cuts

Corporations primarily use tax cuts to buy back their stock instead of adding jobs and expanding capacity. This is because business decisions are a lot less sensitive to tax rates than what the proponents of the low tax theory claim. Business investment is instead driven by perception about the market demand. Not many potential business investments are worth doing at a 21% profit tax that was not worth doing at the previous 35% rate. A substantial portion of corporate profits represents rewards to monopoly power instead of returns on investment, making a tax cut more of a giveaway than a reason to invest.

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The book "Arguing with Zombies" suggests that corporate tax cuts do not necessarily lead to job creation or capacity expansion. Instead, businesses often use these cuts to buy back their stock. The book argues that business decisions are less sensitive to tax rates and more driven by market demand perceptions. Therefore, entrepreneurs or managers should not rely solely on tax cuts for business investments. Instead, they should focus on understanding market demand and making investment decisions accordingly. Furthermore, the book suggests that a significant portion of corporate profits are rewards to monopoly power, not returns on investment, making tax cuts more of a giveaway than an investment incentive.

Zombie ideas" is a term used to describe theories or concepts that, despite being debunked or disproven, continue to persist in public discourse and policy debates. They are called "zombie ideas" because they refuse to die, much like zombies in popular culture. In the context of the book "Arguing with Zombies", the author, Paul Krugman, uses this term to critique certain persistent economic theories. For example, the idea that tax cuts for corporations will lead to significant business investment is considered a "zombie idea" because it continues to influence policy despite evidence to the contrary.

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The myth of capital flight

The idea that in a global capital market, companies flock to countries with the lowest tax rate isn't very compelling either. Companies manage their accounting in such a way that reported profits to show up in low-tax jurisdictions. This shows up in the paper as large overseas investments. The vast sums corporations have supposedly invested in Ireland have led to remarkably few jobs and little income for the Irish. Similarly, the money that moved back to the United States after the tax cut was also an accounting fiction. It hasn't resulted in increases in jobs, wages or investments.

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In 'Arguing with Zombies: Economics, Politics, and the Fight for a Better Future', Paul Krugman uses various case studies to debunk economic myths. One such example is the belief that companies flock to countries with the lowest tax rate. Krugman argues that this is not compelling as companies manage their accounting to show reported profits in low-tax jurisdictions. This is evident in the case of Ireland, where large overseas investments have led to few jobs and little income for the Irish. Similarly, the money that moved back to the United States after the tax cut was an accounting fiction, resulting in no increases in jobs, wages, or investments. These examples highlight the broader implications of economic policies and the need for a more nuanced understanding.

A startup can use the key topics or framework covered in "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future" to grow by understanding and debunking economic "zombie ideas". These are misconceptions that refuse to die despite evidence disproving them. By understanding these, a startup can avoid common pitfalls and misconceptions in economics and politics that could hinder their growth. They can also learn to manage their accounting in such a way that reported profits show up in low-tax jurisdictions, leading to more financial resources for growth.

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Inequality

Today, CEOs are paid nearly 300 times as much as an average worker. The shift of a growing share of income to a small elite was seen from the late 80s. Between 1947 and 1973, all groups' incomes rose roughly at the same rate – around 2.5% annually. Between 1977 and 1989, a startling 70% of the rise in family incomes went to the top 1%. This inequality meant that ordinary workers did not share America's economic progress. There was a loss of living in a shared society.

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The lessons from "Arguing with Zombies" can be applied in today's business environment to fight wage disparity by debunking the "zombie ideas" that perpetuate income inequality. For instance, the idea that CEOs deserve to be paid nearly 300 times as much as an average worker can be challenged by presenting evidence of the negative impacts of such disparity on society and the economy. Businesses can also adopt more equitable pay structures and advocate for policies that promote income equality.

Zombie ideas, as explained by Paul Krugman in his book, are essentially ideas or theories that, despite being debunked or disproven by evidence, continue to persist and influence policy and public opinion. These ideas refuse to die and keep coming back, hence the term 'zombie'. Krugman, as an economist, particularly refers to these ideas in the context of economics and politics, where they can cause significant harm by driving policies that are not based on factual evidence or sound reasoning.

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Arguing with Zombies - Diagrams

It's not education

The argument that growth in income inequality is due to education is untrue. We aren't seeing the rise of a broad class of knowledge workers. The real earnings of college graduates actually fell more than 5% between 2000 and 2004. Income and wealth are becoming concentrated in the hands of a small privileged elite. Between 1972 to 2001, the top 10 percentile incomes rose at just 1% per year. But incomes at the 99 percentile rose at 87% per year; income at the 99.99 percentile rose at a staggering 497% per year. The real problem is the rise of oligarchy in the U.S. that poses a real threat to its democratic society. It's time to come to terms with the problem to begin thinking of appropriate policy responses.

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It's not values either

Among rich countries, The United States stands out as a country where wealth is most likely to be inherited. However, there is a conservative argument that this is more due to the decline of traditional family values than income inequality. But this is not true. Rising inequality has caused a decline in family values among the working class.

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'Arguing with Zombies' by Paul Krugman has influenced corporate strategies to address social inequality by shedding light on the economic policies and practices that perpetuate inequality. The book encourages corporations to rethink their strategies and adopt more equitable practices. It emphasizes the importance of fair wages, health benefits, and equal opportunities for all employees, regardless of their educational background. However, the specific influence on each corporation may vary based on their interpretation and application of the ideas presented in the book.

From "Arguing with Zombies", managers can take away the importance of providing fair wages and benefits to their employees. The book highlights the decline in wages and benefits for less-educated men, leading to social changes and a decrease in workforce participation. Managers can counteract this by ensuring their employees are adequately compensated and have access to health benefits. This not only improves employee welfare but also encourages workforce participation and loyalty.

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Entry-level wages for male high school graduates have fallen 23% since 1973. The percentage of high school graduates working in the private sector with health benefits had declined from 65% in 1980 to 29% in 2009. The United States has become a society where less-educated men had great difficulty finding jobs with fair wages and benefits. This lack of opportunities leads to these men being less likely to participate in the workforce or get married. Social changes taking place in America's working class are the result of sharply rising inequality and not its cause, Krugman says.

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Automation is not stealing jobs

Many of those who advocate a universal basic income believe that jobs will become rarer as robots take over larger parts of the economy. However, technological disruption isn't new. Strip mining and mountaintop removal techniques in the '60s and 70's utterly transformed the coal industry, doubling outputs and reducing the number of jobs from 470,000 to 80,000. If the rate of technological disruption were accelerating, labor productivity would have soared. Though, labor productivity grew much faster from the 1990s to the mid-2000s than it has ever since.

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Paul Krugman's book, "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future", holds significant potential for shaping future policies on worker wages and productivity. The book addresses the issue of wage stagnation and the disconnect between rising labor productivity and stagnant wages. It suggests that the reduction in worker bargaining power, largely due to the decline of unions, has contributed to this issue. By debunking economic myths and presenting evidence-based arguments, the book could influence policymakers to reevaluate their stance on worker wages and productivity, potentially leading to policies that ensure the benefits of increased productivity are shared more equitably with workers.

Small businesses can use insights from Paul Krugman's book to ensure fair wages for their employees by understanding the importance of worker bargaining power and the role of unions. They can also recognize the impact of wage stagnation and the need to adjust wages for inflation. Small businesses can strive to share the benefits of increased productivity with their workers, rather than allowing all the gains to go to the top. They can also advocate for policies that increase the federal minimum wage and strengthen worker protections.

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Technology change is not new. What is new is that the benefits are not shared with workers. Until the 1970s, rising labor productivity resulted in rising wages for a great majority of workers. Then the connection was broken. This wage stagnation resulted from a reduction in worker bargaining power, mostly due to the decline of unions. Over 50 years, the federal minimum wage adjusted for inflation has fallen by more than 30%, even as worker productivity has risen by 150%. The discourse about automation causing inequality is just a diversion from the real causes that matter.

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A company in a traditional sector like manufacturing can apply the innovative approaches discussed in "Arguing with Zombies" by basing their policies and strategies on solid economic research rather than political beliefs or popular opinion. This involves ignoring "zombie ideas" that refuse to die despite evidence disproving them. Instead, they should listen to real experts and consider counterintuitive solutions that may arise from rigorous research. This approach can help them avoid amateurism and make informed decisions that can lead to a better future.

In 'Arguing with Zombies', Paul Krugman uses various examples to debunk economic myths, often referred to as 'zombie ideas'. These are ideas that, despite being disproven by evidence, continue to influence political policy. For instance, he discusses the myth of austerity, arguing that cutting government spending during a recession can actually worsen the economy, not improve it. He also tackles the myth of tax cuts for the rich stimulating economic growth, providing evidence that this is not the case. The broader implications of these examples are that policy decisions should be based on solid economic research, not on debunked ideas that refuse to die.

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In a world of rising disinformation and polarization, it becomes essential for policy to be based on solid economic research and not political beliefs. As Krugman clearly shows, many issues may have counterintuitive solutions, and there is just too much at stake to risk amateurism. In other words, ignore the "zombies" and listen to the real experts.

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Arguing with Zombies - Diagrams

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