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josie's avatar

Where did the economic theory of "zero sum game" come from?

Asked by josie (27865points) July 23rd, 2010

Much of what we think about free market economics probably comes from Adam Smith, and more recently Milton Friedman. Most of what we think about government influence over economics comes from John Maynard Keynes.
But there is an economic model that seems to be held by more people than the free marketeers, and the Keynesians combined. This is the “zero sum game” theory, which as you know, states that there is only a fixed amount of wealth in the universe, and that when one person gains a part of this wealth, somebody else is losing that part. Who is originator of this theory? Since the notion is so popular, why do we not learn about him in econ class?

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8 Answers

jerv's avatar

Game Theory has been around for centuries, but is used more in Neoclassical Economics than in Classical Economics. Since most schools teach Classical instead of Neoclassical, I am not surprised that you learned more about Adam Smith than about John von Neumann.

BTW – Have you read Theory of Games and Economic Behavior ? It was first published in 1944 but is likely more accurate and relevant than most other economic texts.

wundayatta's avatar

Huh?

Everyone knows the size of the pie is always increasing. Labor creates value. There no need to take anything from anyone. We create new stuff all the time.

Game theory, as I understand it, has to do with negotiations. You can take a zero-sum approach if you want, but that’s a big gamble. Especially when you know that if you cooperate, you will always end up better off. If you go for everything, you might win it all, but also you will lose in the long run because no one else will want to do business with you. You’ll have to establish a monopoly to be in business so no one will have a choice but to work with you.

josie's avatar

@wundayatta Not everybody knows that the size of the pie is increasing. How many politicians have gotten votes by implying that the rich have victimized the poor. This is the false but implied “theory” that they use. It is why, if there is a Hell, they will all wind up there (politicians that is, not the poor).

jerv's avatar

@wundayatta But how much value? There are many economists that insist that economics is not a zero-sum game because they dismiss the value of labor.. just like you appear to be doing.
Or are you saying that labor is more valuable than they believe it is?

wundayatta's avatar

@jerv I’m saying labor is valuable. But also that the amount of goods and services being created is increasing. I’m saying that without growth and change, we putrify and die. Or maybe it’s the other way around.

@josie We can have an expanding economy and the poor can still be taken advantage of. Of course “taken advantage of” is a relative term. There is no right or wrong here. It’s a struggle over wealth. Politicians can say what they want, and in this case, it’s in the cause of the poor.

The poor have numbers. The rich have resources. Guess which come out on top? Or let me ask it another way: would you rather try to achieve your goals with resources or with numbers of people?

I prefer resources. I can always buy the numbers I need. However, one can achieve goals with numbers of people—if you can organize them. However, if you can organize them, you also have the skills to create a lot of resources. People, almost universally, “sell out.” Everyone wants a good return on their investment. In this case, the investment is the labor they put into organizing people. When these organizers end up in positions of power, they might argue that they can better serve the people from that position, but me—I’m not so sure of that. I know for sure they can better serve themselves. As far as I know, only ACORN and a number of religious groups require the organizers to live at the same living standard as the people they are working with.

Anyways, economists are just researchers like any other academic. They have a lot of theories, and some of those theories are useful in some cases, but I don’t know of any theory that handles the entire economy very well at all. That’s why we have a stock market. People bet on the future. Some may make better bets at one time than others do, but eventually they fall back to the pack. Except, perhaps, Warren Buffett. Then again, when you have enough resources, you can pretty well make any future you want, regardless of the overall economy.

jerv's avatar

After the collapse of the derivative market, I cannot help but refute any claim that wealth can be created from thin air.
The closest you can really come is transfer of wealth of some form, whether that transfer actually has a dollar value assigned to it or not.
Leverage and speculation can produce profits but not wealth. To claim otherwise would spark a long discussion about the nature of time, but suffice it to say that robbing generations as-yet unborn isn’t creation of wealth.

wundayatta's avatar

Oh man. Now we’re in deep. We have to talk about what money is and what credit is and blah blah blah. Then we have to talk about how labor creates value that wasn’t there before. It’s too much. I won’t do it. If you need to know, look up some of my other economic posts where I have dealt with these issues.

Let’s just say this, @jerv. I believe that if you studied these issues in greater depth, you wouldn’t say the things you say. And if you have studied these things in greater depth, then nothing I can say will ever change your understanding.

But I thought we already agreed we were talking at cross purposes? You are an honorable discussant. Discuss on if you want. I’m stopping following this question.

jerv's avatar

@wundayatta Given our recent history together, I think that the only thing we are likely to agree on right now is that we disagree :D

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