Does Price Making Lead to a Zero Sum Economy?

Normally, price making in aggregate should not lead to this result. However, price making may imply not just a lack of resource coordination among private firms, but also economic activity which benefits from taxpayer support. Ultimately, much depends on the relevant sectors.

Likewise, economic dynamism may be reversed when societies overreact to perceptions of "ill gotten" gains. Venezuela provides one of the strongest warnings of our time, as to what might occur when citizens and governments overreact to existing prosperity by breaking up firms. All too often, such intentional destruction does little to preserve markets, for the products supplied up to this point. There is danger in placing excessive blame on the dominant tech firms of our time. Should these firms be broken up, it could lead to the loss of valuable product, especially for those who lack sufficient access to other platforms for knowledge and information dispersal. Whatever weariness or disillusion society may have with social media, it would be far better to create new economic patterns and systems for face to face interaction, instead of holding social media accountable for problems which in many instances it only bears partial responsibility.

Why do so many believe we are living with a zero sum economy? For one, non tradable sector dominance tends to lack the level of output that occurs during periods of tradable sector dominance. Unfortunately, price making as a way to reimburse extensive overhead costs (in lieu of limited output), can negatively impact aggregate output if practiced to excess over long periods.

Of course, economists and others regularly remind us there is no such thing as a zero sum economy in the long term, in aggregate. One observer put it this way:

In a capitalistic economy, in aggregate, there will always be more winners than losers. This is because the economy is growing in the long run and both parties benefit from an exchange.

Let's keep the faith in long run positives as best we can, since the short run has plenty of uncertainty. Even small examples of protectionism and zero sum thinking can cause further problems. Recently, zero sum thinking on President Trump's part, prompted him to impose a 17.5% tariff on tomatoes from Mexico. Many of us in Texas have already faced rising prices on fresh tomatoes for months, as it has gradually become more difficult for deliveries to cross the border in timely fashion. And given the lengthy wait those truck drivers face, by no means are tomatoes the only fresh produce being affected.

Is the supposed "product dumping" on Mexico's part a form of price making? Even if it was, low prices for commodities such as these, lead to a positive sum circumstance. There's more fresh food consumption than would otherwise be the case for lower income levels, more income for growers and workers and also retailers. Affordable produce for all income levels means more economic dynamism, not to mention health benefits. Seriously, is anyone really being hurt by tomatoes from across the border? After all, many tomatoes grown commercially in the U.S. are already slated for canning and other processing, instead of grocery store produce sections.

The price making that causes a structural possibility of zero sum circumstance, is when price making occurs in ways which pose clear limits for supply side potential. All the more so, when the production processes correlate with product linked to space and time, which only sets up additional negative ripple effects. However, the best way to ensure as much economic dynamism as possible, is to respond to price making by ensuring that price taking is also possible in the same markets that already contain natural scarcities. In other words, continue to provide real economic options, instead of destroying what continues to function in the here and now.

After all, creative destruction is not due to purposeful destruction. It's about the potential for societies to make new choices, not just in terms of both consumption, but also production.The best way to make certain we don't end up with zero sum outcomes, is to always leave room for the full coordination and market enhancement of price taking. All the more so, when product and services are already subject to the natural scarcities of space and time.