The Zero-Sum Problem

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Eric M replied on Sun, Feb 27 2011 11:53 AM

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Z:

You are obviously not willing to work with me on this thesis. So, tell me, what's your solution to the culture divide?

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Micah71381 replied on Sun, Feb 27 2011 1:44 PM

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@Z Let's assume for a moment that some currency is used that *is* finite/unprintable like the BitCoin and let's say there are 100 of them in circulation (no more ever created).  If I do some work and produce a good, then sell that good to another person money trades hands, say 10 BitCoins.  Then I go and buy some other good from someone else for 5 BitCoins.  The total number of BitCoins in circulation is still 100 meaning it is a zero-sum system and in order for me to gain money someone else had to lose it.  This concept is why we are arguing that money is zero-sum.

Now let's look at the produced good that were traded above.  I did some work, created something new, and introduced it into the system.  There was no loss to the system by me completing this labor meaning the total amount of goods in the system has increased.  Previously there were say, 100 goods in the system and now there are 110 goods in the system at no loss.  Assuming the total amount of goods and services in the system make up the total wealth of the system then this is not a zero-sum system and hence why we classify wealth as non zero-sum.

Now, just as in the laws of physics and the conservation of matter/energy I can see why you would theorize that wealth is a zero sum system since everything is finite (energy, matter, etc.) but that only holds true if you are working with a closed system.  If you are looking at "the system" as goods/services that humans find useful then the matter that makes up the earth is not part of that system.  The eletromagnetic enerngy that hits the earth from the sun is not part of that system.  The gravitational effects of the moon are not part of the system.  However, once someone mines the earth and makes use of it that matter now becomes part of the system.  When someone builds a solar panel and harnesses the energy from the sun's radiation that energy now becomes part of the system.  When someone creates a tidal generator and harnesses the gravitational effects of the moon for energy that energy becomes part of the system.

These external elements entering into the system that we call the economy are what make it a non zero-sum system.  Now, if you classify the system as the entirety of the universe, known and unknown then the laws of physics would agree with you that wealth is a zero-sum system because when you mine the earth, you are taking matter away from the earth.  When you harness solar radiation you are taking away from radiation that would otherwise heat the planet, grow plants, reflect back into space, etc.

Personally, when I talk about 'the economy' I am referring to the open system that includes all goods and services that are useful to man and in a form that is readily usable.  Solar radiation, gravitational effects and the matter that makes up the planet do not fall into the box of what I consider the economy to be.

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Drew replied on Sun, Feb 27 2011 1:47 PM

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So if I own 2 milliion acres, 500 tons of gold, 54 houses, and 10% share in every business in the planet, BUT have no money in my bank account, the socialist would leave me alone?

Lol

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Eric M replied on Sun, Feb 27 2011 3:35 PM

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Micah:

You provide another excellent summary of the concept and solid examples.

I would add that even in considering that the universe is finite and technically limited, the amount of wealth in that universe is practically infinite because man's view of what is valuable can change and so can he manipulate the resources in the universe to provide an increasing amount of goods and services. For example, there is a finite supply of oil, but we can change our perception of oil so that it is more or less valuable, and we can also refine our technology so as to make better use of the oil there is (increasing wealth as a  result). Ultimately, there is no good reason to talk of real wealth being limited. In contrast, money is by design limited and controllable. It cannot change value or else it ceases to be valuable as money.

Question: Have you read about this concept or written any more extensive work on this at all? I would be interested to know if there is a well-reasoned argument that looks at these issues out there. Thanks.

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z1235 replied on Sun, Feb 27 2011 3:54 PM

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Micah71381:

Now, if you classify the system as the entirety of the universe, known and unknown then the laws of physics would agree with you that wealth is a zero-sum system...

?

Have you read any of my posts in this thread?

Z.

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z1235 replied on Sun, Feb 27 2011 4:02 PM

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Eric M:

So, tell me, what's your solution to the culture divide?

Education about:

1. subjectiveness of value

2. subjective wealth (value) AFTER a voluntary exchange > subjective wealth (value) BEFORE a voluntary exchange ...as the fundamental mechanism for creation of wealth among humans.

Singling out money in the capitalist/socialist (positive-sum/zero-sum) paradigm is a blind alley, IMO, but if it does the job for you, be my guest. We can agree to disagree.

What is your solution to the cultural divide?

Z.

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Micah71381 replied on Sun, Feb 27 2011 4:13 PM

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@Z: I think I misinterpretted this quote it seems:

So what? Land is finite, too. One's time on this planet is finite, as well (for now). No one can "print" land either. No can "print" more gold or oil than it can be extracted from the ground. No one can "print" more labor than is available through birth/death rates. No one can "print" more time than the time each of us has before we die.

I took that to be an argument for zero-sum wealth in that everything is limited in some way, meaning that if I mine the gold for myself, or harvest solar radiation for myself then I am depriving someone else of the opportunity to mine that gold or harvest that solar radiation.

Am I correct to understand that you are arguing that wealth and money are equivilant and therefor if wealth is not zero-sum then therefore money is also not zero-sum?  If so then I think our disagreement lies in that I don't think wealth and money are equivilant.  Money is a zero-sum (or limited sum depending on money printing) item that represents potential wealth but money by itself is not wealth in any way (just wealth potential).

If I have again misunderstood your argument please correct me (simple words and short statements are preferable, I am easily confused by the big ones).

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Micah71381 replied on Sun, Feb 27 2011 4:18 PM

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Singling out money in the capitalist/socialist (positive-sum/zero-sum) paradigm is a blind alley, IMO, but if it does the job for you, be my guest. We can agree to disagree.

It's not that money is the issue for me, but I believe that money is the issue for some socialists.  I think some people out there see a transaction in which money changes hands and they (incorrectly) believe that the person gaining money from the transaction is exploiting the person who is losing money in the transaction.  I do not think all socialists see it this way, but I do believe there are quite a few out there that do and this is where a lot of the hatred for the "rich" comes from.

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Micah71381 replied on Sun, Feb 27 2011 4:20 PM

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Question: Have you read about this concept or written any more extensive work on this at all? I would be interested to know if there is a well-reasoned argument that looks at these issues out there. Thanks.

I have not.  I have been doing a lot of physics studying lately (hobby) and this caused me to look at this particular situation in that light which lead me to think of the analogy.

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z1235 replied on Sun, Feb 27 2011 4:55 PM

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Micah71381:

Am I correct to understand that you are arguing that wealth and money are equivilant and therefor if wealth is not zero-sum then therefore money is also not zero-sum?

I am completely lost as to what the point is of these semantics games (equivalent, similar, differrent, etc.). Wealth and money are as "equivalent" as wealth and gold, or wealth and oil, or wealth and land, or gold and ZCH, or land and ZCH, or money and oil, or ZCH and YCH, or... Do you see the logic by which this infinite sequence could be continued?

As I wrote couple of posts ago: The capitalist/socialist paradigm refers to whether voluntary exhanges as acts are positive-sum (mutual benefit) or zero-sum (exploitative). It doesn't refer to whether the amount of total real wealth (gold, oil, scotch, ZHC, time, labor, etc.) on this planet is fixed or growing. 

Z.

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Micah71381 replied on Sun, Feb 27 2011 5:41 PM

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z1235:

I am completely lost as to what the point is of these semantics games (equivalent, similar, differrent, etc.). Wealth and money are as "equivalent" as wealth and gold, or wealth and oil, or wealth and land, or gold and ZCH, or land and ZCH, or money and oil, or ZCH and YCH, or... Do you see the logic by which this infinite sequence could be continued?

The goal is to try and better understand how socialists perceive the world so as to be able to formulate better arguments against them (at least that is my goal).  The theory I am working off of is that they perceive money to be the only thing of true value, they seem to not understand the concept of wealth beyond money (or wealth beyond monetary value at least).  This thinking leads them to see voluntary exchanges as zero-sum because they only see money, not wealth.

In a voluntary exchange when you only consider money to have value (nothing else does), anything other than trading a $10 bill for two $5 bills is an exploitive exchange because one person is coming out ahead of the other person (as far as money goes).

While I agree with you that in the end, goods/services are trading hands and there is mutual benefit regardless of wether it's barter or with money, I don't think this is how some socialists see it which is why terminology matters.  Since we are trying to grasp the socialist point of view we need to try and understand how they think, even if it isn't logical.  In this case I think they see money and wealth differently and therefore when they see a company getting rich they immediately think that someone else had to be exploited in order for the company to gain that money since currency is a zero-sum system.

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Eric M replied on Sun, Feb 27 2011 5:50 PM

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Roger that. I would be interested in the connection between physics and this topic if you are so inclined to share.

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Eric M replied on Sun, Feb 27 2011 5:57 PM

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Eric M:

So, tell me, what's your solution to the culture divide?

z1235:

Education about:

1. subjectiveness of value

2. subjective wealth (value) AFTER a voluntary exchange > subjective wealth (value) BEFORE a voluntary exchange ...as the fundamental mechanism for creation of wealth among humans.

Z: Education is an excellent approach. But the first step in trying to educate people is to understand where they're coming from. To understand where the Left is coming from, we have to understand how they view wealth. Surely someone of your erudition knows that.

As Micah put it:

Micah71381:

The goal is to try and better understand how socialists perceive the world so as to be able to formulate better arguments against them

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z1235 replied on Sun, Feb 27 2011 5:58 PM

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Micah71381:

In this case I think they see money and wealth differently and therefore when they see a company getting rich they immediately think that someone else had to be exploited in order for the company to gain that money since currency is a zero-sum system.

OK. I think you're wrong. I don't know who you've been talking to but the socialists I know are perfectly aware that a person owning 2 million acres of land, 500 tons of gold, 54 houses, and $10 cash is much richer (wealthier) than a person owning $10,000 cash.

Z.

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Eric M replied on Sun, Feb 27 2011 6:01 PM

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Micah71381:

While I agree with you that in the end, goods/services are trading hands and there is mutual benefit regardless of wether it's barter or with money, I don't think this is how some socialists see it which is why terminology matters.  Since we are trying to grasp the socialist point of view we need to try and understand how they think, even if it isn't logical.  In this case I think they see money and wealth differently and therefore when they see a company getting rich they immediately think that someone else had to be exploited in order for the company to gain that money since currency is a zero-sum system.

Brilliance.

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z1235 replied on Sun, Feb 27 2011 6:20 PM

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Eric, Micah --

How do you plan to use your superior understanding of the socialist mind (logic) toward bridging the capitalist/socialist cultural divide?

Z.

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Micah71381 replied on Sun, Feb 27 2011 6:39 PM

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I have no delusions of grandeur so I doubt that I will be able to have any significant impact on the society as a whole.  However, I do find a certain amount of enjoyment in having these sort of debates with socialist friends of mine and I am always attempting to hone my understanding of both sides of the debate so the debate can be more productive.

Prior to this thread I never considered the fact that some people may see the economy as a zero-sum system and perhaps the non zero-sum argument can be a good entry point into such a political debate.  Start off by asking them to identify whether or not wealth is zero-sum and from there you can logically extrapolate with them to determine if capitalism is as bad as they think.

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Eric M replied on Sun, Feb 27 2011 11:36 PM

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Z:

Anything is possible with cooperation.

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John James replied on Mon, Feb 28 2011 1:26 PM

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Eric M:

I'm not sure where you found the quote "if perfection is unattainable, then working for improvement is futile", so I'll quote myself in response:

Eric M:

Similarly, the good that is aimed for is in a sense perfect in that it serves as the "standard of excellence" for one's action (this phrase is from your definition of 'ideal'). Only when that standard of excellence is believed to be attainable will anyone endeavor to improve. Otherwise, the action would be seen as futile and any rational person would abdicate.

But since that didn't solve anything earlier, I wanted to know what you saw as perfection. Could you please describe what you see as perfection and what the perfect world would look like?

"Only when that standard of excellence ["perfection/ideal"] is believed to be attainable will anyone endeavor to improve. Otherwise, the action would be seen as futile and any rational person would abdicate."

....As I said, which basically boils down to, "if perfection is unattainable, then working for improvement is futile."  I honestly don't see how you can differentiate between what you said and that paraphrase.  You literally said that only when perfection is believed to be attainable will anyone endeavor to improve, otherwise striving to improve would be seen as futile.

So I'll ask you again, do you stand by your statement?  Do you still believe that only when one believes perfection to be attainable...only then will he endeavor to improve?

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Eric M replied on Mon, Feb 28 2011 2:11 PM

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John James:

The problem is that we're using different definitions of the pertinent words. Yes, I stand by the statement if 'perfection' means 'a standard of excellence', but not necessarily if it means 'some world where no one does anything bad and lives a completely moral life according to John James'.

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EmperorNero replied on Tue, Mar 1 2011 4:00 PM

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Eric M:

I thank you for your input, though I'm not sure I follow your logic. What is the difference between 'ideal', 'solution', and 'improvement' in your estimation?

An improvement is a move away from something bad. E.g. poverty, war, crime, injustice. A solution is a movement towards something good. E.g. affluence, peace, kindness, justice. I think the latter approach is ultimately doomed to fail, because it is prone to aim at unattainable ends - 'ideals'. If you are trying to move towards something good the unintended consequences are likely to get in your way before you get there. You're going to be a better doctor if you want to cure diseases than if you aim to create health.

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Eric M replied on Wed, Mar 2 2011 10:55 PM

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EmperorNero:

Thanks for your explanation. While I cannot distinguish the two as much as you (and others) have, I do see your point now. Striving for something is very different than striving against something. What should be pointed out is that any action, whether it is on the surface striving for or against something, is actually both. Striving for food more or less encompasses striving against hunger; striving for knowledge is the same thing as striving against ignorance. If you want to improve, you must have a goal in mind and you must move toward that goal. It is true that you must also have in mind a defect that you want to move away from, but you still must have a goal in mind that serves as the other side to the coin.

It occurs to me that all of this debate might be contingent on exactly who is doing the striving. To hear you (and others) talk badly of striving for ideals, it seems as though you are concerned not necessarily with the notion of striving for something positive, but that someone else (a city planner, a government bureaucrat) might be in charge of setting the ideal. Striving for one's own ideals should not be looked down upon, but when a government official sets out a broad plan for everyone to follow in order to meet an ideal (which must be personal and thus arbitrary), then we run into some serious problems.

If this is the case, then the issue shouldn't be with the notion of ideals or solutions, but simply the notion of someone else coercing you to do what they want. We can all agree that that is a problem.