THE ZERO-SUM ERROR 

THE ZERO-SUM ERROR 

The opinion that in life, and specifically in the economy, when someone gains someone else loses, that nobody can prosper unless another or others are unsuccessful, is widespread even among those of us who should be experts in these issues. What is gained by those who win has to be equal to that which is lost by those who lose, and so only zero-sum phenomenon are produced.

I believe, however, that the general regressive nature of this conduct hasn’t been set forth sufficiently clearly. Faced by criticism, the response has always been that economic policies based on the zero-sum exerted a re-distributive effect in society;  and that they favoured, in short, the poorest and most marginal sectors of the population, to the detriment of the highest incomes. It is on this point where I disagree.

The core of the potentiality of economic science and its responsibility, is in convincing and applying that conviction consistently, that economic phenomenon are rarely zero-sum.  The most habitual is that they are positive-sum or also, and here lies the risk of a mistaken policy, negative-sum. An action will be positive-sum when all gain or, at least that which is gained is more than what is lost by those who lose. It will be negative-sum when all lose, or also if what is gained falls short of the amount lost.

I greatly fear that the vision of economic policy with zero-sum results is in the philosophy of many general and concrete outlines of budgets nowadays, in certain pressures of socio-economic agents and in many of the reflex actions of our daily life.  This type of attitude is restrained, for example, in the majority of collective agreement negotiations; in the simple act of bringing out an insinuation about the suitability of an ‘iron law’ for profits and in the entrepreneurial obsession with prejudice of wage rises without taking into account individual productivity. It is also restrained in the false dichotomy, raised so many times over the years, between the so-called social costs and investment costs (as if investment costs weren’t social or as if the social costs, well oriented, could not be considered as investment in human capital); in the attempts to force a regional redistribution by decree; in the general controversy over whether the public sector should increase or reduce its protagonism in economic life; etc. 

The radical contradiction entrepreneur-employee, rich-poor, good-bad, friend-enemy, native-foreigner continues to prevail, despite being an already obsolete interpretation.  It is assumed that what one gains the other necessarily loses.

Economic reality and experience, on the contrary, indicate that on the majority of occasions both have common interests.  The most fitting policy consists of being capable of generating positive economic synergies and avoiding negative ones.  It is necessary to substitute, in short, the Darwinian conception of competition (according to which the survival of the fittest implies the disappearance of others), for a vision more in tune with reality, in which competition is formed as a system of dynamic collaboration in the course of which all participants benefit.  I sincerely believe that a lot of energy has been wasted in deciding who were the guilty ones and in arguing over unimportant issues. I trust that there will be a reaction in time and the Spanish economy doesn’t end up like the fable about hounds and greyhounds.

The previous remarks indicate the usefulness of remembering, to conclude, Shackle’s deep and challenging affirmation: “The future is not discovered, it has to be created”.  If the government’s attitude, and the rest of the economic agents, is to trust in the determinist error that the simple passing of time improves the previous situation, we could reach a point of difficult return.  The longer it takes us to escape from the negative spiral in which we are immersed,  the more painful it will be to renounce such passive trends in order to begin to walk along the path of positive synergies.  Everyone will gain if we change the general orientation…and there will be no winners or losers.

JJ Franch Meneu

%d bloggers like this: