By | April 27, 2013

The economy – contrary to popular belief and even the belief of some economists – is absolutely not zero sum.

Many people want you to believe that as it is in their best interests that you do so. That would be mostly members of the 1%, large banks, etc. Certain parts of the economy are indeed zero sum, but these parts are very small and are shrinking more every day.

I don’t really feel like going into long explanations here, but this is the most common misconception I see out there about how a large economy works – that value creation always by necessity causes value destruction elsewhere.

However, if I write a computer program for which you pay me, both of us are objectively better off.

If a famer creates a better method for rotating crops for which people pay him to consult on for their own farms, he is better off and so is everyone else. No one loses anything – and this is true if the farmer never personally profits monetarily from the work.

If a researcher creates a clever algorithm to optimize encoding of digital information for which she receives the Fields Medal, again, everyone is better off.

That the economy is a zero sum game is actually completely the opposite of how economies work. An economy can’t work that way and function. Just can not. In an economy that is in fact a zero sum game, everyone would do only the bare minimum to obtain food and water and that’s about all.

I realize that as one my teachers once put it that I am jumping from mountaintop to mountaintop here and not exploring the valleys below, but smart people read this blog. I am sure you can handle it.