Inequality and the Zero Sum Myth

I was recently involved in a discussion on Facebook wherein this video was linked. The video creator and the OP claim that the top 1% have too much of the nation’s wealth.  The subsequent discussion crystallized for me the intractability of the argument when we do not address the basic assumptions that underlie our positions.

The unspoken assumption in the video is that there is some pile of money that gets divided up somehow. (Actually it’s not unspoken, that is literally how he portrays it.) That is the essence of  a Zero Sum game. Any gain by one party is a loss by another. If such an assumption is true, there is some merit to the claims made in the video. In such a case, every dollar that Warren Buffet has to spend is a dollar that you and I don’t. The zero sum perspective may have been relevant when a band of early humans killed a woolly mammoth and had one mammoth worth of meat to divide up, but it has not been appropriate since at least the industrial revolution.

The inevitable, and from that perspective quite reasonable, complaint about inequality from a zero sum perspective is that if Buffet has all the dollars, the rest of us will have none and therefore we’ll be starving.  So, are we starving because other people are rich?  In historical terms, the poor and middle class are doing awesomely. Check out the stats  on poor people as inequality has been rising:

The following are facts about persons defined as “poor” by the Census Bureau as taken from various government reports:

  • 80 percent of poor households have air conditioning. In 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.
  • 92 percent of poor households have a microwave.
  • Nearly three-fourths have a car or truck, and 31 percent have two or more cars or trucks.
  • Nearly two-thirds have cable or satellite TV.
  • Two-thirds have at least one DVD player, and 70 percent have a VCR.
  • Half have a personal computer, and one in seven have two or more computers.
  • More than half of poor families with children have a video game system, such as an Xbox or PlayStation.
  • 43 percent have Internet access.
  • One-third have a wide-screen plasma or LCD TV.
  • One-fourth have a digital video recorder system, such as a TiVo.

For decades, the living conditions of the poor have steadily improved. Consumer items that were luxuries or significant purchases for the middle class a few decades ago have become commonplace in poor households, partially because of the normal downward price trend that follows introduction of a new product.

Liberals use the declining relative prices of many amenities to argue that it is no big deal that poor households have air conditioning, computers, cable TV, and wide-screen TV. They contend, polemically, that even though most poor families may have a house full of modern conveniences, the average poor family still suffers from substantial deprivation in basic needs, such as food and housing. In reality, this is just not true.

The growing wealth of the 1% is not coming at the expense of the rest of us. The rising tide of prosperity truly is raising all boats. The 1% may have super luxury yachts while we have bayliners, but they are not swamping us, we are all rising together. I get 5% richer and Warren Buffet gets 5% richer. Is that somehow unfair? I’m happy with my gain.  Why am I supposed to be mad that i made a few grand more just because some other guy’s 5% gain is a billion dollars?

It’s not all sunshine and rainbows. I would prefer the tide rise faster for one thing. I’m not saying the current system is a good one. I have a lot of my own complaints bout how we run things. We have a lot of fiscal, financial, and economic issues that need fixing.  I’m trying not to comment too much on the inequality issue itself. I’m trying to shed some light on why we are taking the positions we are, and how we might better understand the other side’s argument and our own. And of course I’m trying to persuade you zero sum folks that things don’t really work that way.


Inequality and the Zero Sum Myth