The Zero-Sum Game Fallacy views wealth as a fixed quantity meaning the only way someone gets wealthy is at someone else’s expense.
There are three possible types of games in the world. First, there is the lose-lose game. There are not many examples of this one. I always think of the 1983 movie War Games starring Matthew Broderick. The military’s supercomputer takes on a mind of its own and plays out all the scenarios of a nuclear war only to conclude that the only winning move is not to play.
Then there are win-lose games. Most athletic competition is of this type. Turn to the sports section of newspaper and look at the standings for the teams in the National Football League. Add up every team’s wins and every team’s loses, subtract the loses from the wins, and the total will be zero. If any team has more wins than loses, then someone else must have more loses than wins. This is the perspective that many have about wealth and poverty. Someone’s wealth is the cause of someone else’s poverty. But the market economy is not a win-lose game.
The market economy is a win-win game. If you add up the growth in Gross Domestic Product (GDP) for all nations in a given year, the total will not be zero. Overall wealth is growing. Some nations are getting a greater portion of the expansion than others and a few nations may actually have declined in GDP but the total for the world is a positive number. How does this happen?
Jay Richards in his talk on Economic Myths uses the example of “The Trading Game” played in many classrooms. Richards describes his experience playing the game in the sixth grade. Each student was randomly distributed an item of approximately the same value. Each student was instructed to rate how much they valued what they had received from 1 to 10 with 10 being the highest value. Richards received Barbie trading cards, which he ranked as a 1. Then the students were placed in groups of five and allowed to trade with each other. Richards found a girl with a paddle-ball and they traded to each other’s satisfaction. The students recorded their values again. Finally, they were allowed to trade with anyone else in the room. When the trading was finished, the students wrote down the value of the item now in their possession.
If you added up the students' ratings at the start of the game and compared them to the sum of the students' ratings at the end of the first trade, you would find that the sum for the class was higher than it was at the beginning. The sum would be higher still after the second round of trade. Furthermore, no one would have an item of lesser value than the one they started with at the end of the game. There were rules to these market exchanges. There was no theft or intimidation so there was no way to go lower than the value of the starting item. Often in these games, everyone’s value goes at least a little higher. “Societal wealth” has expanded purely through free trade in an environment with rule of law and respect for property rights. This is without even considering the enormous impact of human and financial capital on production and distribution of goods and services.
The Zero-Sum Game is possibly the most pervasive of the economic fallacies. Well-meaning Christians see people in poverty and decide that the answer is to shift more wealth from the rich to the poor. They look at what Americans have and conclude that the USA has more than their “share” (of a fixed amount) of wealth. Now let’s be clear here. Just as with biblical ethics in the Mosaic Law, society is obligated to care for the poor and helpless. This is different from saying that redistribution should be imposed because one group has more than another or that one group’s wealth is the cause of the other’s poverty. The issue is not that the wealthy have taken from the poor but that the poor have nothing to trade in the economy. Robert Lupton in short but excellent book Compassion, Justice, and Christian Life: Rethinking Ministry to the Poor, writes:
Remember your last garage sale? Or the last antique bargain you purchased at a flea market? Or the last car you traded? How is it that when a transaction is done well both purchaser and seller come away with a sense of gain? It’s the magic of exchange. And it transcends the boundaries of age and gender, race and class. Whether the find is a rare Babe Ruth baseball card, a silk blouse reduced for quick sale or the perfect piece of land at the right price, the ecstasy of exchange is for all to enjoy.
Exchange is remarkably invigorating process. The very thought of acquiring a new treasure motivates us to calculate value, rearrange priorities, juggle finances, analyze past performance and make predictions about the future. And ultimately, it pushes us to the risky edge of letting go of something valued in the hopes of gaining that which will be of greater worth to us.
However, when the labor you offer is unneeded in the marketplace of when your abilities area worth less to employers than the amount of your welfare check, you are exchange-less. Indeed, poverty may be defined as having little of value to exchange. And when society subsidizes you for being a noncontributor, it has added insult to your already injured self-esteem. (43-44)
Well intentioned efforts to redistribute wealth to the poor can have too negative consequences. First, the wealthy have not taken their wealth and put it in a safe at home. The great majority of their wealth is invested in productive enterprise like owning their own business, owning shares in other businesses, or in loan instrument at lending institutions. Reducing the wealth of the wealthy through forced redistribution means fewer funds for productive economic enterprises and if the reductions are substantial enough it slows economic performance. Second, subsidizing “noncontribution” by the poor is dehumanizing. God has called each of us to be stewards over some corner of his creation. It is an ontological expression of our humanity. Our primary focus must be restored stewardship; equipping people with something they can trade in the marketplace combined with the skills to work the marketplace.
Developing nations need greater gradual integration into the global market economy (not the failed “extreme makeover” approach imposed by developed nations in the past) with more economic freedom circumscribed by the rule of law and property rights so they may partake of the benefits of the trading game. Our objective is not equalizing a falsely conceived fixed amount of wealth in the world.