The dark side of zero-sum thinking

Zero-sum thinking is often explained using the metaphor of a "fixed pie" view of the world: there is only so much wealth out there, and the more people there are competing for any given portion of it, the less there is for everyone else to squabble over.

Those who have a fixed-pie or zero-sum view of the world naturally see others as potential competitors for resources, and even support measures to reduce the addition of other people whom they view as making everyone's pie even smaller.

For instance, the United Nations Population Fund (UNFPA) uses the euphemistic term "population issues" to refer to the "link between population and poverty" -- as if additional human beings are always a burden who decrease the resources available to everyone else.

In their advocacy of this zero-sum viewpoint, they participate in various "global and regional forums" such as this one which they link on their website, which declares that the "solution to climate change and food security must tackle population growth." At that forum, from December of last year, the UNFPA's G. Giridhar, "speaking on behalf of UNFPA," praised the benefits of "lower fertility, smaller families, and slower population growth, thus reducing the burden on the environment."

We have written about the problems with such zero-sum thinking many times in the past, such as here and here. The biggest error those who hold such a "fixed-pie" view make is in their failure to realize that every single person is a potential producer as well as a potential consumer -- every single person has the ability to make the pie bigger. The pie, in other words, is not "fixed" in its size.

When individuals and groups of individuals think of new ways to add value to others (which translates into making money for themselves, in exchange for the value they add), the pie grows. You can probably think of dozens of things that you use today that did not even exist ten years ago -- iPods, cellphones with video cameras and GPS capability, high-definition television sets -- and that is just scratching the surface of consumer goods, to say nothing of medical breakthroughs, manufacturing breakthroughs, and other business innovations that we don't usually notice on a daily basis.

The zero-sum fallacy sees people as liabilities rather than as they truly are: potential contributors to the prosperity of everyone else, because to the extent that they contribute to the economy, they actually enlarge the pie.

In an essay we have linked previously, first published in 1964, economics professor George Reisman of Pepperdine University wrote that this erroneous focus leads to the fear "that the work performed by machines leaves less to be performed by people, that the work performed by women leaves less to be performed by men, that the work performed by children leaves less to be performed by adults, that the work performed by Jews leaves less to be performed by Christians, that the work performed by blacks leaves less to be performed by whites, and that the extra work of some leaves a deficiency of work available for others."

It is appropriate to revisit the dangers of the zero-sum mindset, especially because tomorrow is Holocaust Remembrance Day, established to commemorate those murdered by people subscribing to thinking that is clearly linked to what Professor Reisman describes in the paragraph above.

Nevertheless, the news continues to provide examples of despotic leaders from countries with closed economies built upon zero-sum thinking who have taken their zero-sum thinking to violent and racist levels, such as Iran's leader today at the United Nations.

In the aftermath of an economic crisis, it is extremely important to understand the dangers of such thinking, because history has proven that such crises can cause a retreat into just such fixed-pie behavior. Thirty years ago, writing in an edition of the Journal of Portfolio Management that we have mentioned before, Rose and Milton Friedman observed:

"The spread of the Depression to other countries brought lower output, higher unemployment, hunger, and misery everywhere. In Germany, the Depression helped Adolf Hitler rise to power and paved the way for World War II. In Japan, it strengthened the hold of the military clique dedicated to creating the Greater East Asia co-prosperity sphere. In China, the aftermath of the Depression destroyed the monetary system, weakened the ability of the Nationalist government to resist the Japanese and then the Communists, and fostered the final hyper-inflation that sealed the doom of the Chiang Kai-shek regime and elevated Mao to power."

We feel that it is important to understand the connections between economic ideas and political events, and that it is critical that everyone be able to recognize zero-sum thinking, and able to explain why it is so fallacious and so dangerous.

Subscribe (no cost) to receive new posts from the Taylor Frigon Advisor via email -- click here.


Post a Comment