One of the basic insights of economics is that trade is mutually beneficial, making both parties better off than they were before. It’s a proposition about human exchange that stretches back to Adam Smith’s foundational treatise, “The Wealth of Nations.”
“Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only,” Smith wrote in 1776. “He will be far more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this.”
The abounding growth of our global economy underscores this truth, showing how trade turns work into fellowship, as well as fellowship into flourishing. Among economists, there is almost universal agreement on the matter, whether one looks to free-marketers like Milton Friedman or welfare-state liberals like Paul Krugman.
Yet, somehow, a contradictory myth continues to persist and pervade, one which frames economic exchange as a zero-sum game wherein one person’s gain is necessarily another person’s loss. In “The Good Society,” Acton’s educational film series, Michael Miller explains the fallacy as follows:
“One of the mistakes we often make when we think about trade is to view it as a win-lose proposition, instead of mutually beneficial. This is the idea that success can only come at the expense of others; for every winner, there must be a loser. This is the fallacy called the “zero-sum game,” where we imagine the economy as a pie, and if one person has a bigger piece, that leaves a smaller piece for someone else.”
“…The problem with the zero-sum game is that it fails to acknowledge the mutual benefit of trade and that the pie can grow. As productivity increases, or as new innovations and inventions take off, the pie can expand. This means that everyone’s share can get bigger, and this is what we call economic growth.”
So, if the evidence of such growth is clear, and if the academic consensus clearly corresponds, why does zero-sum thinking continue to thrive among non-economists?
It’s a question at the center of a new study in which researchers Samuel G.B. Johnson, Jiewen Zhang, and Frank C. Keil explore the psychological roots of what they call “win-win denial.” For whatever reason, zero-sum thinking “appears to be endemic in people’s thinking about economic matters,” the authors write, whether applied to day-to-day transactions at the grocery store or voting choices on matters of public policy.
Drawing from a range of previous research, the authors highlight how far the phenomenon truly reaches, pointing to something persistent in the human psyche:
“Laypeople tend to believe that more profitable companies are less socially responsible, when the true correlation is just the opposite. Negotiators often perceive themselves as carving up a “fixed pie,” decreasing the chances of a successful outcome. People believe that the government cannot benefit one group without harming another and are particularly inclined to think in zero-sum ways about international trade and immigration.
“But zero-sum thinking also seems to be psychologically natural, occurring across many countries and political orientations, though manifesting differently among liberals and conservatives. Zero-sum thinking has been noted in numerous settings (albeit not always fallaciously), including students’ thinking about grades, reasoners’ thinking about evidence, consumers’ thinking about product features, and even couples’ thinking about love.”
The study is centered around four separate experiments, wherein participants were asked to offer value judgments about specific consumer-driven trades (e.g., “Sally purchasing a shirt from Tony’s store”). In each case, participants were ultimately asked “whether each party to the transaction was better off or worse off afterwards.” The conclusion?
“These studies revealed that win-win denial is pervasive, with buyers consistently seen as less likely to benefit from transactions than sellers,” the authors concluded. “… Overall, the overwhelming majority of participants claimed that at least some of the parties did not benefit from one or more exchanges.”
To understand why, the authors weigh several possibilities, concluding that much of it can be explained by specific psychological mechanisms.
First, it appears as though many people give way to “mercantilist theories of value,” commonly confusing wealth for money:
“Across all studies buyers were consistently seen as less likely to benefit from exchange than sellers, and barters were often seen as not benefitting either party. This is consistent with intuitive mercantilism—the idea that a person’s welfare is determined by their monetary wealth, not by their command of useful goods and services. Perceived benefit flows with currency, so that sellers are seen as better-off, buyers as worse-off, and traders as experiencing no change. Despite perennial attempts to conquer mercantilist thinking by economists, this sort of thinking may be so cognitively natural that even extensive economics education does not stamp it out. In our experiments, mercantilist thinking also manifested in a smaller degree of win–win denial when payments were described in terms of time rather than money.”
Second, many tend to project their own personal preferences and notions of value onto others, “failing to observe that people do not arbitrarily enter exchanges”:
“Win–win denial seems to be exacerbated by issues in our theory of mind. Specifically, people are naïve realists, making a perspective-taking error in which they interpret their own preferences as ground truth, neglecting that others have different preferences and reasons for their actions. Merely reminding people that the buyers and traders had reasons for their choices (even empty reasons such as “Mary wanted the chocolate bar”) reduced the incidence of win–win denial… Making the preference of buyers and traders more salient reduced win–win denial, as did asking participants to rate the parties’ perceived gain or loss. Together, these results suggest that people do not spontaneously reflect on the fact that parties to exchanges have reasons for their behavior, leading them to discount potential gains from trade.”
The study considers other possibilities as well (“evolutionary mismatch,” confusion over bargain quality, etc.). But while some of these may play some role, each is ruled out as a root cause. And yet, as the authors conclude, there is still so much left to explore.
For example, how do breakdowns in social trust alter our subconscious beliefs about sellers, businesses, and other economic institutions? Do our suspicions about exploitation or generosity correspond with different seasons of economic crises or prosperity? Does the more recent bureaucratization of big business breed more cynicism about where “value” ultimately resides and who determines what? Or what about common attitudes toward our fellow buyers? How common is it for us to distrust our neighbors’ ability to know their best interests? Do these same findings apply to other areas beyond economic policy? Does a similar zero-sum bias exist at the heart of anti-immigrant sentiment, for example?
This study offers just one introductory glimpse into the roots of such thinking, but in doing so, it reminds us that our common disputes over economic issues are rooted in deeper attitudes about the human person and the basic nature of human relationships in economic life (and beyond). As Acton’s PovertyCure primer states:
“The zero-sum fallacy is rooted in a pessimistic and, often materialistic, view of human beings as consumers. But a view enriched by economic history and theology positions human persons not merely as mouths devouring the Earth’s resources, but as productive gardeners and sub-creators imprinted with God’s divine creative spark.
“While God alone can create ex nihilo, Scripture reveals to us with clarity our responsibility to participate in the creative process of cultivating His garden bringing forth from it new fruits. ‘Be fruitful,’ God says to Adam.”
We need not be experts in economics to resist and counter the win-win denial of our age. Instead, we can embrace and promote a view of creation and human creators that is marked by a faith in abundance, not cynicism and scarcity.
Far from viewing ourselves as combative actors in a zero-sum struggle — buyers vs. sellers, employees vs. employers — we can reimagine our work in the global economy as creators and servants, collaborators and contributors, working together with our neighbors to paint a grand picture of God’s abundance and harmony in society.