Question

In: Economics

Why economic growth is not zero-sum?

Why economic growth is not zero-sum?

Solutions

Expert Solution

Zero sum is a situation in game theory in which one person's gain is equivalent to another's loss.A sport game is a true example of zero sum game. Every team's success comes at the expense of the other team, in a match or a tournament. So the net change in wealth or benefit is zero. And a zero sum game may have a few as two players or as many as millions of patticipant.

The economy is not a zero sum game because the sum of the gains and losses of all players do not consistently equal zero. And if this was the case then the significant increase in prosperity that has taken place around the world in the past decades would not have happened. Economic is not a zero sum game because of its definition, which refers to only the human activities and the system under consideration is not closed. Natural resources flows in the system so it is non human activities that loses.

In other words, situation where one decision maker's gain or loss does not necessarily result in the other decision maker's loss or gain or where the winning or losses of all players do not add up to zero and everyone can gain. Thats why economic growth is not a zero sum game because in it, it is possible for both players to gain or loss nor like zero sum game in which one players winning or loss equals to others loss or gain.


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