[quote=pri_dk][quote=davelj]Let’s get the math straight first. The US economy – and all economies – are n-sum games, at the end of the day, with n = real GDP growth. I would argue that the US economy is not a zero sum game, but it’s certainly not much more than a 1.5%-sum game over the next couple of decades. (And, in fact, it was a negative sum game during the recession.)[/quote]
Dave, you are one of the more knowledgeable posters here, but I’m afraid you don’t understand the definition of “zero sum.” And there really is no accepted use of the term “n-sum” such as you are trying to use with “1.5%-sum.”
As best I can tell you are using “n” to mean growth, but that that’s not what the phrase “zero-sum” means.
Zero-sum does not mean zero growth – it means that zero wealth is created in a system (or “game” as the term comes from game-theory) It means that nothing of value is actually produced, that there is a comparable loser for every winner, that stuff is just moved around.
Casinos are zero sum. National economies are not.
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National economies can absolutely be zero sum games and, in fact, they are at times. Fortunately, it’s the exception rather than the rule. But allow me to explain the concept of n-sum games using the stock market as an example. (I’ve always used the term n-sum without ever bothering to see if anyone “accepted” such use – it’s common sense, really.) The stock market is what I’d refer to as a “market-sum” game. Simply, this means that whatever the market returns (“n”) in a given year is the aggregate combined performance of all its participants. If it’s up 5%, there may be some up 50% and others down 50% but it all aggregates out to 5%. That 5% is the total (or “sum”) that must be divided among all of the participants. (For more on this concept see: Bogle, John)
Now, back to the economy. If real GDP grows by 2% in a given year, then that 2% is split up among all participants. And (obviously) not equally. If real GDP is 0% in a given year, then FOR THAT YEAR the economy was a zero-sum game – the winners and losers aggregated out to zero gain. There was no growth (just like that casino in which the net winnings were zero but for the house’s vig).
So, I’ll repeat myself: the economy is an n-sum game in that all of the growth must aggregate to “n”. Fortunately, more often than not, n is greater than zero. But that’s not always the case.
[quote=pri_dk][quote=davelj]I never claimed this. There is actual value being created. But, arguably, the value created has been greatly exaggerated over the past 30 years (as a result of debt driving a lot of unsustainable consumption).[/quote]
I think we are talking past each other here. I never claimed you claimed it (I was referring to a conversation in another thread.)
But as far as your last sentence goes, you’ll have to back that up with some data.
I remember life from 1982, and a lot of things were different, not just the music. Call me on my cell phone if you need more examples – but I may not answer because I’ll be shopping on the internet. But I’ll answer if I’m in my hybrid car, because it has Bluetooth…[/quote]
Another straw man alert. I didn’t say GDP growth was “completely” exaggerated; I said it was “greatly exaggerated”. There are a lot of estimates out there suggesting that debt creation added between 50 and 100 basis points to annualized real GDP over the last several decades. Using a base of 300 basis points, that suggests that 17%-33% of GDP growth was fueled by debt – as opposed to fundamentals – over the last several decades. I’d say that qualifies as significant.
