Is Economics a Zero Sum Game?

Is the economy a zero sum game? Most economists in the neo-classical tradition would dismiss the idea out of hand, I think. It's not hard to find arguments against the idea. This being a physicist's blog, a quote from Feynman ought to be just as good as (better than) one from any economist:

"[T]he idea of distributing everything evenly is based on a theory that there’s only X amount of stuff in the world, that somehow we took it away from the poorer countries in the first place, and therefore we should give it back to them. But this theory doesn’t take into account the real reason for the differences between countries — that is, the development of new techniques for growing food, the development of machinery to grow food and do other things, and the fact that all this machinery requires the concentration of capital. It isn’t the stuff, but the power to make the stuff, that is important. But I realize now that these people were not in science; they didn’t understand it. They didn’t understand technology; they didn’t understand their time."

— Richard Feynman

Such is the conventional wisdom, and one cannot doubt that it is true is some approximation. The history of the human race has included a vast expansion in our capability to exploit the world, so some truth is self-evident. It's also a very convenient fact for the rich.

So what, then, if some billionaire builds himself a sixty story high palace? And so what if I choose a carnivorous life-style rather than a vegetarian one?

However, just because economics doesn't seem to be a zero sum game today doesn't mean that it's an unlimited sum game either. All resources are ultimately finite. Land, for example, and fresh water, and food. Technological and political progress are the factors that make expanding the pot possible, and to us, at the dawn of the twenty-first century technological progress looks like our inevitable birthright - after all, we have seen six or so centuries of virtually uninterrupted progress.

Looking at history on a smaller scale gives less encouraging examples. We have many cultures whose history ended at the height of their technological prowess. In fact those calamities were often a direct effect of the fact that their technology enabled them to exploit their environments to the point of exhaustion and consequent collapse. Should we fear that our national or global civilization might fall prey to the same collapse at the hands of our own wretched excess. Regular readers already know that I think the answer is yes.

There are some fundamental facts and principles that lead to the conclusion that, taken in context, economics really is a zero sum game. All but a tiny fraction of the energy consumed by life on Earth comes from the Sun. About 0.05% of the solar energy incident on the Earth at the top of the atmosphere is converted into biological net primary production (NPP), and that is the major source of energy for life, including us. Humans are now the top level consumer of about 40% of this energy, not including fossil energy consumption.

This situation is utterly different from 10000 years ago, when our consumption was a tiny fraction of a per cent, or even 150 years ago, when it was perhaps two per cent. There are a few minor ways in which we can slightly increase NPP - irrigation, for example, and there are many ways that we can decrease it substantially - deforestation, desertification, pollution, and erosion, to name a few.

Ultimately there is a lid on the pot, and ultimately the economic game becomes a zero sum or decreasing sum game. The lid is put there by the laws of thermodynamics, the amount of natural resources, and the limits of living systems. In some sense, too, the billionaire's yacht consumes resources that could have built schools, cured diseases, or fed the starving. Jesus Christ may not have understood the principles of economics, but I still like that he said that the rich were all going to hell.

That said, we have ample evidence that socialism doesn't work. It's too contrary to human nature. We are left with Capitalism, the worst form of economic system - except for the others. We need the rich to concentrate capital and invest it, and we should encourage them to do so. We don't really need for them to live lives of wretched excess, and we should make them pay for the priviledge - in taxes.

Questions of distribution aren't really the point though. If the human population continues to increase, increasing equality just means reducing more to miserable poverty. Population will be controlled. It might be controlled through the traditional means of war, murder, starvation and disease, or it might be controlled by limiting reproduction. It's our choice.