Zero-sum plus envy equals poverty
Messed up economies have more similarities than differences. The lowest common denominator of economic wrongthink is the zero-sum fallacy.
Zero-sum is a fancy sounding term for a simple concept. The concept is this: if you and I are sharing a pie, every slice that I eat is a slice that you cannot eat. Let’s say I take two additional slices of pie. That means that your allocation changed by negative two. Two plus negative two add (or “sum”) to zero. Zero-sum.
It’s as easy as, er, pie!
The concept is so easy to visualize that it’s tempting to extrapolate it into the realm of the abstract. The trouble is, however, that the abstract — at least in economics — is far more complicated than eating slices of pie.
Indeed, in economics, the creation (or destruction) or wealth is not zero-sum. Wealth — food, housing, medical attention, transportation, communications, and all the rest of this good stuff — is created, not merely re-allocated. If you build a house, it doesn’t mean that you took a house from me. The carpenters and electricians and roofers and plumbers and laborers you paid would take that money, spend it in the economy (or save it, in which case the bank can make loans against that money), which would generate more economic activity, more wealth, and this rising economic tide would make it easier — not harder — for the rest of us to buy houses.
Okay, that’s a pretty lousy stab at distilling too much economic theory into too few words, but forget theory for a minute, and look at the outside world. You’ll see that countries that permit free trade have more wealth than countries that don’t permit it. The United States, for example, is rich. Russia, pathetically poor
Did the United States somehow steal wealth from Russia in a zero-sum arrangement? Of course not. Uncle Sam creates wealth, while the Russians spend more of their time trying to grab the wealth of each other.
And that’s where we hit the fork in the road. If you want wealth, you can either create it, or you can take it from somebody else (a zero-sum solution). You’ll find that lazy and dishonest people view economics as a zero-sum proposition because, to them, wealth is something to be taken from somebody else, not something to be created. Survey the world, and you’ll notice societies in which people are either busy creating wealth or busy trying to steal it.
The zero-sum outlook dovetails devilishly well with another low-grade attitude: envy (and we’ve got our fair share of it here on our fair shores, unfortunately). If most people, as Henry David Thoreau observed, are living lives of quiet desperation, they sure seem to resent those who are more fulfilled.
Show me a messed up economy, and I’ll show you a place where the zero-sum outlook and its cousin, envy, are the prevailing attitudes.
