The Zero-Sum Fallacy
There’s a false notion that poor countries are poor because rich countries are rich.
- Michael Miller
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Michael Miller on A False Notion
There’s a false notion that poor countries are poor because rich countries are rich. And that somehow there’s a justice requirement that wealthy countries have to transfer money from developing country’s taxpayers to developing countries. Well, we’ve seen the effects today. We’ve seen that aid has subsidized dictators. We’ve seen that aid has encouraged inefficiency. We’ve seen most of the money for aid doesn’t actually get to the poor. But even perhaps more important, or more problematic is that a lot of this money… in fact, sometimes a majority of the money actually goes back to the rich countries to those developed countries, those donor countries, to pay for the salaries of their large aid staffs.More from Michael Miller
Damian Von Stauffenberg on The True Source of Wealth
What creates wealth? People create wealth! The source of wealth is inside our head. It’s our creativity, something we’ve been endowed with. Now if human creativity is the source of wealth, then people are the source of wealth. And if you have a vast reservoir of poor people living in these slums that is a source of untapped wealth that far exceeds the biggest oil reserves you could possibly find um underneath your soil. That is really your source of wealth.More from Damian Von Stauffenberg
Robert Woodson on Black and White
The race grievance industry believes in zero-sum solutions: In order for blacks to gain whites must lose; in order for poor people to prosper business must lose. But if you look at it from a positive sum solution to say, “How can we all benefit?” the way most faith-based groups operate, then you look for opportunities to think and act outside of the box where you say “How can we partner?More from Robert Woodson
Samuel Gregg on A Great Economic Fallacy
The Zero Sum Game is one of the great economic fallacies. It assumes that if one person gets rich, it must mean that someone else gets poorer. That’s reliant upon a static view of wealth. It’s like a pie; the idea that there’s just one pie, and the pie can’t grow.
In market economies and dynamic, open economies what you’ll find is that the pie grows. This is very important, because what that means is that everyone can start to get out of poverty.More from Samuel Gregg
The Zero-Sum-Game Fallacy
The "zero-sum game" is a Game Theory illustration of instances in which one player’s win necessitates the other player's loss; in other words, there is no such thing as a win-win scenario where both players benefit. Some view the free market economy as a zero-sum game in which individuals and nations can enrich themselves only by impoverishing other individuals and nations. This is an elementary error, however, since it fails to take into account the basic principles of voluntary exchange and wealth creation. Here we will explore the nature of this error and its implications for economics, public policy, and development.
Table of Contents
- The Zero-Sum-Game Fallacy
- Wealth Creation
- Policy Implications
- A Brief History of Zero-Sum Thinking
- Overcoming the Zero-Sum Mindset
Wealth is produced when creative human beings devise new or more efficient ways to meet the wants and needs of others. The invention of the internal combustion engine, for example, combined with technology for extracting and refining crude oil, turned a previously worthless, sticky substance, into an immensely valuable resource, “black gold.” Its use, in turn, enabled people around the globe to travel and deliver goods farther, more quickly and more economically than ever before.
Such improvements have allowed the world’s population to grow exponentially while simultaneously decreasing the proportion of that population living in poverty. This could not have been possible if global wealth were a zero-sum game.
Despite the obvious promise of wealth creation and the fallacy of zero-sum thinking, many popular policies reflect zero-sum-game thinking. For example, some believe that rich nations must have acquired their wealth only by exploiting others and, therefore, this imbalance should be redressed by transferring aid from rich nations to poor ones. Unfortunately, such top-down foreign aid strategies have a poor track record of success, and often do more harm than good. What has proven successful, however, is fostering the conditions (e.g., property rights, the rule of law, the freedom to enter into wider networks of productivity and circles of exchange, a culture of entrepreneurship) that lead to increased wealth creation for rich countries and poor countries alike.
A Brief History of Zero-Sum Thinking
It is, of course, foolish to ignore the challenges of a growing world population, but more widespread by far is an excessively stingy view of human ingenuity and productivity. The idea that our planet’s wealth is a fixed pie has been proven wrong over and over again. Would-be prophets consistently underestimate the capacity of human beings to innovate and create new forms of wealth. Below are just four examples of doomsday thinking encouraged by a zero-sum-game mindset:
- “When our coal mines are exhausted, the prosperity and glory of this flourishing and fortunate island are at an end. Our cities and great towns must then become ruinous heaps …; and the future inhabitants of this island must live like its first inhabitants, by fishing and hunting.” John Williams, Natural Survey of the Mineral Kingdom, 1789
- “There is no probability that when our coal is used up any more powerful substitute will be forthcoming.” W. Stanley Jevons, The Coal Question, 1865
- “American oil supplies will run out in 13 years.” U.S. Department of the Interior, 1939
- "The world as we know it will likely be ruined before the year 2,000…. World food production cannot keep pace with the galloping growth of population.” The Environmental Fund, 1975
- “I would take even money that England will not exist in the year 2000.” Paul Ehrlich, 1970
Overcoming the Zero-Sum Mindset
The zero-sum fallacy is rooted in a pessimistic and, often materialistic, view of human beings as consumers. But a view enriched by economic history and theology positions human persons not merely as mouths devouring the Earth's resources, but as productive gardeners and sub-creators imprinted with God's divine creative spark. While God alone can create ex nihilo, Scripture reveals to us with clarity our responsibility to participate in the creative process of cultivating His garden bringing forth from it new fruits. "Be fruitful," God says to Adam. As we see in the Parable of the Talents, and indeed throughout Scripture, this mandate entails more than the mere management of existing resources but also the production of valued goods and services i.e. wealth creation (where "wealth" is not measured by mere dollars and cents).
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