The Economy is Not a Zero-Sum Game: A Refugee Camp Story

Our forebears often held the belief that the sole means of ameliorating our circumstances was to appropriate the riches of others or other societies. They perceived the economy as a zero-sum contest. The English nomenclature for this concept is “game,” which, when translated, signifies “game.” It denotes the pursuits undertaken by two or more individuals engaged in interactiave endeavors.

A zero-sum game resembles the division of 100 yuan between you and me. If you receive a greater share, I am left with less. Hence, if I aspire to augment my own wealth, I can only pilfer yours. However, the economy is not a zero-sum game; rather, it is a positive-sum game, signifying that through commerce, both of us can attain greater affluence than before.

Let us commence by envisioning a refugee encampment and observing the wondrous occurrences that transpire there. Following a typhoon, numerous dwellings crumbled, rendering many individuals as refugees. They erected a makeshift refugee camp. The Red Cross, a philanthropic organization, disburses 20 barrels of mineral water and 20 boxes of instant noodles to each refugee on a monthly basis, aiding them in surmounting their hardships.

Two days later, an economist arrived at the refugee camp. Due to his belated arrival, he missed the opportunity to receive this month’s allocation of water and noodles. However, this did not vex the astute economist.

Initially, he sought out refugee Zhang San and articulated, “If you offer me 7 boxes of instant noodles, I shall reciprocate with 10 barrels of mineral water in due course.” Zhang San, who perspires abundantly and necessitates substantial hydration daily, was even willing to pay for the additional 10 barrels of mineral water, amounting to 8 boxes of instant noodles. Consequently, Zhang San happily struck a bargain with the economist.

Subsequently, the economist approached refugee Li Si and addressed him thus, “If you surrender 10 barrels of mineral water, I shall exchange them for 5 boxes of instant noodles.” Li Si possessed an insatiable appetite and consumed even 10 barrels of mineral water. He was willing to barter them for merely 4 boxes of instant noodles. Hence, Li Si also assented to the proposition.

Thus, the economist employed 5 out of the 7 boxes of instant noodles provided by Zhang San to acquire the 10 barrels of mineral water held by Li Si, which he then bestowed upon Zhang San. All three parties were content. Zhang San had initially been willing to relinquish 8 boxes of instant noodles in order to obtain 10 barrels of mineral water, but now he only surrendered 7 boxes. The outcome of the entire transaction left him feeling as though he had profited by 1 box of instant noodles. Similarly, Li Si anticipated that he would secure 4 boxes of instant noodles in exchange for his 10 barrels of mineral water. However, he ended up receiving 5 boxes of instant noodles, thus perceiving a gain of 1 box. And what of our economist? Naturally, he acquired two boxes of instant noodles, as he had arrived at the refugee camp empty-handed.

Zhang San, Li Si, and the economist collectively retained the original 40 barrels of mineral water and 40 boxes of instant noodles in their possession. Nevertheless, their overall impression was that they had acquired an additional 4 boxes of instant noodles.

These four surplus boxes of instant noodles represent the newfound wealth engendered by the exchange. Yes, you apprehend correctly; the quantity of instant noodles remains unchanged, yet wealth has increased. Is this an artifice employed by the economist? The truth is that he conducted himself honestly throughout the entire process, without deceiving Zhang San or Li Si. The economist executed the transaction in accordance with the mutually agreed-upon terms, ensuring both quality and quantity.

“Both of you have benefited. Naturally, I obtained two boxes of instant noodles, but this serves as recompense for my service. To be candid, I certainly do not act out of fondness for you. I, too, desire sustenance for myself. It is an act of self-interest. By aiding you, I have aided myself as well. In other words, if you aspire to aid me, you have not only assisted me, but I have also assisted you. Each of you may believe that you are not gullible and have taken advantage of me, but I, too, have derived benefit from you. It is indisputable that we all find ourselves in a superior position now. None of us are fools,” declared the economist.

The underlying cause behind the fruition of this transaction lies in the divergent personal assessments of mineral water and instant noodles by Zhang San and Li Si. In other words, they possess dissimilar valuations of one commodity relative to the other. If personal assessments differ, room for trade emerges. The economist seized upon this business opportunity, enabling him to endure the month when water and instant noodles were no longeravailable. The existence of exchange in the world stems from the fact that you and I hold disparate valuations for the same objects.

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