Comment by crimsonalucard | Hacker News Reader

Comment by crimsonalucard | Hacker News Reader

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>The economy is not a pure zero sum game.

Why do people keep saying this? This is a huge misconception. The economy IS zero sum.

Energy and physical resources are limited. When one person uses a limited resource, than another person will be unable to use that same resource. This is a Zero Sum.

I've heard people say that seemingly "unlimited" products like an idea, a painting or an abstract idea can be created out of thin air and because of this the economy is not zero sum. Well guess what? Have you ever heard of an economy that can exist while thriving only on abstract ideas and pieces of art? No. All economies thrive on energy and physical resources while abstraction only sits on top of these things as a luxury. AKA: A farmer can feed himself with his own crops, but an artist cannot survive without trading his painting with a farmer for food.

Another cop out people use is that although the sun is technically a limited resource (it will burn out one day), it is seemingly unlimited because it outputs more energy then humanity will ever need or comprehend. This argument is flawed too. We are limited by the amount of energy we can extract from the sun. There will always be a limit to the amount of energy we extract from the sun due to fundamental limits in technology and physics.

It gets worse than this, because technically speaking you are correct.. the economy is not zero sum, it's actually a negative sum. When you add up the numbers there will always be a net loss for all economic actors. The second law of thermodynamics dictates that even if an economic agent doesn't extract or use a resource, the resource on it's own will eventually, slowly degrade into an unusable state.

I have a saw, you have a log. If we bring our resources together, we can build something more economically valuable than the sum of the parts, and we both benefit. That's not a zero sum game.

It is zero sum. Did you even read past the first sentence of my post? The situation is much more complex, and unfortunately I can't elegantly shoot you down with one highly misguided sentence as you tried to do for my argument.

Let me spell it out for you in a way you can comprehend:

1. There is a limited amount of logs that the earth can produce.

2. There is also a limited amount of metal that the earth can produce.

3. There is also a limited amount of energy that we can extract from the earth or the sun.

4. Therefore, there is a LIMITED amount saws I can build with metal and energy.

5. With logs and saws being limited, then that means there is also is also a limited amount of "things" that can be built with the logs and saws.

What this all means:

The totality of "things" that can potentially be built with limited resources is limited because resources are in itself limited.

This totality can be referred to as our economic pie (or cake). Once a slice of pie is extracted and eaten another person cannot eat it. That is zero sum.

See cake example in the very short first paragraph: https://en.wikipedia.org/wiki/Zero-sum_game

"It's not zero-sum" is a popular and lazy fallacy used by economically illiterate people to argue against welfare policies.

It goes hand in hand with the just world fallacy, which, in conjunction is used to justify the position of the currently capital-poor class.

E.G. Because the economy is not zero-sum, those people would have been able to produce wealth for themselves with the same ease as the people who are currently in possession of wealth/capital.

For the record, I'm certainly sympathetic to arguments re: wealth inequality. I've just observed first-hand that it's possible to create value without taking something away from someone else.

The value was never created. It was extracted from a resource. Creation implies that it came from nothing. It is highly unlikely whatever you created came from nothing.

Value is a subjective thing. Of course it can be created- if I decide to value something.

Then when you value an apple to be one billion trillion dollars did you increase the economy by one billion trillion dollars? No. That makes no sense.

There is value and then there is intrinsic value aka True value. True value is extracted not created.

Ah. Here you'll find you're miles from most people's definition.

Nobody in the real world thinks value is subjective because if I subjectively valued an apple at two billion dollars everyone would think I'm crazy.

Only people who blindly read economic textbooks will take that misguided definition at face value.

People who blindly read textbooks, as well as anyone with real world market experience. If you believe in economic value as an objective truth, and not based on the subjective view of a buyer or seller, we have no common ground to continue this discussion.

We do have common ground. The common ground is exactly as you say: real world people with real market experience.

But before I get into that real world example... you just threatened to end the discussion if I disagree with you. This is weak. I am telling you I can end this argument not on a mere disagreement... I can end this argument with factual, non-subjective evidence that will prove you wrong.

Now, onto the real world example: Warren Buffet, arguably one of the most successful investors on the planet. Warren Buffet operates on a investment strategy known as investing on intrinsic value. In other words he believes that the market fluctuations of a stock price by the daily subjective valuations of day traders are meaningless, he peers beyond the noise and picks stocks based off of a very real economic concept called "intrinsic value" or a true value separate from the subjective valuations of people. Intrinsic value is a very real and actual concept. Warren Buffet believes it and many many other real world and experienced investors follow the strategy as well. See sources below:

This link is solid proof intrinsic value exists as a theory in economics: https://en.wikipedia.org/wiki/Intrinsic_theory_of_value

This link shows intrinsic value applied in finance: https://en.wikipedia.org/wiki/Intrinsic_value_(finance)

This link shows intrinsic value applied as a stock investment strategy: https://en.wikipedia.org/wiki/Value_investing

This is a biography on warren buffet: https://en.wikipedia.org/wiki/Warren_Buffett

Academia and "most people" are not unanimously sided with you. The above argument is solid proof. This is not a mere disagreement and if you end the discussion here it's an admission of total and utter loss.

Quick thoughts:

You didn't provide any "non-subjective evidence" - you just reframed what you think my position is to knock it down.

I'm familiar with value investing. It's not clear to me why you believe the occasional success of value investors is proof in inherent value as a universal economic truth. I haven't claimed anything about value other than that it's subjective- that doesn't preclude, for example, a company's perceived value relying on a number of other subjective values.

Anyway, again, I don't think we're getting anywhere here, and I think framing a discussion as requiring "admission of total and utter loss" to leave is childish and the hallmark of a troll. I'm equal parts embarrassed and impressed that I've been strung along this long.

Non subjective evidence? I gave you actual sources and actual real world people who use the concept in the "real world". Actual sources and actual people is not subjective evidence. These are things that directly contradict your statements.

>I'm familiar with value investing. It's not clear to me why you believe the occasional success of value investors is proof in inherent value as a universal economic truth.

Occasional success? I gave you a person who has year after year of success for around 50 years. There is no quantitative way of expressing this unparalleled success rate as "occasional success." Also what is a universal economic truth? There is no such thing. Economics is a soft science which consists of a bunch of varying theoretical models and schools of thought, none of which (like all science.) can ever be fully "proven" as a universal truth.

I presume you are actually asking whether or not intrinsic value is valid school of thought in the academic landscape? It is. See the economic definition of intrinsic value in the link I posted above. Or google it.

>I haven't claimed anything about value other than that it's subjective- that doesn't preclude, for example, a company's perceived value relying on a number of other subjective values.

Perceived value is subjective and therefore according to your definition a logical interpretation of value. There are many cases where the "Perceived value" of a company is different from the the sum of its parts or other "subjective valuations" in which the company is built upon. This leads to an inherit contradiction in the subjective theory of valuation. Meaning that a company has two different values: The subjective value of the company as a whole and the subjective value of the company as a sum of its parts. A contradiction indicates that this is a highly flawed way of thinking about valuation.

>to leave is childish and the hallmark of a troll.

You insulted me and called me a troll. Am I being the one being childish? I am simply stating facts. If you leave saying we have no subjective common ground when I only offer hard facts. The only logical conclusion is that you are trying to exit the conversation because you have no hard facts to prove your point.

Alternative conclusion- I'm exhausted by this conversation, and don't want to continue it. It has little to do with your argument and everything to do with the way you're arguing.

> It has little to do with your argument and everything to do with the way you're arguing.

Sure that's a valid possibility. But my hypothesis is valid as well.

One thing is solid though: Your statement is a subliminal personal attack on the "way" I "argue" and has nothing to do with the argument itself.

Perhaps another alternative conclusion is that you have no way of continuing the discussion because you have nothing solid left to say, so you decide to reframe the situation and end it with a cheap excuse that has nothing to do with the argument itself.

A painter creates value when they add color to a blank canvas. Some colored canvases are worth millions of dollars.

The value was not created. The value was extracted from supplies, skill and time required to paint it.

NOT from America, so I don't have to hold the same cultural beleifs you'll do. I have no idea why welfare is linked with the non Zero sumness of the economy, nor subscribe to the other notions mentioned.

Matter of fact, I have diametrically different positions.

My question to you though, is how the economy being non zero sum is a fallacy. I've had to work directly in economics and finance, so if I got this wrong it would be a huge gap. I'd really like to understand how it's a fallacy.

>...used by economically illiterate people

Please don't insult people on this forum.

In terms of your statement: >..."It's not zero-sum" is a popular and lazy fallacy

Simply look at the simplest case. Unless coercion is involved, if I make a trade with someone, the only reason I do it is because I am better off because of the trade or I wouldn't do it. The same goes for the other side of the trade. So we decide to do a trade and both of us are better off than we were before.

First of all, it's really not an insult and more of a statement.

Barging into a thread and yelling "economy is not zero sum" is the CS equivalent of doing the same and yelling something like "X is not a good programming language" with no explanation or context. Wouldn't you be considered illiterate in that programming language by someone who uses it?

> So we decide to do a trade and both of us are better off than we were before.

In a vacuum, yes. However, consider that no actual new goods have been produced. Does your example work in the case when one party is unable or unwilling to see the benefit of the trade? Does it work when no new goods can be produced by one of the parties, like in the example of land?

If you want a more detailed statement - in the short run, everything in economics is essentially zero-sum. As we progress towards a longer time frame, it shifts to being non-zero sum, with the exception of intrinsically limited resources.

> Simply look at the simplest case.

Yes, most users of this site look at Economics as some series of simplest case scenarios. I'm standing by this statement until I see evidence to the contrary.

What's misguided is your fatalistic application of thermodynamics. I of course understand that there is a limited amount of energy in the universe, and that it will one day all stop due to heat death. I disagree that that has any impact on our much smaller, more limited human experience.

I also disagree that the entirety of human demand is about raw resources, ignoring art, romance, or other interests in our lives. Unfortunately, you'd then argue that there are only 10^78 atoms in the universe, with which we can only build 10^24 paintbrushes.

Thermodynamics does have an impact. I don't need to show you ludicrous examples to prove my point either.

Take gasoline. When you use it, you convert it to a unusable state. Oil is finite and as fracking wanes the supply will lessen and the price will go up.

This is not a unrealistic application, but a very real application of thermodynamics that will have a very real impact on your life.

>I also disagree that the entirety of human demand is about raw resources, ignoring art, romance, or other interests in our lives.

I don't ignore art or romance. But every economic product follows an economic food chain and the root of that chain is ALWAYS a raw resource. Take romance for instance:

IN order to experience romance you must be alive. IN order to be alive you need food and air (raw resource). In order to make food you need to grow plants or animals. In order to grow an animal you need to feed it plants. In order to grow plants you need to give it earth (raw resource), sun (raw resource) and water (raw resource).

Note how the economic chain splits into many threads and always terminates at a raw resource. This chain of dependence ends at a resource that is limited therefore all of art and other abstractions are limited.

>Unfortunately, you'd then argue that there are only 10^78 atoms in the universe, with which we can only build 10^24 paintbrushes.

What's unfortunate is not the fact that I have an argument but the fact that you have NO argument.

My argument is fairly straightforward. The universe is much larger than our appetites, and that's the horizon we're talking about with economics- centuries, not the heat death of the universe.

Your comment about gasoline is a good example of a resource that has a real world constraint, but it doesn't show that economics is zero sum. It shows that the limited game, where the goal is to obtain as much gasoline as possible, is zero sum. If I also use nuclear power, I'm not playing that game.

We have a sad tendency to ignore negative externalities, as a species. And it could be our undoing. But countering that by claiming that human econonic activity is zero sum is an abuse of game theory.

You argument is not straightforward. It is logically flawed.

> The universe is much larger than our appetites, and that's the horizon we're talking about with economics- centuries, not the heat death of the universe.

You don't have access to the universe. You only have access to the earth. If you reduce the time horizon to centuries you must also reduce the resource horizon to that which is available on earth. The earth is a highly limited resource. The situation is not even close to your flawed argument of limited appetites vs unlimited resources.

That is fairly straight forward. I never talked about the heat death of the universe nor any epic cataclysms outside of the human experience. That came from you. Thermodynamics applies to smaller systems as well as the universe and is highly relevant to the human experience.

>Your comment about gasoline is a good example of a resource that has a real world constraint, but it doesn't show that economics is zero sum. It shows that the limited game, where the goal is to obtain as much gasoline as possible, is zero sum. If I also use nuclear power, I'm not playing that game.

How is nuclear power not a zero sum game? Follow the economic chain. Nuclear power involves a resource called uranium. Uranium is used up in process of generating nuclear energy. Uranium is mined from the earth and therefore limited. Additionally, the global supply of uranium is nowhere near high enough to be classified as a seemingly 'unlimited' resource. You cannot escape the game.

Your best argument here is the sun. The sun can be classified as a seemingly 'unlimited' resource. However the bottleneck here is the amount of solar energy we can extract from the sun. That energy amount extracted is limited by technology and physics to a concrete amount. That concrete amount is significantly less than the energy we demand.

>We have a sad tendency to ignore negative externalities, as a species. And it could be our undoing. But countering that by claiming that human econonic activity is zero sum is an abuse of game theory.

By claiming that economic activity is not a zero sum game is an abuse of reality. Find an example that isn't zero sum. Find a resource that isn't constrained.

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