Donald Trump, Bernie Sanders, many political actors, too many intellectuals, and much of the general public share a false and destructive belief about the nature of exchange: that economic activity is something akin to a battle or a full-fledged war in which the goal is for one group to “defeat” another. We see this mentality across the political spectrum.
Think of the ways Trump and others on the political right talk about international trade. The basic framework is to see other countries as enemies in competition with us. The goal of trade policy is somehow to “beat” them, because if they are “winning” by selling us a lot of stuff, we must be losing. The result is mistaken policies such as Trump’s proposed 45 percent tariff on Chinese imports.
Market economies are not zero-sum games.
We see the same us-and-them thinking on the left, where progressives perceive a persistent battle between capital and labor, each trying to defeat the other. For leftists, capital is always the winner and labor is always the loser — unless the government intervenes. The appropriate policy response, from this perspective, is either to limit capital’s gains or, if you’re a bit more radical, to help labor vanquish capital once and for all. One of the related beliefs on the left is that the wealth of capital comes at the expense of labor. That is, capital’s gains come from labor’s losses.
Both arguments share the underlying belief that the winners’ gains must come at the losers’ expense. Economic activity, and specifically wealth creation, is at best seen as what economists would call a “zero-sum game.”
In zero-sum games, the winners’ gains do, in fact, come at the losers’ expense. Think of a poker game where each person buys $100 worth of chips. If there are five players, there is $500 to be apportioned out. If the game ends with me having $250, then the remaining $250 will be sp…