From newly re-elected president Donald Trump’s threatened tariff increases to concerns about immigrants taking Americans’ jobs, zero-sum thinking is common. Lee Cronk argues that despite the pervasiveness of this thinking, society has become mostly positive sum through the growth of trade. With this in mind, he writes, we should be vigilant towards politicians’ unnecessary zero-sum proposals. This piece has been reprinted from the London School of Economics Blog.
An old folk tale goes like this: A genii appears to a man and offers him a deal: “I will grant any wish you have, but I will also grant your neighbor the same wish twice over.” The man thinks for a minute and then says, “All right, put out one of my eyes.”
As gruesome as that story may be, it accurately captures the nature of feudal economies. At that time, one person’s wealth led to someone else’s poverty. In what’s known as ‘game theory’, which is a way of studying decision making and strategy, this is a ‘zero-sum’ situation. Zero-sum games are win-or-lose scenarios in which one person’s gain necessarily means someone else loses. Positive sum games, in contrast, are win-win: though everyone involved may not benefit equally from the interaction, they will all benefit, and no one will pay a cost.
Zero-sum thinking
We do not have to look far to find examples of real-world zero-sum thinking. In her 2024 memoir, Freedom, former German Chancellor, Angela Merkel, wrote of the then US president, Donald Trump:
“He assessed everything from the perspective of the real-estate developer he had been before entering politics. Each piece of property can be allocated once. If he didn’t get one, he got another. That’s how he saw the world. For him, all countries were in competition, and the success of one meant the failure of another. He didn’t believe that cooperation could increase prosperity for everyone.”
Now consider the following ideas that have been all too common in recent American political rhetoric:
- If other countries grow wealthier, then the United States must grow poorer.
- If immigrants win, then residents must lose.
- If women win, then men must lose.
- If gay people win, then straight people must lose.
- If transgender people win, then cisgender people must lose.
Those propositions have two things in common: (1) they all are examples of zero-sum thinking, and (2) they are all false.
While some situations are indeed zero-sum, zero-sum thinking is often a mistake. If it is a mistake, then why is it so common? Think about the kinds of economies in which our ancestors lived until just a few hundred years ago. When people were barely eking out a living as, say, subsistence farmers, wealth was difficult to create and amass. People took care of their basic needs, such as food, housing, and clothing, largely on their own. As a result, food was sometimes scarce, houses were of poor quality, and clothing was lousy, often literally so. If someone did somehow manage to become wealthier than their neighbors, it almost always came at someone else’s expense.
Consider, for example, the kings, queens, emperors, and other rulers of ancient states. They were wealthy not because they provided any useful good or service that people were willing to pay for voluntarily but because they were able to use the power of the state to forcibly extract wealth from their subjects. In that kind of economy, zero-sum thinking makes perfect sense, because the economy is, with a few exceptions for small-scale trading, zero-sum.
Trade can mean a positive-sum economy
Fortunately, we no longer live in a society dominated by zero-sum games. Instead, we live in one in which we play positive-sum games pretty much every day. What changed? Trade. While the practice had existed for thousands of years, starting in earnest just a few hundred years ago, trade exploded. This created a positive-sum economy in which the wealthiest people are no longer kings but rather those who sell goods and services on the market to people who are willing to pay for them voluntarily. As the system developed, the division of labor among people and among nations became more refined, allowing people and nations to focus their efforts on whatever they did best in the service of others’ needs.
Did some people become extraordinarily wealthy because of this new system? Yes. Did that wealth sometimes engender envy and resentment on the part of others? Yes. But were those emotions appropriate? No. In a positive-sum economy, a wealthy person is not a problem for those poorer than them, but a possible solution to poverty. The trick is finding a good or service that those who are currently poor can sell to those who are currently wealthy.
Zero-sum thinking about positive-sum reality
This has all been well understood among economists since the time of Adam Smith’s The Wealth of Nations. However, people without much training in economics or game theory often have a difficult time both understanding it and remembering it. The result: Zero-sum thinking in situations that are, in reality, positive-sum.
Take international trade, for example. When it is unencumbered by tariffs and other restrictions, it is a positive-sum game. People around the world create the goods and services they are in the best position to create and then trade them with others. If you do this for a few hundred years, vast sums of wealth are created. Poverty stops being the norm and starts becoming an outlier.
Tariffs – which Donald Trump has declared he will greatly increase when he re-enters the White House – take the positive-sum game of international trade and pit nation against nation in a zero-sum fight for dominance while forcibly extracting wealth from the consumers who ultimately must pay for them.
Or consider immigrants. A common belief is that they take jobs that would otherwise be available to American citizens. In reality, immigrants increase the size of the economic pie, benefitting not only themselves but also the nation as a whole.
What can we do to help people appreciate the difference between zero-sum and positive-sum interactions and to identify them correctly when they occur? For a start, we can spread the word about these concepts so that more people are aware of them. But human psychology being what it is, we will also have to be vigilant ourselves whenever politicians or others make dubious and misleading claims about the zero-sum nature of our society or propose policies that would make it more zero-sum than it needs to be. That would be a win for all concerned.
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