Zero-Sum World Economics

There are, it seems, two competing views of world economics. The first is the most common and goes almost unquestioned in everyday affairs; it holds that there is no limit to potential wealth and that everyone, conceivably, can be wealthy at the same time; all you need is something to trade.

The other view holds that global wealth is a zero-sum affair wherein for one cluster of people to be wealthy another must be poor. The latter view has been inaccurately characterized by a regular visitor to this website as “communist” and “pure Marxist posturing.” In economic terms, Marx’s only real contribution was the (correct) suggestion that labour can be a kind of capital, which has nothing to do with what I’m talking about. Today’s economics are more or less Keynesian and hold that macro-level trends tend to overwhelm individual behaviours.

The zero-sum scenario only makes sense when all factors of economic transaction are accounted for. A problem is the idea of an “externality”, or the cost that others must pay for you to use your product. You pay a price for gas at the gas station, for example, but that price does not necessarily reflect the “external” price of producing and transporting the gas; such costs are often not monetary but environmental.

In the non zero-sum world, there are no appreciable external costs. Rather, unquantifiable externalities are absorbed by the “commons”, the shared pool of human assets, such as the earthly environment. Garret Hardin captured the world’s imagination with his 1968 article, The Tragedy of the Commons, in which he pointed out that regulation of pollution and depletion of the commons is a losing affair. This is partly because those who have acquired wealth also dictate the terms by which the commons can be exploited. In this sense, those who acquire wealth deny it for others by skewing exploitation of the commons toward their own advantage.

Here’s a good way to better understand the situation. Play the Tragedy of the Bunnies game! By some measures, the world may be wealthier now than it ever has been before. But by other measures it’s never been poorer. Don’t close your mind to either measure. Don’t let wishful or defensive thinking blind you.