Is wealth (and the world economy) a zero-sum game?

Posted:
in General Discussion edited January 2014
This is (meant to be) a serious question/debate/discussion (yeah...yeah...I know).



Some (many) people believe that the world economy (and more specifically, wealth) is a zero-sum game. Some believe not.



The implications of this are significant and have profound effects on business, political, tax and other policy strategies and tactics.



Certainly some interactions we see in the short-term are zero-sum interactions. Others perhaps not.



If the world economy is truly a zero-sum game, that would imply there is basically no hope for the (significant) portion of the world currently in poverty.



I'd like to hear (cogent) arguments for/against.

Comments

  • Reply 1 of 16
    scottscott Posts: 7,431member
    There's nothing to debate. It's not a zero sum game.
  • Reply 2 of 16
    Quote:

    Originally posted by Scott

    There's nothing to debate. It's not a zero sum game.



    Whew. I was afraid that the responses might include cogent arguments.
  • Reply 3 of 16
    brussellbrussell Posts: 9,812member
    I don't think anyone really thinks it's a zero-sum game. However, I believe that wealth inequality is a serious social problem, and it's getting bigger and bigger in the US.



    For example, take a look at this:







    From this report based on CBO data.



    You can't enact policies that increase the income gap, like the tax cuts of Bush (and the many Democrats who voted for it), and then just say "it's not a zero-sum game." Some policies favor the wealthy, some favor the poor, and some are neutral. I think many liberals like me get tired of hearing "it's not a zero-sum game" as a catch-all slogan to defend any policy that increase the gap or heavily favors the wealthy or big corporations.
  • Reply 4 of 16
    Quote:

    Originally posted by BRussell

    I don't think anyone really thinks it's a zero-sum game.



    Actually, I think there are many who do. And, to be fair, in the short term it certainly looks/feels/smells zero-sum-ish. The real question is how long is the short term?



    Quote:

    Originally posted by BRussell

    Some policies favor the wealthy, some favor the poor, and some are neutral. I think many liberals like me get tired of hearing "it's not a zero-sum game" as a catch-all slogan to defend any policy that increase the gap or heavily favors the wealthy or big corporations.



    This kind of hints at another question here...and that is how the issue/concept of asymetric information and power affect a so-called free market economy (I say so-called) "free market" because I think (certainly here in the U.S.) that there are so many bastardizations that it seems unfair to call it a free market.



    I've been digging around for good, solid reasoning for saying things are not zero-sum. Mostly I get articles that just take a lot words to say..."well it just is". That's not terribly satisfying.



    BTW...that graph would appear to be one piece of evidence in favor of the zero-sum-ness.

  • Reply 5 of 16
    scottscott Posts: 7,431member
    Quote:

    Originally posted by BRussell

    ...



    You can't enact policies that increase the income gap, like the tax cuts of Bush (and the many Democrats who voted for it), and then just say "it's not a zero-sum game." Some policies favor the wealthy, some favor the poor, and some are neutral. I think many liberals like me get tired of hearing "it's not a zero-sum game" as a catch-all slogan to defend any policy that increase the gap or heavily favors the wealthy or big corporations.




    The purpose of the income tax is to fund the government. It's not an instrument of "economic justice". Our government does not exist to create more equal outcomes for everyone.
  • Reply 6 of 16
    Quote:

    Originally posted by Scott

    The purpose of the income tax is to fund the government. It's not an instrument of "economic justice". Our government does not exist to create more equal outcomes for everyone.



    Well, this isn't entirely true. On the surface yes...but upon closer examination (at least in the U.S.) the tax code has become some kind of "social engineering" tool. Note, I don't agree with this usage, just observing the reality of it. In fact, it seems that if it was strictly about revenue, we'd dump the progressive tax and opt for something flat (either consumption or income based)...with some break for those in the lowest tier to help them out a bit.
  • Reply 7 of 16
    spindlerspindler Posts: 713member
    The middle class in China and India are growing, so that's good. I don't think there is anything that makes things "fair", but I don't think people in the U.S. could ever become as poor as people in Mexico. The wealthy do need lots of comsumers to keep buying products. If there was an underclass of 50% poor and unskilled Americans it would be worse for the rich.



    So I think if things get better slowly around the world they will tend to stay better.
  • Reply 8 of 16
    brussellbrussell Posts: 9,812member
    I don't see how you can separate taxes and spending from economic justice. How the gov't sets up the tax code has an effect on people, and how the gov't spends money has an effect on people. Like it or not, want it or not, it effects people, and therefore involves "economic justice."
  • Reply 9 of 16
    Clearly the economy isn't a zero sum game -- people add value to goods.
  • Reply 10 of 16
    trumptmantrumptman Posts: 16,464member
    Quote:

    Originally posted by BRussell

    I don't think anyone really thinks it's a zero-sum game. However, I believe that wealth inequality is a serious social problem, and it's getting bigger and bigger in the US.



    For example, take a look at this:







    From this report based on CBO data.



    You can't enact policies that increase the income gap, like the tax cuts of Bush (and the many Democrats who voted for it), and then just say "it's not a zero-sum game." Some policies favor the wealthy, some favor the poor, and some are neutral. I think many liberals like me get tired of hearing "it's not a zero-sum game" as a catch-all slogan to defend any policy that increase the gap or heavily favors the wealthy or big corporations.




    While I don't necessarily disagree with your conclusion BRussell, I do disagree with your graph and especially with the way graphs like that break down the last quintile.



    I mean if we passed a policy and broke down the bottom fifth of the graph into the bottom 15%, top 4% and then top 1% of that bottom 20%, it might look exactly the same way.



    It also does not address any sort of turn over one way or another. How long is someone likely to remain in the top 1% for from year to year?



    My wife and I still do not earn the "income" we did when she quit working, yet we are better off. Also income does not have to be correlated to net-worth at all. I could be a retired grandmother living on a pension and social security to the tune of $20k a year and live in a beach front property in Redondo Beach that I bought in 1960 and have paid off. The government would declare me poor, but the reality is that the house would be worth at least a million plus.



    It also uses the household definition instead of per capita with which I very much take issue.



    In 1979 a woman and man might have been married with two children. He worked full-time, she worked part-time and their house hold made $12,600. In this day and age with a large increase of households consisting of single adults with children (often women) that same household could be just one income earner, and yet earn more in inflation adjusted dollars than the two did in the past.



    Additionally on the flip side of that, any household that has a married couple is much, much more likely to have both adults working now than at any time in the past. The women in these households are more educated and earning more than any women before them. That alone might attribute a large amount to the increase on the high end of the scale.



    Of course it would be easy to see this if they would break it down by per capita income.



    Nick
  • Reply 11 of 16
    NM
  • Reply 12 of 16
    Another question is what conditions are conducive to wealth creation in an economy. What kinds of governmental structure, laws, tax policies, etc. either foster or hinder wealth creation?
  • Reply 13 of 16
    brussellbrussell Posts: 9,812member
    Quote:

    Originally posted by trumptman

    While I don't necessarily disagree with your conclusion BRussell, I do disagree with your graph and especially with the way graphs like that break down the last quintile.



    I mean if we passed a policy and broke down the bottom fifth of the graph into the bottom 15%, top 4% and then top 1% of that bottom 20%, it might look exactly the same way.




    I'm not sure what the complaint is. I'm sure they could break it down into 1% slivers, and the same basic pattern would emerge (the greater the income, the greater the gains), but it would just be too big to fit. In what way is the graph misleading? Are you saying lower-income groups gained more than is being shown here?







    Quote:

    It also does not address any sort of turn over one way or another. How long is someone likely to remain in the top 1% for from year to year?



    True. It's my understanding though that the US has less income mobility than many European economies with more social welfare programs and gov't spending, and the US has less than it used to have.



    Here's a recent article in The Ecnomist about the increase in income inequality, and the lack of mobility. It makes the interesting, and accurate, point that when that happens, you don't have a meritocracy any more. People aren't wealthy because they earn it, they're wealthy because that's the class they're in.



    Quote:

    Also income does not have to be correlated to net-worth at all. I could be a retired grandmother living on a pension and social security to the tune of $20k a year and live in a beach front property in Redondo Beach that I bought in 1960 and have paid off. The government would declare me poor, but the reality is that the house would be worth at least a million plus.



    I agree. I've kept my eye out for graphs like the one I posted above, but for wealth rather than just income, but I've never seen one. I think it's pretty obvious that it would show an even great inequality.



    Quote:

    It also uses the household definition instead of per capita with which I very much take issue.



    I'd have to think about that.
  • Reply 14 of 16
    brussellbrussell Posts: 9,812member
    Quote:

    Originally posted by Chris Cuilla

    Another question is what conditions are conducive to wealth creation in an economy. What kinds of governmental structure, laws, tax policies, etc. either foster or hinder wealth creation?



    Maybe you or someone else could give their opinion on that question more directly, but I want to ask this: Should wealth creation per se really be the goal of a society? I mean, you can definitely get wealth creation by having policies favoring the wealthy - aristocracy, plutocracy, etc. But would that be the right thing to do? Would it be the kind of society we want to live in? I guess what I'm asking is what type of wealth creation you're talking about - GDP? Median family income? Number of billionaires?
  • Reply 15 of 16
    trumptmantrumptman Posts: 16,464member
    Quote:

    Originally posted by BRussell

    I'm not sure what the complaint is. I'm sure they could break it down into 1% slivers, and the same basic pattern would emerge (the greater the income, the greater the gains), but it would just be too big to fit. In what way is the graph misleading? Are you saying lower-income groups gained more than is being shown here?





    No I'm saying that by breakind down the highest quintile as they do, it is misleading because they take the outlier out of the average and display it to make their point.



    If you did this on the bottom quintile you would have a whole bunch of people who earned zero and continue to earn zero in terms of income. That would mean that it is very likely that the largest gains came from within the top 1% of that bottom 20%. I'm not how well the mental description for what I just explained will pop out. But the reality is that to move up $900 against a bunch of zero's likely means you are gaining much more than that. If I represented that as a sole percent, it would likely look much like the graph for the final quintile.



    If they broke it down into 1% slivers, I don't think the same pattern would emerge. I think the part of the pattern you see is breaking apart the last quintile and ripping apart the averages there. In any "average" there is a broad middle and then extremes. You don't use the extremes to draw conclusions about the average, even within quintiles.



    Quote:

    True. It's my understanding though that the US has less income mobility than many European economies with more social welfare programs and gov't spending, and the US has less than it used to have.



    Here's a recent article in The Ecnomist about the increase in income inequality, and the lack of mobility. It makes the interesting, and accurate, point that when that happens, you don't have a meritocracy any more. People aren't wealthy because they earn it, they're wealthy because that's the class they're in.



    I'd have to disagree with the articles and it's conclusions. For one Forbes often publishes their richest list and also what percentage are first generation self-made versus inherited, etc. they would note if there had been any sudden changes. I can easily name probably a dozen billionaires that were self made alone (Jobs, Gates, Ellison, etc. for example)



    The article is terribly wrong in it's conclusions about school funding. I could go into it more, but that would be an entirely different thread. (Almost all states have had dozens of lawsuits to equalize their educational spending plus all poorer schools receive loads of federal aid in addition to the state, they are truly the richest schools of all)



    Quote:

    I agree. I've kept my eye out for graphs like the one I posted above, but for wealth rather than just income, but I've never seen one. I think it's pretty obvious that it would show an even great inequality.



    Actually what it would show is what must of us already see and know. I've seen such charts broken down not only by quintile but by age. It shows what most of us see. We start out young and often (but not always) poor by income standards. Even many of the young on here who are very well off while living with their parents and attending trade schools or college are "poor" by income standards. For a fun exercise I showed ShawnJ once how he would qualify for food stamps.



    Now speaking in terms of averages, they graduate/certify/etc. and begin working at more than the minimum wage or part time jobs they had before. They stop earning say $7-$12k per year and start earning likely around double that. Throughout the years they made change professions, gain additional education, etc, marry, buy a house, etc.



    The average person does this and has their peak earning years in their 50's. It is also when their net-worth tends to peak as houses are paid down disproportionate to when they were starting out, 401k's are maxxed out, etc.



    As they retire they begin withdrawing from their "networth" and of course their income goes down as well.



    From this, it is still quite easy to go from nothing or zero income to well above say, $120k as an educated married "household" which would, if I recall correctly, put you in the highest quintile. (They inflation adjust the brackets now so they flow with inflation and I may not have accounted for that)



    Quote:

    'd have to think about that.



    You should because many of these "poor" households are in fact "poor" because of their filing status and not because of their income. This becomes even more involved if there are children involved and any sort of support or family court matters. See if you and I live together BRussell and you are my boyfriend we are not a household "income-wise" until we marry.



    Now suppose I am a single or divorced female. I live with my boyfriend with whom I have a child. According to the tax filing status, she can still claim her and the child alone as a "household" and file with just her income. This allows her to obtain more benefits with regard to child care, etc. Just because they all live in a household does not mean they are a household for tax or benefit purposes. We all have read that the rate of marriage is lower than ever. This is why I have continually argued for recognition of more than marriage as a form of legal partnership with regard to the government. People get their noses in a joint about the homosexuality issue when it is clear lots of other people are avoiding marriage because of household income and family court matters. (Again anothe thread ) The point is you can see why per capita matters.



    Nick
  • Reply 16 of 16
    Quote:

    Originally posted by BRussell

    Maybe you or someone else could give their opinion on that question more directly, but I want to ask this: Should wealth creation per se really be the goal of a society? I mean, you can definitely get wealth creation by having policies favoring the wealthy - aristocracy, plutocracy, etc. But would that be the right thing to do? Would it be the kind of society we want to live in? I guess what I'm asking is what type of wealth creation you're talking about - GDP? Median family income? Number of billionaires?



    These are good questions all. A couple of brief responses.



    Not really making any moral assertions about wealth creation being the ultimate goal of society (I don't really think it is). But the issue does factor into another moral issue that I am wrestling with and trying to understand...that is poverty. Before I go into this...let me address another thing in your post.



    I don't think "wealth" (in my question) is just about billionaires. Wikipedia has a lengthy discussion of the term ( http://en.wikipedia.org/wiki/Wealth ). I am thinking/speaking more generically...about material goods that enable people to sustain and (perhaps...at least to some level) enjoy life. Clearly there are vastly different levels...but there is a significant percentage of the world that lives in such poverty (materially speaking) that their lives are merely an existence...and barely at that. Which leads back to my previous point...poverty.



    If wealth and the world economy are not zero-sum games (which, they appear to be in the short-term but not long-term)...then there is hope for poverty stricken people to emerge from this level of (bare) sustinence without "draining wealth" from other nations of the world. And...if this is so...what can be done in order to grow self-sustaining, life-providing economies in these areas?





    EDIT:



    So thinking about what I just said, perhaps a decent (simple?) definition of wealth might be the ability, means and materials to sustain and enjoy life?

Sign In or Register to comment.