The “It’s not a zero-sum game” fallacy

If you enjoy this essay check out my free book here: Something to Read in Quarantine, Essays 2018-2020

All the time I see people saying “The economy shouldn’t be modelled as exploitative or based in conflict, it’s not a zero-sum game”.

This is junk. While the economy isn’t a zero-sum game, this doesn’t mean it’s not exploitative. A zero-sum game is one in which any gain to one player requires a loss of equal magnitude to the other player. There are plenty of games that aren’t zero-sum but that are nonetheless exploitative.

Consider a game in which I threaten to beat you up unless you wash my car. The worst outcome for everyone is that I beat you up, and you don’t wash my car. If you wash my car and I don’t beat you up, everyone’s situation has improved. Nonetheless, our interaction is wholly exploitative on my part.

Another line you often see is “someone’s being rich doesn’t make another person poor”. This is willfully obtuse for a number of reasons.

Let’s start with a really obvious example, a monopoly. Say I own the only source of water for a hundred miles. I demand extortionate prices as a result and impoverish many consequently. My being rich is making other people poor. While monopolies this extreme are rare, the abuse of market power to extract wealth (and underpay workers) is absolutely ubiquitous.

But even in the absence of such factors, my being rich can make you poor because of opportunity costs. Let’s suppose that, due to a generous no inheritance tax policy, a safety net in the country of Dynastia cannot be funded. The opportunity cost of letting the heirs and heiresses of Dynastia keep their wealth is the poverty of the poor.

2 thoughts on “The “It’s not a zero-sum game” fallacy

    1. No, both players are better off than their worst possible outcome, in which A beats up B, and B doesn’t wash A’s car. Not being beaten up is a gain in this context.

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