The zero sum fallacy

Ah yes, the Zero Sum Game fallacy returns to haunt us yet again. We can bury it with a stake of logic through its heart at the crossroads, but still it rises from the dead. It’s the one that says wealth is fixed, so that if someone gains more of it, it must be at the expense of someone else having less. It’s often nicknamed the pizza pie fallacy because, with a fixed size of pie, a bigger slice for one person means less pie left for others.

It’s popular on the Left because they don’t like rich and successful people, and think the only way to help the poor is to take that wealth and distribute it. They say the reason the industrialized West became rich was that they stole wealth from poorer countries. It never occurs to them that wealth is created by trade and exchange. You can grow that pizza pie, instead of redistributing it, so that everyone can have a larger share. Wealth was not redistributed by the Industrial Revolution; it was created by it.

The poor don’t improve their lot by having wealth confiscated from the rich. They do it by being part of an economy that grows. The billion-odd people lifted out of starvation in the past 30 years didn’t gain money confiscated from rich people. They did it by creating wealth through trade and exchange, by providing goods and services that people were prepared to buy. They didn’t redistribute existing wealth; they created new wealth.

Some people now call for the wealth of billionaires to be confiscated and distributed. If they did their sums, they would see that people would receive only tiny amounts if this were done, and it would be a one-off that couldn’t be repeated. Society is far better off if we allow people to become billionaires by providing millions of us with goods and services that add value to our lives. It makes us all richer.

We support free markets and free trade because they make the poor richer, and have proved in practice that they can do this. Redistribution doesn’t do that. After the epidemic we want policies that will grow the economy and create wealth, not ones that will shuffle it around without increasing it. We want policies that will enable the poor to become richer, not ones whose only effect is to make the rich poorer.