Are there any other scenarios where you can see non-zero sum cooperative economics without:
A. Creating an externality that exactly equals the non-zero sum gain?
i.e. (non-zero sum gain) + (externality created) = 0
B. Increasing the risk of an individual who cooperates with another person(s) to benefit from non-zero sum economics such that the increased risk of no gain + loss of energy put into the cooperative failure exactly offsets the non-zero-sum gain?
i.e (non-zero sum gain)(probability of cooperation succeeding) + (loss from non-zero sum failing)*(probability of cooperation succeeding) = 0
Both of these examples should probably be thought of as non-linear integrals but the single instances I have highlighted have exemplified the problem well enough
Is this a kind of universal law for all economics? The equivalent of saying "there is no free lunch" for all of cooperation? Or am I missing something?
I don't really know what it is as I can't think of an example so any comments/thoughts would be greatly appreciated.
PS- It is kind of depressing if true
Bonds And Money
1 year ago
41 comments:
For comments
You know Thai...
IF this comment doesn't get squelched the way my last comments (inoffensive...) got squelched, you can check out what I wrote on grace over at Toby's place.
Enjoy...
I'll check it out
If I may be so bold as to translate this post into junior high-speak:
Zero sum (aka constant sum): We play a game. One of us wins and gets the trophy and the other gets jack.
Non-zero: Our team plays a game. We win and share the trophy.
But isn't this some trickster wordplay ignoring the fact that there was another team who got jack. Choosing and picking which level we'll calculate the sum at?
The way I see "externality" is "an unforeseen consequence" not included in the summation calculation. Our team wins the trophy, but you got a concussion while I mostly stood on the sidelines trying to seduce your mom.
So in summary, someone wasn't careful about defining the boundaries of how they'll "add it up".
So,
Thermodynamically: always zero-sum
Just looking at our team's trophy: non-zero sum
Just looking at our team member's day as a whole: non-zero sum with uncountable externalities.
Wait, wait...
Been thinking about it and I don't like my previous comment.
In the commons, rarely are things so cleanly defined as a game with winner and loser. At least overtly.
I've got some hazy, sloppy idea knocking around about "if/then" flow charts and how it relates to this constant-sum concept, but I had better refine it before I comment.
I do not see how ANYTHING is ever non-zero sum from what I am reading as the trophy exists and is part of the equation and hence is neither gained or lost in the total sum regardless of who wins. You can bracket the trophy in the equation any way you want it still is part of the sum in the equation.
If we include the universe we are just back to the conservation of energy and matter. I just keep thinking of the example of trash left on the moon.
How can anything be non-zero sum?
Dink, your translation is a perfect junior high school illustration of point A.
"Yes", the team that loses is handed the "externality" in the form of a loss
Can you make a similar junior high translation for point B?
John re: "How can anything be non-zero sum?"
John gets an A on his very first try
Don't get confused with viewpoint. Indeed it ALWAYS has to do with the issue of perspective, or viewpoint or frame of reference or whatever term you want to use.
non-zero sum ALWAYS implies an externality since otherwise you would not see it as non-zero sum.
Just like the issue of grammatical aspect illustrated by Clinton's famous "it depends what the meaning of the word is is" which is really about the viewpoint in which you are looking at the verb "is", so too does aspect, or perspective, or viewpoint frame every discussion we have.
So imagine a circle. You are a person sitting on the rim of the circle and you can look either inside, or outside the circle.
If you look inside only, and a "win" enters your circle, this seems like a gain. If you look outside only and a loss enters the outside, then you only see a loss. If you simultaneously look inside and outside you see the win is balanced by the loss and they cancel each other out- e.g. zero-sum.
non-zero sum people don't want to consider it is still zero sum by creating an externality so they think of it as "win-win" forgetting that someone/something else still looses.
So let's move to example "B" where we are on the rim of the circle and only looking inside and want to create a non-zero sum "win win" between players all in the same team without anyone loosing outside the team.
I tried to describe this in apparently illegible fashion with example B so now Dink can translate "how does this work"?
But why is it still zero-sum?
As before it is all "relative" to viewpoint- hence we have the theory of "Relativity". ;-)
"Can you make a similar junior high translation for point B?"
I can try, but at risk of an externality of looking like an even bigger fool ;)
So the two teams get to talking and decide that football is crap. They agree to return the trophy to the shop and use the money to buy model rockets to shoot off on the field.
One guy lights the fuse on a dud rocket and it explodes. His eyebrows are burnt off, but this is the extent of the physical damage. Everyone else on the field is highly entertained and agrees that it was awesome.
There is comedy of the commons. For Mr. No-Brows potentially losing a trophy would have been a better outcome than cooperating. He is the only person with this perspective, though. Everyone else has a gnarly story (non-zero-sum) and has forgotten about the trophy.
John keeps returning to the trash on the moon. In my head, I keep returning to the thought of opportunity costs.
You want to eat donuts, but you don't want to look like the michelin man. You don't want to pay for business class seats, but you don't want to be squished in coach.
And to properly evaluate the options you have to 1) be aware of all the options, 2) properly extrapolate the chain reaction of each option, and 3) be consistent with yourself on the criteria.
The last bit there reminds me of something from Seinfeld. Jerry was talking about how Morning Jerry is exhausted and can't believe that Night Jerry was such a prick and stayed up so late. To thy own self be true and whatnot.
LOL!!!
Dink gets a A
That was funny Dink. Really very funny.
Is there a cash prize for an A? I think it will be some time before I get another Thai.
Here is a non-zero sum scenario:
Team A play Team B. Loser pays for trophy. Team B loses, but pay for trophy with fraudulent check. Trophy company is unable to collect their losses. In fact, the losses that are incurred by the trophy company create a chain reaction of defaults with all of their creditors and trophy company goes bankrupt. And that sets off a chain reaction with all of their creditors, and so on.
Secondly, your boundaries are such that you cannot claim to be a space alien floating above the earth (or any party outside of the transactions).
Actually Okie, your example is perfect!
Team B wins by giving the fraudulent check. Team A loses (even though they won)
Team A's loss creates an externality that leads to all the rest as you said (of course, in order to create this externality, Team A is in effect winning back its loss from team B as it pushes the loss to the external system)
A butterfly effect ensues in the external system that bankrupts the trophy company
Add it all up
Team B wins
Team A would have lost but recoups their loss by externalizing it so remains "flat"
The rest of the system loses from the externality created from Team A's default.
Add them all up
Zero-sum
... Indeed, even if the externality to the outside system and to the the trophy company eventually comes back to kills Team B, it is still zero-sum.
Care to try again? ;-)
And I don't need space aliens, but I can go there if you want.
I was helping YOU my friend to understand ;-)
Be well
An A from the Fractal Sensei and nice words from Hugh G. Rection! A good day, indeed.
" you cannot claim to be a space alien floating above the earth (or any party outside of the transactions)."
Somewhere back in the blog layers we talked about how humans evolved in groups no larger than 150 people. Maybe we're just wired to only be able to really track that many "files" (reputations, etc.). Any more and we can't attach? Hmmm.
No, Thai. You are changing the equation to fit your beliefs.
Team A won because they got the trophy. Team B zeroed out because, other than losing the game, they did not pay.
The trophy company is out their costs AND out the payment, so they are -2.
+1 - 2 does not = zero sum.
Were really going to continue down this hole...
Educating Okie
No, wrong again
You are confusing several issues and created an externality you haven't included in the form of not accounting for trophy costs
Team A won game +1
Team B lost game -1
Zero Sum
Team B forged check a check so is up the money +1
Team A was cheated and lost the money -1
Zero sum
Team A defaulted to trophy company +1
Trophy company loses payment -1
Zero sum
Now you want include the cost of the trophy and expand the boundaries even more. This is fine to do but you need to account for it and not do off book balance accounting.
Dink or John, wand to point out to Okie his error as I'm out of time and need to go to work?
I think you have done a better job than I can Thai. To me it is as simple as looking at non-zero sum transactions as taking place with participants who you do not include as part of the transaction. That is the only way you can get a non-zero sum transaction.
Okie when you say they are "out the costs and out the payment" these appear to me to be really just the same thing. They are not -2. They are -1. If you want to make it -2 than you have to include the supplier who they got the trophy materials from who got a +1 as they got paid and the trophy maker did not. This can go on and on and on until we reach conservation of matter and energy and nothing is ever created or lost. It's all zero sum in the end.
It's noon. Someone must be drinking somewhere.
John
I'm in the ED and I promise you they are;-)
"Secondly, your boundaries are such that you cannot claim to be a space alien floating above the earth"
Here's a thought on "boundaries". I think Okie is looking at one, big picture boundary. I think Thai is looking at a whole bunch of mini-boundaries. Both perspectives assume all the mini boundaries equal the whole at some point, but its too complex to see them all.
So I get to pondering Venn diagrams. Little circles either fully enveloped by big circles. Or on the border. Or on the outside.
Nope. My neurons are shot. Maybe I'll try again later.
Team A won game +1
Team B lost game -1
Zero Sum
Team B forged check a check so is up the money +1
Team A was cheated and lost the money -1
Zero sum
Team A defaulted to trophy company +1
Trophy company loses payment -1
Zero sum
Team A does owe any money to the trophy company! Only Team B owes the money and they paid with a check that was worthless!
-1 to the trophy company.
Team B is not out anything because they did not give anything of value.
Now you want include the cost of the trophy and expand the boundaries even more. This is fine to do but you need to account for it and not do off book balance accounting.
That's what "cascading defaults" means. No one ever recovers the $$$ owed for the trophies. You can expand it all you want, but it stays a loss at all levels because no one is ever able to collect. It just stays a loss -- always and everywhere.
-1 does not equal 0. Ever.
The only part that is zero sum is:
Team A won game +1
Team B lost game -1
Team A did not lose anything. They won the game and got the trophy (+1, offset by trophy company -1). They are not responsible for the debt for the trophy. So trophy company is -1 in the payment category which does not get offset anywhere.
As a result, they are not able to pay the supplier, who is not able to pay for the raw materials, who is not able to pay ... etc.
Someone somewhere will always be -1 no matter how far you stretch it out.
Correction:
Team A DOES NOT owe money to trophy company. Ever.
Agreed and it's zero-sum
the -1 that keeps cascading is out there as the externality. And it is balanced out by the fact that there is a trophy between teams A and B
The teams got to keep the trophy and are therefore +1 between them (in this case A has it) and everyone else is out -1 as someone eats the cost of the trophy.
The person out the -1 could ask for the trophy to zero out only they probably don't want it
John, you have to understand zero-sum is VERY threatening to liberal ideology
When it comes to the dealings of temas A and B with their payment and the outside world, it might be conceptually easier to lump them together as one system (so between the two of them there is a defulat vs. the rest of the world) and then they can split between them who pays for what.
B was supposed to pay but did not
A got the trophy
The rest of the world is out the cost of the trophy
You can add 100 more teams and 100 more instances of fraud and things still work out the same
If someone take the trophy from A, then A is out a trophy and therefore -1.
You can divide that by 100, but -.01 is still not zero.
Here is another example:
Who wins a nuclear war?
We know who loses, but who wins to offset the loss?
Still zero sum?
I get that all people loose in a nuclear war but does not anything left over win? Whatever is left over wins. If one species dies out and another survives it wins one and humans loose one. Why are people the only thing involved in the nuclear war transaction?
This seems to be an exercise in mostly where you artificially choose to put the brackets on who is involved in the transaction.
Why is zero sum scary to liberals?
Correct
re: "This seems to be an exercise in mostly where you artificially choose to put the brackets on who is involved in the transaction."
Bingo!
Is, was and always will be about perspective.
Zero sum is threatening since at its very core, they cannot achieve "justice" without causing an equal harm.
How is this justice?
A better question is why are you guys so scared of the fact that there are destructive dilemmas where there are no winners?
And if someone "wins," why must there be losers? Why can't you just accept the fact that sometimes you also have win-win scenario?
I used destructive dilemmas because they are the easiest to conjure up. We were taught in law school "there is not a remedy for every wrong."
You may spread the pain out among as many people as you want (and we often do), but that doesn't negate the fact that it cannot be made zero-sum. The original example I gave is quite common in the legal practice. Someone gets defrauded and the wealth is wasted / spent / hidden and there is no way to recover from anyone. Wealth is destroyed. That is not zero-sum.
Ahhhh!!!
This is literally why I want to pull my hair out on this discussion.
It's like showing someone 2+2=4 and they keep saying "no, its 3" and you see how they get there and politely correct them and say "I hear you" but you keep missing something.
It is not a matter of wanting to be right. It is a matter of "am right".
If you can't see how non-zero sum ONLY occurs through either creation of an externality or by increasing risk, I don't know what to say other that you will become that which you despise.
Your example is zero-sum because the person got the "goods" through fraud was up materially (though down from a reputation standpoint) and the person who lost the goods was down.
Even if the crook either looses the goods somewhere outside the boundaries of your system or completely wastes the goods without ever benefiting from them INSIDE the boundaries of your system, so he is again down and the outside system is up or the system itself is up as it has the wasted material, it is still zero-sum.
The place the goods now reside from the wasted is now up, etc...
You cannot have off book balance keeping in physics. It is not allowed.
If a tree falls in the woods then "yes" it falls and the tree is down and the woods are up.
If you do anything somewhere outside your systems or you place or give or create or destroy anything somewhere outside your system, you have to include that "somewhere else" in the boundaries of your system.
If you do this within your system, then you have to include the system.
If you don't, it looks like non-zero-sum to those within the boundaries of the system YOU DEFINE but you have created an externality that balances the loss or gain you see.
This is not subject to interpretation. If you do not do this you will violate every law of physics we know.
Go ahead and pretend there are perpetual motion machines but you have basically said science is crap and I don't by thermodynamics.
As I've said, I do not believe in perpetual motion machines.
"A better question is why are you guys so scared of the fact that there are destructive dilemmas where there are no winners"
I think on a practical level Okie I see this existing and you are correct. In fact it is at the core of my belief system as a libertarian. The world is an imperfect place and always will be. It is not we who are frightened of it but those who look to govt. in a misguided attempt to protect everyone from such scenarios who are the frightened ones.We accept that many transactions in the world have no obvious winners and this will always be the case.
I think as a thought exercise and on the level of physics everything is zero-sum but in real life it does appear that things work out in a non-zero sum fashion because perspective is difficult to achieve.
All the govt in the world, all the gun laws for those who pay no attention or drug laws for those who want to get high regardless or free health care(medicaid) for those who do not value their own bodies or laws against trans fats or salt does not prevent such "destructive dilemmas".
On a pure level I agree that Thai is right and there is no such thing as non-zero sum. On a practical level, acceptance of the world and more importantly freedom requires us to come to grips with the fact that many transactions appear non-zero sum and there is not a damn thing we can do about it and attempts to change that through intrusive govt. simply result in greater destruction.
I agree with you here John on one level, but my caveat is how it illustrates that problem of perspective and cooperation and morality which are not impractical issues.
Further, it points out how people like Krugman can be absolutely correct and you still disagree with him.
And that at times, we disagree with people we might otherwise agree more with if we do shift perspective for a moment.
All economics is based in the end on cooperation.
Everything else is just distraction.
It even applies to medicine
I give ASA to prevent ACS or TIA but since the boundaries of what I'm treating are simply ACS or TIA, I forget that ASA causes PUD or creates a few hemorrhagic CVAs that would not have occurred had I not put the patient on ASA, etc...
Life is a complex/chaotic system but we define very narrow perspectives as we focus on treating particular ailments. And while we have to do this, the number one problem we see in medicine today is too much specialization and no one sees the big picture.
It reminds me that it is always "both" as I alluded to when I said Rich reminded me whom I serve.
And "both" is a tough place to be
I agree with you Thai. It is all about perspective and cooperation. It is difficult to force people to cooperate and govt. is not good at setting up systems to promote this. We have more govt. than ever but I look out at our country and we seem to have less cooperation all the time between many groups. Cooperation in the end requires freedom. Freedom in the end requires risks and responsibilities and acceptance of this. Parents teach this, not governments.
Agreed.
There are simply too many levels between government and the individual to make government meaningful.
It does require parents and it takes a village.
No man is an island
Remember, I tend to see life as simply a fractal of cooperation.
Different structures within a cell cooperate to create the totality we call a cell.
The cells cooperate to form clusters of cells.
These clusters further cooperate to form organs
Organs cooperate to form you
You cooperate (form teams) to form families, form businesses, form organizations, form churches
These cooperate to form societies. etc..., etc..., etc...
If cooperation breaks at any level of the fractal, the entire fractals changes.
And we see ourselves the effects of what happens when on little part of a whole decides it is more important than the whole.
Indeed what do you think cancer is?
Indeed, going back to our discussions on consciousness, when you think about the concept of "who are you?", you need to ask yourself: "which part of me are we talking about"? ;-)
Okie, FYI
I thought you might be interested in In particular, the following post by Stiglitz with all this discussion of zero-sum and Keynes
In particular, I wanted to point you to the following quote:
"John Maynard Keynes pointed out that surpluses lead to weak global aggregate demand – countries running surpluses exert a “negative externality” on their trading partners. Indeed, Keynes believed that it was surplus countries, far more than deficit countries, that posed a threat to global prosperity; he went so far as to recommend a tax on surplus countries."
Be well my friend
Funnily enough, Jacques Lacan, towards the end of his life got all excited about topography.
Jacques was a little... spaced, maybe.
Imagine... a psychoanalyst (but Jacques was always more interested in.. THEORY than people anyway, and he wasn't a great therapist) trying to eliminate all polysemie from language.
Turn our regular every day speech into.. mathematical equations. Get rid of ambiguity. No more misunderstanding, right, if we get rid of ambiguity in our language ? (Geez, Jacques, I can't believe you could have been so misguided about your little narcissistic enterprise...)
I vote with Dink on his very perspicaceous comment that I used to trot out every once in a while when I was commenting here.
Okie is seeing the global boundaries.
Thai is seeing a bunch of mini boundaries.
Do all the... mini boundaries added up make the global boundary ?
NO.
"The whole is greater than the sum of its parts". (Who said that, I have a hole in my head...)
I used to say that... only from the OMNISCIENT perspective does zero sum work out.
But... think about it for a minute.
How can you see BEHIND and IN FRONT at the same time WITH YOUR EYES and IN YOUR BODY ?
You can't, now, can you ?
So... the omniscient perspective is gained at the cost of... not being in your body.
Being OUTSIDE of it.
Usurping God's STRUCTURAL place with respect to consciousness.
Being everywhere and nowhere is the same thing, basically.
And it's not being in your body.
Where IT all starts.
I'll let YOU take it from there, Doctor John, right ?
Does the shrink in you have something to say about that ?
I'm here because of Okie's link in the jungle, by the way.
I don't... hang out here any more, don't worry.
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