Politics is a Negative-Sum Game

Marcel Votlucka at Strike the Root

Actually, In Politics, Both Sides Lose

•  First, the apparent winner at one moment becomes dependent as tax consumer and finds skills and resources diminished at another time when they lose.

•  Second, the tax supplier finds resources diminished due to taxation and generally receives in inferior kind only 30 to 50% of the services provided by government compared to what a free market could provide for the resources taken.

•  Third, the failure of all member of society to be fully productive means that society as a whole gains less wealth over time.

Losing Should Be Rare

In the free market, to expand on Marcel's thought, losing is rare. There are situations where your timing can be off, such as when a natural disaster causes big changes in the price of some goods. More often, losing is the result of trying to get a better bargain in an exchange when no better deal is available, it is stubbornness and stupidity. It comes from ignoring the information that prices give you, the point at which the supply and demand curves intersect. It is due to the mistake of over-producing what you are best at when too few others want it.

Win-Win In The Free Market

In the free market one buys from another when you think that the item offered is worth more than what you are bidding. In the free market one sells to another thinking that what is being bid is worth more than what you are offering. Both are true. Everyone wins. This is multiplied millions of times if left unrestrained. How does that work?

I (A) happen to have one dollar in my pocket and you (B) have three apples. If we are indifferent to the comparative value of dollars to apples at a given rate, no exchange will happen. However, if I am hungry and value the three apples than I value the dollar, an exchange might happen. However, if you were still indifferent, I would have to change my offer to one dollar for just two apples, or offer you more than the one dollar. You might still be indifferent.

The exchange can happen when a perception of equality vanishes , when indifference disappears, when both parties perceive the offered item from the other party as being more valuable than what they themselves have. Multiply this mutually benefiting event by the millions and you will see what trade is based on and how it makes everyone better off. However, there are some who think this is not good enough and want to fix it.

What do Politicians Want

There are some who still complain that this is an unfair system. There is too big a range between the best off and the worst off. They are complaining lately that the pay of CEOs and ordinary workers is getting out of hand. If they complain loudly enough, they will get the attention of another, more powerful person.

The politician's answer involves a third party, C, who perhaps has neither dollars nor apples, nothing that others want to trade for. The politician expropriates part of my dollar and one of your apples and gives a third of them to C. He keeps the remainder. He then declares everyone as being better off. What he means is on average everyone is well off now, whereas before this there was poverty and need. Now imagine that A, B and C stand for millions of people each.

A is much better off than B or C, most likely because members of group A were entrepreneurs and investors. Unlike B and C, A does not spend their entire income. Therefore, it is argued, when some of that excess is redistributed to C, C will spend more. The total spending of the entire society increases, indicating everyone is better off.

A and B, who were relatively well off had more than they needed to live on. They only spent a portion of what they earn. They really do not need all of what they have. Society would be better off if everyone had enough resources to cover their needs. Therefore, redistribution is justified. The wellness of the society is higher if the C group is made richer as long as A and B still have what they need.

What the Politician Accomplishes

The politician forgot that the income that A earned did not just sit idle. It used to be invested in businesses. Businesses create jobs, improve products, and create new products. More people are employed if savings are retained and are put to work. The more of it that is put to work, buying capital equipment, the higher worker productivity grows, the more money earned by both the worker and the provider of the capital. Moreover, the worker does not have to work harder to get that. Maybe he has to work smarter.

However, by skimming off the savings of A and B, the politician shrinks the investment pool. Fewer new jobs are created, fewer capital investments are made, and fewer pay raises are given.

Everyone is worse off. The politician turns win-win into lose-lose. Politics is a negative sum game.