This post follows from an article titled “Keep on trucking”, published in The Economist.
Zero-sum games are templates hard-wired to our brains. We have seen a possible reason for this your-win-is-my-loss syndrome. The cognitive bias towards zero-sum thinking is sometimes called the fixed pie fallacy. Examples are everywhere – immigration, retirement ages, computerisation, outsourcing, the list is endless!!
Take, for example, the argument against the increase of retirement age. Part of the society, the younger lot, genuinely feel either their progress will stall or new opportunities will dry out due to the older generation keeping their jobs for longer.
The lump-of-labour fallacy, so it is known, is very appealing to everybody. But the data suggest something else. In developed economies, the higher employment rate of the old (55-64) is often positively correlated to a higher rate for the young (15-24). Reports of ILO can tell similar stories on migration – correlation between increased prosperity of the economy and the presence of migrant workers.
This fallacy appeals to most due to the simplistic picture it presents – a fixed amount of wealth that can only be exchanged between people, a form of the law of conservation of wealth. They conveniently forget human history. Wealth creation is the story of the modern world. Imaginative and innovative economies grew faster than inward-looking ones. Think about the cost to society when a person is retired. She no longer contributes but withdraws from public (pension) funds. In other words, part of the money from the younger lot goes out from the funds, built on bonds or equities, which could otherwise get more time to circulate and compound. On the other hand, if older people are still in the workforce, they spend, and money comes back to the economy, creating more (diverse types of) jobs that employ more, and the cycle continues.
The economies that kick part of their people out to employ the next batch are doing so either due to ignorance or because their economies are genuine candidates for zero-sum. Such economies are unlikely to prosper due to the same reason – the lack of imagination and growth mindset. We have ample examples to support from the last 300 years of human history.
Keep-on-trucking: The Economist
