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I'm curious as to why anyone would think economics could only be zero sum. How would they explain going from mud huts to skyscrapers and animals to aircraft? Su

I'm curious as to why anyone would think economics could only be zero sum. How would they explain going from mud huts to skyscrapers and animals to aircraft? Such a "simulation" would not account for this obvious reality.

clavalle 11y ago
Transactions cannot be zero sum. What would the point be? In the common case: Two people come together and trade because each feels they get more value after the transaction than before the transaction. Positive sum. In a less common case: Two people get come together and trade because without the trade one of them would lose more than the value they spend on the transaction and the other one gains value. For example, if you have a gold watch but you are hungry and have no cash and I have food you might trade that watch for a sandwich. Also not a zero sum game. In this example a negative sum but I could imagine a positive sum where the one party gains more value than the other stands to lose after the transaction is complete. Say, you need to pay some workers on your construction crew and you have a generator that is normally worth about $50K and you sell it to me for cash at $40K. I, in turn, use that generator to do my job worth $100K that I wouldn't be able to complete without it..etc. It can get complicated. A zero sum transaction would have one person losing the exact value the other person gains. A very odd and rare case I would guess.
- dredmorbius 11y ago
  Transactions can be negative sum. Theft or armed robbery are transactions. They typically reduce overall wealth.
  - meric 11y ago
    Also gambling between two people - though one party loses the exact amount the other person gains, the time spent to place the bet and to watch the result costs time. One could argue they both gained utility in terms of enjoyment, but in terms of wealth and GDP the transaction is negative-sum.
    - monort 11y ago
      By this logic any entertainment-related transactions are zero-sum. People gain utility by being entertained, sometimes you can even objectively measure it, e.g. higher productivity after holidays.
      - dredmorbius 11y ago
        Note that you've made the leap from "may be" to "must be". There are numerous highly persistent behaviors, including play, entertainment, sleep, drugs consumption, recreational physical activity in excess of all training response stimulus requirements, etc., which nonetheless continue. While I'm not certain that all are beneficial, and I have a difficult time myself accepting certain of these, I suspect they play a useful and possibly even vital psychological role for those undertaking them. Even explaining these as coping mechanisms for underlying pathologies isn't particularly satisfying.
imtringued 11y ago
Technological progress drives long term economic growth. Economics merely tries to maximise utility of land, labor, capital. We already maximised utility of land and labor a long time ago. We can further increase that utility with physical capital (fancy word for possesion of technology). <sarcasm>There is also financial capital (fancy word for money) and it's primary purpose is getting more financial capital. Buying land, labor or physical capital are secondary.</sarcasm>

clavalle 11y ago

Transactions cannot be zero sum. What would the point be? In the common case: Two people come together and trade because each feels they get more value after the transaction than before the transaction. Positive sum. In a less common case: Two people get come together and trade because without the trade one of them would lose more than the value they spend on the transaction and the other one gains value. For example, if you have a gold watch but you are hungry and have no cash and I have food you might trade that watch for a sandwich. Also not a zero sum game. In this example a negative sum but I could imagine a positive sum where the one party gains more value than the other stands to lose after the transaction is complete. Say, you need to pay some workers on your construction crew and you have a generator that is normally worth about $50K and you sell it to me for cash at $40K. I, in turn, use that generator to do my job worth $100K that I wouldn't be able to complete without it..etc. It can get complicated. A zero sum transaction would have one person losing the exact value the other person gains. A very odd and rare case I would guess.

dredmorbius 11y ago
Transactions can be negative sum. Theft or armed robbery are transactions. They typically reduce overall wealth.
- meric 11y ago
  Also gambling between two people - though one party loses the exact amount the other person gains, the time spent to place the bet and to watch the result costs time. One could argue they both gained utility in terms of enjoyment, but in terms of wealth and GDP the transaction is negative-sum.
  - monort 11y ago
    By this logic any entertainment-related transactions are zero-sum. People gain utility by being entertained, sometimes you can even objectively measure it, e.g. higher productivity after holidays.
    - dredmorbius 11y ago
      Note that you've made the leap from "may be" to "must be". There are numerous highly persistent behaviors, including play, entertainment, sleep, drugs consumption, recreational physical activity in excess of all training response stimulus requirements, etc., which nonetheless continue. While I'm not certain that all are beneficial, and I have a difficult time myself accepting certain of these, I suspect they play a useful and possibly even vital psychological role for those undertaking them. Even explaining these as coping mechanisms for underlying pathologies isn't particularly satisfying.

imtringued 11y ago

Technological progress drives long term economic growth. Economics merely tries to maximise utility of land, labor, capital. We already maximised utility of land and labor a long time ago. We can further increase that utility with physical capital (fancy word for possesion of technology). <sarcasm>There is also financial capital (fancy word for money) and it's primary purpose is getting more financial capital. Buying land, labor or physical capital are secondary.</sarcasm>