October 6, 2000
In one form or another, a zero-sum equation is probably the most common systematic argument against a really free market of voluntary exchange. The essential basis of this argument, whatever its particular focus, is a 'zero-sum game' of wealth, in which everyone cuts pieces of a 'wealth pie,' if you will, which can only be sliced so many ways and is only so large. According to this, any addition to the amount of wealth must have been balanced by its removal from somewhere else. The additions and subtractions add up to consistent amount. Wealth may not be created, only redistributed, the gain and loss adding up to zero.
If one believes this, it is perfectly understandable to object to anyone being richer than someone else (since they have necessarily appropriated more than their 'fair share'), or to think the wealthier western world has to be exploiting the rest of the world since it has a greater piece of the pie, or that profit is unfair because it must come at the expense of someone else even in a voluntary exchange, or to believe in the use of force to 'redress the balance.' These things follow from the zero-sum game of wealth if it is accurate. However, the worst of this phenomenon of belief may be that in some cases, these conclusions themselves are desired, and the zero-sum economics have been discovered as a justification. I believe that to have been the case with many communist economists such as Marx, who really wanted to be justified to hate capitalists, since they already did. Before discussing any specifics, it is worth noting initially that this claim is characteristic of pessimism, and while dealing with it, it is wise to keep in mind that the proclamation of this kind of limit may have less to do with a realistic perception of the world than a pessimistic desire for such a limit to exist.
Capitalism in a free market is not a zero-sum game, and exchange is not limited to zero-sum equations, for multiple reasons. First, wealth is subjective in amount and kind according to individual understandings of value. There cannot be a fixed amount of wealth in the world if the wealth that matters to each person is subjectively different. Certainly, physical commodities and resources like gold and wood and food and stone are not overly subjective in the way we experience them, and they are not interchangeable depending on who you are. But their value to each of us does vary, and it is subjective, depending on who we are. The same is true of the products produced from them, and their various applications. There is also great variation in the worth of what is physical depending on what we have the knowledge to accomplish. To experienced workers today, iron ore means tools and girders to build into the sky. But to our distant ancestors, iron ore was just another rock. In the hands of a skilled doctor today a knife can save a life, but once people only knew that knives were good for cutting up food and each other. Before papyrus and sheepskin became the first kinds of paper and made literature and accounting possible, they were just reeds and a way to keep warm. Obviously the vast difference in value has come from the subjective realm of mental capital. Much of what is often called culture is mental capital, such as art and science, and even every idea or concept, with perhaps a value which is even more subjective. Individual human capacities and abilities count as well, and those are certainly not measurable statistically.
All that matters is that someone values a thing, and then it is real wealth to them. Of course, some people believe that capital which is not physical is not 'real.' But for proof that ideas and concepts can have as much, or much more, real impact than quantities of physical resources, consider the difference that knowledge and technique makes in efficiency, and in what can be accomplished with resources. Once all people spent virtually every waking moment trying to feed and protect themselves with the tools ready at hand. They had all the same basic physical resources. The only important difference is mental; certainly there were fewer people alive to build wealth in the past than there are people building wealth of all kinds now, but exceedingly more value per person is being created today, thanks to the accumulated exchange of mental capital and mental resources. If we were instead billions of cave-dwellers, we would probably still measure wealth in having enough to eat and a fire for warmth. The main reason that some still do is that the profits of unhindered mental and material production and trade have been denied them through the true oppression and exploitation of modern-day societies, which are not free at all.
Another reason the zero-sum equation does not apply is that even according to a given standard of wealth, wealth can be created. Look about you at everything that exists now, all the technology, art, literature, and the material farms and cities, from homes and skyscrapers to gardens and fields. Once people lived in only natural shelter, hunting and gathering, and had none of this. So where did it all come from, if wealth cannot be created? Gains can be made. Effort can accomplish and what is accomplished can accumulate.
Labor is often considered to be the basis of wealth according to zero-sum economics. If all labor is equal in value objectively, if the products produced by less labor are exchanged for what required more hours of labor to make, then that profit is exploitation. In the eyes of many people this has condemned all capitalists as exploiters of their employees, and millions have been killed in the world out of revenge and jealousy, in the name of the 'fairness' of this theory. But it is utterly wrong. It could only be right if value were completely objective, and if the contribution of every person in work is always exactly identical. Labor was closer to commonality when more people did very similar work, such as agricultural farm labor. But labor is in fact highly dissimilar, especially today. It includes inherent and learned talents, experience, individual flair, and many other subjective qualities. It is also worth more or less in subjective value according to the circumstances of the world around the worker. Labor in the strictest physical sense is also a far less significant kind of capital than mental capital, which means the difference between making piles out of sand and making glass out of it, as well as the difference between making glass out of sand and making silicon chips.
The specific justification for a zero-sum game of wealth is often the connection of wealth to a limited amount of resources in the world, a zero-sum game of resources. This claim may be extended to anything from arable land to food production to energy production, to any or all natural resources used by mankind. If this is true, the very use of these limited resources for profit is exploitation of other people. But in practice and in history, every time a limit is found, someone will invent a way to surpass it as long as people are allowed to achieve freely. For example, if the ability to grow food based on available land really stayed constant, this planet could never support billions of people as it does now, with irrigation, hydroponics, and other modern farming techniques effectively creating more cultivated land. It would seem there are always better methods for accomplishment. There are always ways of converting one substance into another more useful one, and even ways of exchanging energy for matter and matter for energy. The only real scientific limits that apparently exist involve the amounts of matter and energy in the universe, and these are hardly limits that we can relate to as human beings.
— Richard Feynman
One popular conviction is that the third world has been exploited by the rest of the world through the pillaging of its resources. There is some truth to this — but not due to a zero-sum of resources. Particularly under the application of the fascism of the past — mercantilism, colonialism, trade monopolies, tariffs, and so on — people in the third world were exploited through force, and their economic progress was set back. The chief means of their exploitation had little to do with shipping more substance out of these lands than was sent back; actually these people were not allowed to innovate and improve using mental capital, and profit accordingly. For example, in India under British colonial occupation, the most weighty leverage for exploitation was in only allowing the Indians to sell raw materials such as indigo dye to the British, prohibiting them from the more profitable work such as producing and dying clothing to sell. This was reserved for British monopolies, which sold finished goods back to the Indians. Even today international trade 'management' interferes using force, preventing some people from prospering even if their own government will let them alone. But this has nothing to do with voluntary exchange. It is economic fascism and tyranny, not simply the use of resources in a free market. Within a free market of individuals, people from any land will always be able to accomplish and prosper far more than those bound by artificial limits.
In a free market, evenly distributing what resources already exist or what is created is both impossible and undesirable. It does not matter that different definitions of capital belong to people in uneven amounts. In fact, this is quite natural because people are different in their abilities and interests. What matters is that in a free market, each person is more likely to achieve his own goals than in any other kind of economy — which includes greater average prosperity as well as relative riches in the hands of those who have made this their goal and achieved it.
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