Is Wealth a Zero Sum Game?

November 6th, 2008

I read a great article over at Blip Blap wondering if wealth was a zero-sum game or not; It implies that wealth can’t be created, just moved around. Brip Blap concluded that wealth is NOT a zero sum game and I agree. If wealth is a zero sum game then when your wealth increases, someone else must see a decrease by the same amount. This may appear to be the case in any given transaction, but it fails to take into account the benefits derived from the service or product involved in the transaction. Belief in this zero-sum game can lead us down a dangerous path where we begin to implement policies to “spread the wealth”, rather than focusing on creating it.

Wealth can be created, as the benefits derived from a new efficient technology may far outweigh what it’s selling price is. But critics look even deeper and tell us that the new technology that increases efficiency (let’s use an example, say a highly efficient growing technique in a technologically advanced greenhouse) may increase wealth for both the inventor and the purchaser, but decrease wealth for anyone that doesn’t have the technology with its higher efficiency - partly because now more supply will be introduced by anyone that does owns the new technology, and this increase in supply will decrease the price that many competitors in the same industry get for their efforts. It can get real deep if you start over-thinking the entire process.

I left a comment on Brip Blap’s blog that sums up what I believe about wealth:

“Creating wealth is definitely NOT a zero sum game. As you said, services, inventors, and technologies can be huge benefits to many people, far more than what they “cost”.

@ Clever Dude: What if a company were to invent an efficient method for growing MORE food, cheaper, using less water, which makes more food available to more people for less money??? Don’t exclude the wealth creation involved with new technologies.

That said, there are obviously some limited resources on this planet that are a zero-sum game, but I wouldn’t say those limited resources create wealth, but they are probably best described as a store of wealth for some people. And the mining companies that make money, are creating wealth by “finding” and “extracting” these limited resources so they can be usable, not just being paid for the resource itself - our they wouldn’t have to do any work (or wealth building) besides just sitting on their land with the minerals/metals contained in it.

I like some limited resources as a store of wealth, but I always invest in the mining operations which help create wealth as well, through exploration and extraction of these resources. - Even better, I like innovative companies that invent or use new technology to solve problems and create wealth for everyone (like the greenhouse growing technique HDVG system employed by Valcent, as just one example, for growing more food in less space with less water for a cheaper price, than has ever been done.) That is wealth creation, and it ain’t no zero sum game!!! Win-win!!”

Yes, limited resources can be considered a store of wealth, but they do not create wealth. But then I start to wonder if somewhere, even deeper down the economic line, someone does end up with a decrease in wealth due to a new technology. If they don’t own the new technology with higher efficiencies and that technology goes on to decrease the price for the underlying product, then I guess someone in the end does see a decrease. I’m confused - It gets deep! I still have this overwhelming belief that wealth can be created, I just don’t know how to explain it. What do you think?

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