Question
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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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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