Zero Sum
In which Niall discovers that things are not what they seem with a POM and there’s work for everybody.
“To review what you have said so far: POMs can be stolen, our money cannot because our money is not transferable. POM can be used to motivate any behavior whether good or bad. Our money is as moral as the payers.” This one gave Niall a little frisson of fear. “No society can control how a POM is used when it’s in the form of currency or coins. Our money is easily controllable.
“There are several more differences between POMs and our money. Think, now.”
D.W.’s face brightened, “Counterfeiting. A physical object can be counterfeited. POMs can be faked. Our money is almost impossible to counterfeit and even if it were it could not be done on a large scale or it would be obvious.”
Niall thought that Jean’s idea about rogue payers, paying themselves and living in the POM colonies could be a way that large scale counterfeiting would not be so obvious.
“Very good, D.W. We can add that to the list. Who’s next?”
“The South American nations often have a problem with inflation,” Leyden said. “With a POM you can just print as much money as you like. It doesn’t matter whether there’s anything to buy or not. With our money prices are always the same.”
“Excellent, Leyden. That is a big difference,” the instructor said. “With POMs the supply of money is independent of the supply of goods and services for sale. With our money, the supply of luxury goods and services for sale determines the amount of money that exists to buy things. We use the payers’ adjustments of paying for benefits rather than the prices of luxury items to be our free market. Therefore, we never have inflation or deflation of our money supply.
“Can anybody think of another difference?”
There was a long pause with some shifting but there were no hands up this time.
“OK. Most classes don’t get this last one even though it might be the most important of the lot. Let’s approach it gradually and perhaps you can figure it out before I tell you.
“Do any of you play poker? Good. If each of the players in a poker game begins the game with $100 in chips and one of the players ends the game with $150 in chips, what do we know about the winnings and losses of the other players?”
D.W.’s hand went up, “Somebody else must have lost $50.”
“Yes. Some one player or some combination of the other players must have lost at least $50. Why is that?”
Oscar said, “Because if you add up the losses and winnings of all the players the total will always be zero. In order for one player to gain some other player must lose. If it wasn’t that way the game could go on forever.”
“Exactly! That situation where winnings and losses have to balance out is called a ‘zero-sum game.’ Is an economy a zero-sum game?”
“Of course not,” said Niall. “The market is a win-win situation. In every trade each trader gains by the trade. That’s how specialization increases everyone’s wealth.”
“Quite right. Now let’s look at a POM economy simple purchase. Leyden, you will pretend to be buying a hat from Oscar. Leyden you have $20 and the hat is being offered for $15. Are you willing to pay $15 for that hat?”
“I guess.”
“Aren’t you sure?”
“Well, I’d like to pay less than that. It looks like it’s only worth about $5,” she responded.
“Good. So what do you say to Oscar?”
“I’ll give you $5 for the hat,” Leyden smiled at Oscar.
Oscar got right into the swing of things, “$5?!? That hat is worth $25. The only reason I am willing to part with it for only $15 is because I like you and want to encourage you to trade with me in the future.”
“Well, I might go as high as $7, since I am in the store,” Leyden countered trying to sound reasonable.
“Look, I am a poor man merely trying to stay in business, here. I guess I could go as low as $12, but it’s taking bread from the mouths of my children.”
“Great acting,” the instructor interrupted, “but let’s assume that the two of you finally complete the transaction at a price of $10. Tell me about your relationship? How did it feel?”
“I was competing with Leyden, trying to get as much money as I could from her for the hat,” Oscar said.
The instructor quickly asked, “Oscar, what was Leyden trying to do?”
“She was trying to get the hat for as little money as possible.”
“So, Leyden, what was your relationship to Oscar?”
“He was my opponent. I had to make him think I would never pay more than just a few dollars. I had to pretend that I hardly cared whether I got that hat or not. He wanted all my money so I had to be careful to see he didn’t get it.”
“Class, who won? Did Oscar win because he got $10 or did Leyden win because she got the hat?”
Niall jumped in before the others could. “They both won because each benefited from the trade.”
“Yes. They both won. Both got what they wanted to some degree without harming the other. Since the trade was voluntary, they could each win. And if you extend what we just saw here to the whole economy you will see that it optimizes the outcomes for the economy as a whole as well.
“But let’s look at the exact same interaction and see only the money part of it. Leyden how much money did you have to begin with?”
“I had $20.”
“Oscar, how much money did you have to begin?”
“I had nothing but a hat.”
“So the total money in the beginning was $20. How much money did you have at the end, Leyden?”
“I had $10 left.”
“Oscar?”
“I had $10, and no hat.”
“Just the money, now. We are ignoring everything else, no matter how relevant or important it may be. So, looking just at the money, who gained by this transaction?”
“Oscar did,” D.W. said. “Oscar gained $10 and Leyden lost $10.”
“Does that sound like a zero-sum game?” the instructor asked.
There were general murmurs of agreement and Niall saying, “But it wasn’t a zero-sum game. They both benefited from the trade. They wouldn’t have made the trade if it wouldn’t benefit both.”
“I did not ask if it was a zero-sum game, I asked if, when we look just at the money, it sounds like a zero-sum game. Does the money part, looked at all by itself, look like a zero-sum game?”
“Only because you are ignoring the other half of the trade,” Niall conceded.
“What was the relationship between the buyer and the seller in our case of the hat?”
Niall said, “They were trading. They were each getting what they wanted.”
“What else?”
Natalie said, “They were also opponents. Leyden admitted that she was trying to fool Oscar and Oscar was trying to fool Leyden. They didn’t feel like they were cooperating even though that was the end result of what they were doing.”
“Anything else?”
“Oscar got the money, so he won,” Clayton said.
“Oscar only won if the other people selling hats got less for their hats than Oscar did,” Leyden said.
“Class, notice that we are measuring the success of the sellers here by the money they get and ignoring the costs to each and the satisfaction experienced by each. But more important, notice that even though, as Niall says, they both benefit by the trade, they each are taking a point of view of opposition to each other.
“This is the point of view of the zero-sum game. In order for me to win I have to make someone else lose. If you aren’t a winner you must be a loser. In that kind of situation what happens to those who are relatively weak?” The instructor looked around the room hoping for a new contributor.
Niall, of course was eager to answer, “They both win so long as the market is free. They both improve their situations.”
Clayton turned to Niall and said, “Really? What if the sellers of hats get together and decide that none of them will sell a hat for less than $19. Leyden is only one person. How can she compete with price fixing of the hat sellers?”
“At those prices,” Niall said, “there will be a lot of other people willing to sell hats for a few dollars less.”
“But you’re assuming that the market stays free,” Clayton said with a touch of anger. “You’re assuming that other people can enter the market. Since there’s money to be made by keeping the prices of hats high, the hatters are motivated to punish anyone who sells hats for less. With people looking upon each other as enemies, how can you keep the market free?” he finished triumphantly.
The instructor asked, “What has happened to those who were weak in POM economies, historically?”
“They get weaker and poorer,” Wendy said.
“What happens to the rich and powerful?” asked the instructor.
“They get richer and more powerful.” said D.W.
“Until what happens?”
“Until the economy falls apart,” said Oscar. “And when the economy falls apart the political system will not be far behind. Take the economic chaos in Russia in 1917 or in Germany in the 1920’s or look at Rome in its long decline. Whenever an economy gets rich, the wealth becomes more and more concentrated until the foundation of that economy is destroyed. In Rome it was the middle class farmers who formed the basis for the success of Rome. But as Rome got more powerful and more wealthy, that very class of farmers was destroyed and the whole economy came to depended upon annexing more areas and enslaving more people until they could no longer expand and could no longer afford to pay the army to protect them.”
“That’s only because they destroyed their free market. If they had left it alone, if they had kept the government controls out of it, they could have remained strong,” Natalie countered.
“How could they have done that, Natalie?” Wendy asked quietly. “How could they have prevented the rich from destroying the free market?”
“It wasn’t the rich, it was the government,” Natalie maintained.
“Weren’t the Senators rich? Weren’t the Caesars rich? Who paid for Julius’ run for office? Who paid the armies?” Clayton was definitely heated. “It was always the rich. The rich were the government. They controlled it and they ran it to benefit themselves.”
“Regardless of whether it was the rich or the government what difference does it make?” Natalie said fiercely. “Did it really matter whether it was one or the other if the free market was destroyed? Because in a POM economy, even if a society is fortunate enough to somehow approximate a free market, that freedom will always be destroyed. That’s because people can make money by destroying the freedom of the market. One can make money by forming monopolies. One can make money by making legislation favorable to one set of people over another set of people. One can lie and cheat and steal and threaten in the market. There are many ways to abuse the market and they all make money for somebody.”
“But it’s stupid to destroy the free market,” Niall said. “Everybody suffers without the free market. If the government would just let the market alone it would be better for everybody.”
“Niall, did you ever hear the story of the monkey trap?” the instructor asked.
“Monkey trap? No.” Niall replied.
“Some explorers in a tropical region found some large heavy pots with small necks in the forest. They picked up some and shook them and found that they had nuts in them. When they asked the natives what they were for they replied that those were monkey traps. The monkeys could smell the nuts in the jars. They would reach inside and grab a handful of nuts but then would be unable to withdraw their arms. Since the jars were heavy the monkeys had to just stand there next to the jar until the hunters came and shot them. This shows that the hope of an immediate, relatively small gain will often cause monkeys and people, too, to do stupid things. The immediate reward for destroying the market always proves to be too tempting for some people to resist. The money they can make by destroying the freedom of the market will always overcome what good sense they might have. At the end of the twentieth century, there were no free markets of any size left in the world, since every society had a government and those governments always imposed limitations on their markets.
“The simulation of a zero-sum game that results from the use of a POM is what makes individuals think they can benefit when they make others suffer. When it’s obvious that the benefits of a free market help everyone to attain their ends, why would people seek to destroy it unless they didn’t understand their actual situation?
“We’re nearing the end of our time so I’ll give a brief review of the main points.
“POMs are transferable therefore they can be stolen and borrowed.
“POMs have a physical manifestation, such as currency, thus they can be counterfeited and produced in any amount whether goods and services exist to be bought with it or not. Inflation and deflation are possible with POMs.
“POMs are used by everybody, thus their use cannot be controlled so their use encourages moral, immoral, and amoral behavior depending on what the money is offered for.
“POMs simulate a zero-sum game causing people to think they are independent of each other when they are really dependent on each other.”
Niall’s hand shot up.
“Niall, we can deal with that next time.
“Our money is not transferable so it cannot be stolen and there is no credit or loans of our money.
“Our money is given only by payers, so the behavior it motivates is as moral as the payers make it.
“Our money does not simulate a zero sum game, since it emphasizes that if others benefit we benefit. It makes obvious our interdependence.”
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After class Niall was still fired up to talk about the points covered in class and since he didn’t have another class for two hours, he asked Oscar if he would like to continue the discussion in the cafeteria. Oscar grinned an acceptance and they set out in search of food.
“Seriously,” Oscar said. “We actually were spending over 25% of our human resources on maintaining the money. Of course, you’d think of cashiers, bookkeepers, accountants, and tax lawyers as not being needed any more but there was also no need for banks, insurance, and stock markets. Whole industries were no longer needed. When you add to that the number of people in government who were no longer needed to enforce various laws or distribute welfare, it added up to over 25% of the workforce. Then too, there were all those buildings and janitors and computers and paper and office furniture and so on and on.”
“There were millions of people suddenly out of work. What did they do?”
“At first there were a lot of scared people. But then they discovered that a lot of things that people weren’t paid to do before they could get paid for now. Child rearing, for example, generated a continuing income for mothers and some fathers. Home schooling mothers in particular had a pretty nice income. The contractors who did road work and infrastructure construction suddenly were recruiting everybody they could who could do the work since the streets and dams and bridges and such had been neglected for decades. There was construction going on all over. The folks who built equipment and supplies for the contractors had a huge surge in requests for materials and tools. Contractors also did very well in the housing industry in renovating old buildings. There were lots of office buildings that were converted to other uses.”
“But what about those bankers and insurance salesmen and bookkeepers and such? They weren’t going to make construction workers. What could they do?”
“The accountants and bookkeepers discovered that there are lots of things that need to be kept track of and organized. Inventory still needs to be monitored. The bankers found that their skills in recognizing good investments were quite useful in helping the capital producers decide how to distribute their resources. In a lot of cases the bankers only needed a little education to make excellent coordinators. The people who were well educated enough to be comptrollers and financial officers and such found it easy to adapt to the new economy. They had lots of skills that were useful.”
“What’s a coordinator?” Niall asked. It was a job category with which he was unfamiliar.
“They bring together people who could cooperate to accomplish some large project and make sure the information each needs about the others is available at the right time and place. Like if you are going to build a house, you would need lumber and tools and nails and plumbing and wiring and cement and shingles and people who knew how to build with and install all those things. They would need to have the materials show up at the right time and place and the various people who would work with them would need to get there at the right time and have the plans available so they would know what they were going to be doing. They would all have to agree ahead of time. The coordinator sees to all those things. When things go wrong as they always do on any complicated enterprise, they are the ones who get the resources, human and otherwise, that are needed to make things work. For some big projects you might have several layers of coordinators each with their own specialty. Naturally the internet is an enormous help, since they can advertise for what they need and when.”
“Why do people obey them?” Niall asked.
“Nobody obeys them. They can’t give orders. Well, they could, but if you disobeyed they couldn’t do anything about it. They provide information. If you know that by showing up first thing in the morning next Tuesday and installing plumbing at the house being built at 1433 Maple Street, you could expect to get paid for the benefit for years, then you have a good reason to do the work. If you said you were going to do that job and then just didn’t show up, there would be some declarations about you in your references file. If you’re willing and able to do a good job and you let it be known that you’re available, you will probably be contacted by several coordinators with work you can do. The better you get, the more important the projects that you will be offered.”
“What if they make a mistake?”
“Then they look bad and people are less likely to want to work on the projects they try to put together. But everybody makes mistakes and since you can get paid pretty good for fixing things after a mistake, there are always lots of folks around who will try to help out.”
“How do they find projects to do?”
Oscar scratched his head, “I really don’t know. I suspect that people bring them ideas and other coordinators probably just look for problems that need solving. Lots of those in the building trades had training as architects or civil engineers. There are also a lot of them who used to be contractors.”
“What about big projects like a dam or large bridge? If a project takes years to complete, do all those guys not get paid anything until it’s done?”
“That’s right. But when you have finished, the pay comes rolling in regularly and you don’t have to lift a finger. It all depends on whether you want a little now or a lot later. Those big projects also attract a lot of people as they get near to completion, since the payoff is nearer.”
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