Question

1. What does zero-sum economics mean? To whom does wealth belong?
2. What is the relationship between equality and liberty? Does fairness demand economic sameness?
3. Do justice and the common good require economic equality? How do individual differences play into notions of equal distribution of wealth?

Answer 1

Question 1- What does zero-sum economics mean? To whom does wealth belong?

Answer - Zero-sum in economics is widely regarded as a type of game in Game Theory but Zero-sum is also an economic fallacy which not many of us are aware of. Let us get the clarity on Fallacy then we can proceed on discussing the question - Fallacy means faulty reasoning or an argument based on unsound logic, now let us proceed to understand what is a zero-sum fallacy in economics.

A zero-sum fallacy believes that wealth is fixed in magnitude and if someone is earning wealth, that is by taking from others. To understand this better, let us take an example - It supposes that total wealth in the system is $100 and it is divided between two people A and B equally, now if A's wealth increases by $10 to make it $60, it will result into reduction in B's wealth by $10 and squeezing it to $40. It can be observed that in the end, wealth remains the same i.e, $100.

While theoretically, this may look appropriate, in reality, this is far from reality. There are two important factors we have overlooked in the aforementioned example while talking about wealth creation. The wealth is created by production and exchange. While in an economy any good is produced, it increases the wealth and when the consumer buys it fulfill his utility it is called an exchange and in this transaction of exchange, we can see that two commodities i.e Money and the Good produced fulfilling the utility of both - the producer and the consumer.

Let us take an example of what we discussed above - Suppose A buys a car Manufactured by Ford in $80000. In this case, A receives the car and Ford receives money, the wealth remains the same with both the parties at that moment but in different forms.

So to formally answer the question; Where does the wealth go? We can say that in case of an exchange wealth remains same it just changes the form and different form is used to fulfill the utility.