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Zero Sum vs. Non-Zero Sum Interactions

From Libertarian Wiki

When you work, you create.
When you win, you just take from the loser.

What does this mean, other than just a strange Internet signature? Relations with other people can be divided into zero sum interactions and non-zero sum interactions. A poker game is a zero sum interaction. If you win at poker, your winnings equal some one else's losses. No wealth is created, it is just transferred. Many people view most of life as zero-sum interactions.

A non-zero sum interaction is when wealth is created. When you work you trade your labor for money. You value the money more than your labor. Your employer values your labor more than his money. So both parties gain and thus wealth is created. This cooperation to create wealth is the essence of the free market.

A wonderful essay as to how the free market allows even people who don't know each other to cooperate to create wealth is I, Pencil. If you do not think this is a wonderful process, go home and stay there until you can make a computer out of stuff you can dig out of the ground.

Many people think that the basis of the free market is competition, and this makes it cold and cruel. Yes, competition is part of the free market. But cooperation is even more important. Only with cooperation can wealth be created.

Zero-sum in government

Elections are fundamentally a zero-sum game, since one faction must loose in order for the other faction to win. This aspect of elections is exaggerated by "winner take all" elections, and may be mediated by proportional representation systems, which allow all groups to retain representation rather than forcing the minority to cede representation to the majority. Power-sharing arrangments may also need to be made within the legislature itself.

Police activity such as the prohibition of theft can also be interpreted as a zero-sum activity, since the wealth that they retain for the legitimate owner is equal to the wealth that they prevent the theif from attaining. Likewise, lawsuits to enforce copyright and patent ownership may be interpreted as being zero-sum, or even negative-sum activities.

Zero-sum in markets

While markets rely on positive-sum outcomes in the big picture, there are a number of zero-sum outcomes involved in the details of their operation. Any activity that involves simply transferring wealth from one person to another is a zero-sum outcome, in this case, cashiers play a zero-sum role since all of their activity involves the transfer of wealth from the customer to the seller. Likewise, marketers who determine the optimal sale price are also acting in a zero-sum role.

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This page has been accessed 778 times. This page was last modified 21:47, 4 September 2005. All content is available as Public Domain.


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