Refutation #4 -- The Market as a Zero-Sum Game

(This refutation is taken with permission from the Presidentís Message in the June, 1996 issue of Acton Notes, the newsletter of the Acton Institute for the Study of Religion and Liberty. See our Related Links for connection to Acton Online.)

There are many criticisms of capitalism, from the simple to the sophisticated. One of the more common is that market exchange is a zero-sum game. Baseball is an example of a zero-sum game; if the Cleveland Indians win, then their opponents the Detroit Tigers must lose. If economic exchange in a capitalist system necessarily benefits one party at the expense of another, then there are sufficient moral grounds for rejecting it.

But this view of capitalism is simply srong. Dr. Ronald Nash, professor at Reformed Theological Seminary and one of our Advisory Board members, explains it this way when he teaches at our "Toward a Free and Virtuous Society" conferences for seminarians: Capitalism is based on the principle that if you do something nice for me, Iíll do something nice for you.

Voluntary exchanges take place because people place diffenent values on different things. If everyone ranked everything in the same way, there would be little reason to trade. Suppose that I am a dairy farmer. I have plenty of milk from my cows, but no money. I donít need all that milk, but I do need to pay my bills. Thus I value money more than my milk. Letís suppose that the opposite is true for you; you have plenty of money, but no milk. You therefore value milk more than your money. If we exchange your money for my milk, we both walk way from the transaction better off than when we started. We each exchanged something we valued less for something we valued more. We have both won; we have participated in a positive-sum game.

So the next time someone tells you capitalism is a zero-sum game, be prepared to clear their confusion. Capitalism and the principle of voluntary exchange allow us to pariticpate in an economy where we all win.

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