[swimbiscuit]

Hello,

I had a quick question regarding the zero-sum fallacy or the fixed pie fallacy.

If the zero-sum fallacy were true, would it also be true that economic growth could not occur at all?

I just want to make sure that my interpretation of the fallacy is correct.

Thank you for your time!

Noah

[jmherbener]

You might take a look at this excerpt from Murray Rothbard’s history of economic thought:

https://mises.org/library/skeptic-absolutist-michel-de-montaigne

As Rothbard points out, the view that trade is a zero-sum game is entirely false. While it’s true that trade is merely the exchanges of existing goods and therefore, appears to be a zero-sum game, instead what actually occurs is that both parties gain what they subjectively value more highly than what they give up. The zero-sum fallacy wasn’t conceived to apply to the case of economic growth. It seems hard to deny that if two parties engage in a division of labor which increases efficiency so that more goods are produced (i.e., they enjoy economic growth), that both of them benefit or at least can benefit by sharing in the larger stock of goods. Growth, by definition, increases the pie.

[swimbiscuit]

Thank you for your clarification.

I have a follow up question.

When someone argues that capitalism is inherently unjust because of the large income inequality gap, do they assume this fallacy? That the 1% of the population are receiving economic benefits at the expense of the impoverished?

I am trying to understand the economic assumptions people make when forming their moral judgments against free markets.

If everyone benefits in trade, and no one is exploited in free exchange, than those who find markets immoral because of income inequality have no basis for their argument.

Thank you so much for your time.

[jmherbener]

Income inequality as an argument against the market economy is typically based on some assumption of the morality of egalitarian outcomes and not the zero-sum fallacy.

Some Marxists, for example, claim that capitalists are able to pay workers subsistence wages and extract their “surplus labor” for themselves. They don’t deny, necessarily, that workers do not gain subjectively from labor contracts they enter into. But, capitalists prevent them from sharing in the productivity gains that their labor creates in a growing economy.

Take a look at Murray Rothbard’s book:

https://www.mises.org/library/egalitarianism-revolt-against-nature-and-other-essays

[swimbiscuit]

Thank you so much!

I appreciate the time.

[Author]

Posts