Zero Sum Thinking

Economic fundamentals are not taught in our public schools. Therefore many of us learned everything we know about economics from playing Monopoly. Don’t get me wrong. I love the game of Monopoly. But Monopoly is not a game based on economic reality. The game of Monopoly is based on zero sum game theory. Someone wins and everyone else loses. The game of Monopoly teaches us to use zero sum thinking as if it were true in the real economy. It is not.

 

A zero sum game describes a “situation or interaction in which one participant's gains result only from another's equivalent losses.” Unfortunately it seems that most of our elected officials think that our economy operates like a zero sum game.  Even worse it seems that most voters believe that the economy operates, as Karl Marx would have us believe, as a zero sum game. But the economy is not a zero sum game. When unburdened by the zero sum thinking policies of excessive regulation, excessive taxation, trade barriers, and re-distribution a free society’s economy will grow, expand, and amplify prosperity.

 

Consider the example of Henry Ford.  When Henry Ford made the Model T he effectively destroyed the horse and buggy industry. A horse industry worker living in that time might have foreseen the imminent loss of hundreds of horse and buggy industry jobs. If such a person applied zero sum thinking he or she would have marched on Washington DC seeking a ban on horseless carriages to save jobs in the horse and buggy industry. Chanting, “Too big to fail! Too big to fail! Too big to fail!” If the politicians of the time agreed they might have employed zero sum thinking and passed laws protecting the horse and buggy industry from the intrusion of horseless carriages. It is true that hundreds of horse and buggy industry jobs were destroyed in the short-term but thousands and thousands of new jobs emerged in the new automobile industry. The automobile industry increase mobility opening the door for thousands and thousands of new jobs in hundreds of new and/or expanding industries. The economy is not a zero sum game.

 

Here’s another example, the typewriter industry.  The typewriter was a wonderful technology made possible by the ever expanding (not zero sum) economy.  Business was great until personal computers came along. Seeing the looming threat typists who applied zero sum thinking would likely have marched on Washington, DC demanding a ban on personal computers in order to save jobs in the typewriter industry less they be stolen by new technology. Chanting, “Too big to fail! Too big to fail! Too big to fail!” Yes it is true that thousands of jobs were destroyed in the typewriting industry in the short-term but millions of new ones were created with the rise of the personal computer industry. And the new personal computer industry opened the door for countless other new businesses thus greatly expanding economic opportunity for millions of Americans. The economy is not a zero sum game.

 

When our leaders taxed and/or borrowed trillions of dollars from the private sector and redistributed it to special interests they were applying zero sum thinking. When the government passed the Dodd/Frank financial reform bill institutionalizing bailouts and establishing a policy of too-big-to-fail they were applying zero sum thinking. When our government raised income tax rates on our society’s top producers on New Year’s Day seeking “fairness,” they were employing zero sum thinking. These zero sum governmental policies are destroying innovation, crushing opportunity, and preventing jobs from being created.  It is time for our leaders to stop institutionalizing failure and robbing the private sector to support government waste. The economy is not, as Karl Marx would have us believe, a zero sum game.  It is time for our leaders in Washington to stop playing Monopoly with the economy.

 

Mark VanSchuyver