| Junior Member
Join Date: Jan 2008 Location: Ohio Gender: Male
Threads: 28
Posts: 167
| Quote:
(#123) Well, to be fair, GDP is zero-sum in the short-run since product is finite. It's in the long-run that we no longer concern ourselves with a constant pie. However, people are, for better or for worse, "stuck" in the short run.
That's why it's troubling that the GINI coefficient in the US is large and growing.
| Because so many are predisposed to support redistribution of wealth policies, the following offers a historical perspective: Quote: Wealth Creation and the Zero-Sum Fallacy
One of the worst ideas that affect public policy around the world is that wealth is somehow zero sum - that it can be stolen or taken or moved or looted but not created. G8 protesters who claim that poor nations are poor because wealthy nations have made them that way; the NY Times, which for years has flogged the idea that the fact of the rich getting richer in this country somehow is a threat to the rest of us; Paul Krugman, who fears that economic advances in China will make the US poorer: All of these positions rest on the notion that wealth is fixed, so that increases in one area must be accompanied by decreases in others. Mercantilism, Marxism, protectionism, and many other destructive -isms have all rested on zero-sum economic thinking.
The (Incorrect) Physics Analogy
My guess is that this zero-sum thinking comes from our training and intuition about the physical world. As we all learned back in high school, nature generally works in zero sums. For example, in any bounded environment, no matter what goes on inside (short of nuclear fission) mass and energy are both conserved, as outlined by the first law of thermodynamics. Energy may change form, like the potential energy from chemical bonds in gasoline being converted to heat and work via combustion, but its all still there somewhere.
In fact, given the second law of thermodynamics, the only change that will occur is that elements will end in a more disorganized, less useful form than when they started. This notion of entropic decay also has a strong effect on economic thinking, as you will hear many of the same zero sum economics folks using the language of decay on human society...
Wealth Is Demonstrably Not Zero-Sum
So are they wrong? Are economics and society driven by something similar to the first and second laws of thermodynamics? I will answer this in a couple of ways.
First, lets ask the related question: Is wealth zero sum and is society, or at least the material portions of society, always in decline? The answer is so obviously no to both that it is hard to believe that these concepts are still believed by anyone, much less by a large number of people. However, since so many people do cling to these false notions, we will spend a moment or two with it.
The following analysis relies on data gathered by Julian Simon and Stephen Moore in Its Getting Better all the Time: 100 Greatest Trends of the Last 100 Years...
...Lets compare the life of an average American in 1900 and today. On every dimension you can think of, we all are orders of magnitude wealthier today (by wealth, I mean the term broadly. I mean not just cash, like Scrooge McDuck's big vault, but also lifespan, healthiness, leisure time, quality of life, etc).
- Life expectancy has increase from 47 to 77 years
- Infant mortality rates have fallen from one in ten to one in 150.
- Average income - in real dollars - has risen from $4,748 to $32,444
In 1900, the average person started their working life at 13, worked 10 hours a day, six days a week with no real vacation right up to the day they died in their mid-forties. Today, the average person works 8 hours a day for five days a week and gets 2-3 weeks of vacation. They work from the age of 18, and sometimes start work as late as 25, and typically take at least 10 years of retirement before they die.
But what about the poor? Well, the poor are certainly wealthier today than the poor were in 1900. But in many ways, the poor are wealthier even than the "robber barons" of the 19th century: Just check out this comparison! Today, even people below the poverty line have a good chance to live past 70. 99% of those below the poverty line in the US have electricity, running water, flush toilets, and a refrigerator. 95% have a TV, 88% have a phone, 71% have a car, and 70% have air conditioning. Cornelius Vanderbilt had none of these, and his children only got running water and electricity later in life...
| |