FACTOID # 22: South Dakota has the highest employment ratio in America, but the lowest median earnings of full-time male employees.
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Encyclopedia > Zero sum fallacy
This article or section should include material from Lump of labour fallacy

A zero-sum fallacy is a logical error committed by assuming that some quantity is constant when it is not. The name comes from a concept in game theory.

In game theory a zero-sum game is one in which the total payout to all participants is constant, regardless of the results. Thus chess is a zero-sum game (when one player wins the other must lose) and so is poker (the total number of chips in the game remaining constant).

The most often cited example of a supposed zero-sum fallacy is in economics, where simplistic arguments might assume that the giving of a certain amount of wealth to one person (e.g. through taxation and subsidy) necessarily results in others losing the same amount of wealth. In fact economic activities can increase or reduce the amount of wealth in the world, making the economic 'game' non zero-sum.

A more controversial example goes as follows. Green politics postulates a zero-sum game regarding the finite supply of fossil fuels available to mankind. Activities that utilize these resources (coal power, internal combustion, etc) are believed to be irreversibly depleting them and precipitating an energy crisis. Opponents to this school of thought call this example a zero-sum fallacy because they believe that increased fossil fuel use leads to research into more efficient utilization as well as creating more of an economic incentive for locating additional resources. This respectively has the results of lower per capita usage and increased supply.

The contradiction to this fallacy is sometimes summed up in the phrase 'rather than arguing over who gets how much of the pie, increase the size of the pie'.

External links

  • Zero sum fallacy in stock trading (http://www.fool.com/news/foth/2000/foth000912.htm)



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