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Why wealth is not a zero-sum game

Why wealth is not a zero-sum game

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Wheylous Posted: Wed, Mar 21 2012 5:05 PM

I found this post on Reddit:

 

I'm not sure if I really understand it. Can someone put this into an analogy or something for me.

Is it just like, if I go fishing and I catch 10 fish, I've created wealth. But me getting that wealth has not made you any poorer. Although, your chances of becoming wealthier may have gone down.

My response is as follows (Please let me know whether it's adequate):

 

Say there is a town of subsistence farmers. They till their soil in a specific way and using this way they make barely enough food to survive. There is not much land in the town, and all the land is already owned by families barely able to survive.
 
In comes John with a new invention in mind - a machine that can till the soil more effectively. This results in a higher yield of crops. He hopes to market his invention, but the people there do not really have the money to buy it.
 
Hence, he offers one family a deal - they let him sleep on their property, and they get to enjoy the benefits of his new invention, with him getting a reasonable amount of any extra food that they are able to produce with the new invention.
 
His idea turns out to actually work and the family he is staying with has its production triple. The family now has extra money, and so does John. He offers the device to other families, and he brings them out of subsistence as well.
 
In a town where there used to be no open jobs, a new job was created. More wealth was created without anyone becoming poorer.
 
Now that families have extra food, they can save the food. Once they have enough, they can afford to let a few of their sons not work the farm, but to focus on building a new town well, which will take a month to build. Because they have extra reserves of food, they are able to not work on the farm. After the well is created, the land is able to be irrigated much more easily and effectively, which increases the yield of the land even more.
 
Now, a large part of the town has extra food. Because they have extra food, they don't all need to constantly be farming. A group of young people decide to start a very small police force and fire department. Now, for a small fee, they will protect the cattle of farmers and come to the rescue if their barns catch on fire.
 
More jobs were created without anyone becoming poorer.
 
Now that the town is becoming more wealthy, it is able to trade with other towns. It acquires new supplies and is able to diversity its work force. We begin to see the division of labor. Some people will still be farming, but others will now specifically become devoted to being carpenters and blacksmiths. Perhaps now that the town has extra food, it can even devote some time to leisure. There happen to be a few men and women in the town who in their spare time write poetry and perform plays. They learn that others also enjoy the fruits of their art, and so they begin to sell their writings and they sell tickets to plays.
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Live_Free_Or_Die replied on Wed, Mar 21 2012 5:38 PM

I'm not sure if I really understand it. Can someone put this into an analogy or something for me.

Is it just like, if I go fishing and I catch 10 fish, I've created wealth. But me getting that wealth has not made you any poorer. Although, your chances of becoming wealthier may have gone down.

 

You should build on the orginal analogy not create a new one.  The fishing example is a superior analogy because it is a simpler form of production than an economy with machines.

 

The part of the story that really sticks out is the chances of becoming wealthier.  Have the chances of becoming wealthier really gone down?  If their are a finite number of resources at any given moment on earth and the human population is increasing, it is only logical the chances of any one individual having an abundance of resources reduces with each new person.  This can not be changed.

 

What if the person who caught 10 fish builds a fish farm and starts breeding fish?

 

The problem I identify with the original story is the assumption wealth = abundance of finite resources.

 

Since the end game of all resources is consumption maybe a different definiton of wealth is in order.  Mabye wealth has more to do with the division of labor.  Instead of the cycle being fisherman -> consumer maybe more wealth is created by fisherman -> meat packager -> consumer or even more wealth created with fisherman -> meat packager -> distributor -> retailer -> consumer.

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