The label “positive-sum” defines an outcome in which no party gains at another’s expense; i.e., one party can gain without another party’s losing, or even both parties can gain. This is often viewed as ‘wealth creation’ in political terms.
A “zero-sum” situation is one in which a party can only gain as another party loses. This is a condition in which the total amount of wealth in the system does not, or cannot, change.
Where, in real life, does one encounter either “positive-sum” or “zero-sum” circumstances? Free markets, innovation, and population growth lead to wealth creation.
If international interaction occurs on a free-market basis, then it can lead to a “positive-sum” outcome, as author David Wallace-Wells writes: “The market fabric of globalization” is “a vision of cross-national participation, imbued with the neoliberal ethos that life on Earth” is “a positive-sum game.”
Note, however, that in international trade, the labels ‘free market’ and ‘free trade’ are significantly different.
If free-market trade happens internationally, then there is “a reward for cooperation, effectively transforming, at least in theory, what had once been seen as zero-sum competitions into positive-sum collaborations.”
David Wallace-Wells calls this outlook ‘neoliberalism,’ an accurate but confusing word. Neoliberalism must be distinguished from classical liberalism, from social liberalism, from left liberalism, and from modern liberalism.
While navigating this swamp of verbiage, it’s helpful to remember that the word ‘liberal’ is related to the word ‘liberty’ - the original use of the word ‘liberalism,’ despite its later applications, spoke of making people ‘free from’ government’s regulations and taxes.
Words and phrases like ‘free market’ and ‘minimalist taxation’ convey similar views with less ambiguity.
In any case, “neoliberalism” fosters “positive-sum cooperation of all kinds.” Note that positive-sum outcomes are linked to cooperation. A voluntary trade increases value on both sides of the equation.
The person in northern Finland trades his air-conditioner to the person in the Sahara, receiving in return a snow-shovel. Each person traded away an object of low value in return for an object of high value. Each person experienced a net increase in value.
By contrast, it is difficult to find true “zero-sum” examples of trade in the real world. Imagined zero-sum transactions occur mainly in the rhetoric of populist politicians who are trying to persuade voters.
Policymakers sometimes act as if they are acting in zero-sum situations; but because zero-sum situations are in reality quite rare, what politicians see as zero-sum conditions are actually positive-sum in some hidden way.
If policies are created because a positive-sum situation has been misidentified as a zero-sum situation, then certain behavior often arise in response to policies based on misidentifications: black markets, gray markets, bartering, etc.
The fact that most situations are positive-sum situations is due in part to human ingenuity. People constantly seek value, seek ways to produce value, and seek ways to trade one value for another. Wealth is sometimes produced when new uses are found for objects or substances deemed worthless and discarded.
The positive-sum principle, i.e., the increase of wealth, makes it possible for all people in a society to enjoy a rising standard of living, and makes it possible for nations to gain wealth without depriving other nations of wealth. Indeed, when one nation gains wealth, the unintended byproduct is often an increase in wealth for other nations.
