Go Lean Commentary
Whether you realize it or not, Zero Sum Thinking is a real concern … and a real problem … in the Caribbean.
The default psychology of Zero-Sum Thinking refers to the perception that a situation is like a zero-sum game, where one person’s gain is another’s loss; (see the full encyclopedic treatment in the Appendix below).
This complex topic relates heavily to the economic discussions of “Supply and Demand“; actually it magnifies more on the different dynamics of Supply. The actuality is not everybody has the same level of supply – this is true despite whatever resource is being considered. If everyone had an adequate supply – if there was no scarcity – then this standard would not apply:
Golden Rule: He who has the gold, makes the Rules. – Old Adage
Just the premise of this Old Adage assumes a limited amount of gold, a “finite pie” and the challenge to get a slice of it. The term Zero Sum infers the same size pie and the activity to just change the slicing; the total mass of the pie never increases or decreases.
The actuality of a finite pie aligns with a primary Economic Principle, 1st among the 6 principles established in the orthodoxy of Economic Principles. This concept was explained in full details in the 2013 book Go Lean…Caribbean. See the excerpt here from Page 21:
- People Choose: We always want more than we can get and productive resources (human, natural, capital) are always limited. Therefore, because of this major economic problem of scarcity, we usually choose the alternative that provides the most benefits with the least cost.
- All Choices Involve Costs.
- People Respond to Incentives in Predictable Ways.
- Economic Systems Influence Individual Choices and Incentives.
- Voluntary Trade Creates Wealth.
- The Consequences of Choices Lie in the Future.
This Economic Principle (1-of-6) predates the Go Lean book; it is Classic Economics. See the encyclopedic definition here:
Scarcity as an economic concept “… refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good … .” If the conditions of scarcity didn’t exist and an “infinite amount of every good could be produced or human wants fully satisfied … there would be no economic goods, i.e. goods that are relatively scarce…” Scarcity is the limited availability of a commodity, which may be in demand in the market or by the commons. Scarcity also includes an individual’s lack of resources to buy commodities. The opposite of scarcity is abundance.
The above points on scarcity are true and valid, when the supply of the limited resource – like gold – actually affects our life. But the world has actually moved away from Zero Sum Thinking, as there is no longer a Gold Standard for economic measurements. See more here:
A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was widely used in the 19th and early part of the 20th century. Most nations abandoned the gold standard as the basis of their monetary systems at some point in the 20th century, although many still hold substantial gold reserves. – Source: Wikipedia
Unfortunately, the Caribbean has not caught up with this advanced thinking. There is no longer any excuses; we must now assimilate this concept that modern society has transformed to a Non-Zero Sum world. The sooner we accept this actuality, the better.
Many Caribbean people still believe that America is the “greatest” country in the world only because they have the largest Gold Reserves. But alas, as reported above, the Gold Standard no longer applies. The World now operates on a “Fiat Currency” principle, and so we can all grow, advance and win without someone else having to decline, lose or fail.
Let’s examine this closer! Every month, the movement behind the 2013 book Go Lean…Caribbean presents a Teaching Series to address issues germane to Caribbean society. For this month of February 2021, we are looking at the psychology and sociology of Zero Sum Thinking. It turns out that many of our societal defects are tied to this reality – (see the Appendix below). This first entry, 1-of-6, introduces the concept and then we drill deeper and climb higher. The full catalog of this series is detailed as follows:
- Zero Sum: Lesson 101 – No more “Gold Standard”
- Zero Sum: Realities of Globalism – “Non-Zero Sum” for the whole world
- Zero Sum: ICT as a tool, the “Great Equalizer”
- Zero Sum: Regional Tourism should not be a competition – Encore
- Zero Sum: Book Review – Racism is a factor; “Us vs Them”
- Zero Sum: How to fix “Inequality” – Raise the tide, all boats are elevated
We start our discussion on Zero Sum by looking at the economic picture – the Gold Standard. This aligns with the assertions of the Go Lean book, that regional stewards can reform and transform Caribbean society by first rebooting the economy engines.
# 6 – Need People Too – Not All About Money, or is it?
The quality of life for the citizenry is very important, otherwise, people leave, and take their time, talents and treasuries elsewhere. Family, cultural pride is more important than economics, and yet when the economics are bad, people leave. This is evident by the large Caribbean Diaspora in foreign lands – where they re-assembled their culture and civic pride. – Go Lean book Page 26 – Title: “10 Ways to Impact the Future“
The regional stewards need to pay more than the usual attention to this consideration. What regional stewards?
There is no such stewardship and this is the first step the political Caribbean needs to do to reform and transform the regional homeland. So that same Page 26 Go Lean Advocacy calls for this #1 “Way to Impact the Future“:
# 1 – Lean-in for the Caribbean Single Market & Economy initiative: Caribbean Union Trade Federation (CU)
This will allow for the unification of the region into a Single Market economy of 30 countries, 42 million people and a GDP of over $800 Billion (based on 2010 figures), thereby creating the world’s 29th largest economy. The CU will then forge multiple Agencies to foster technology growth and garner benefits from the economic “Catch-Up” principle. This should double the GDP after 5 years and help create the structures for the meaningful future that past visionaries had foreseen.
The European Union is the Model for the Caribbean Union
In addition to an integrated political stewardship – which must come first – the roadmap calls for an integrated economic stewardship. The Go Lean book (Page 32) introduces the Caribbean Central Bank (CCB) with this mandate:
CCB – Mixed Basket – Monetary Strength
An obscure Murphy’s Law states “when people claim that it’s the principle, and not the money, chances are, it’s the money”. There are more important things in life than money, but somehow all these things can be bought/sold … for money. The CU strategy is to consolidate monetary reserves for the region into one currency, the Caribbean Dollar, managed by the technocratic Caribbean Central Bank. The C$ will be based on a mixed-basket of foreign reserves (US dollars, Euros, British pounds & Yens). This strategy allows the CU to negotiate with sufficient economic strengths.
The Euro is the Model for the Caribbean Dollar
So if Gold is no longer the Reserve Standard, and we are not limited to Zero Sum Thinking, then nothing prevents us from growing and growing our economy – monetary reserves and Fiat valuations.
This concept was thoroughly explained in a previous blog-commentary from March 25, 2014 entitled:
How to Create Money from Thin Air
Something more amazing happens in our modern economic system, money is created out of “thin air” … . How is this possible? This is accomplished through the Commercial/Central Banking system.
First of all, banks are financial institutions that take in deposits from people and use their money to give out loans to others. The reason why banks provide this service [to the community] for free is because they earn a profit by letting people deposit their money. Banks charge higher interests rates on the money they lend out compared to the money deposited. All in all, banks are both borrowers and lenders. People trust banks to store their money. The deposits allow banks to lend out money with higher interest rates with the expectancy that the loans will be paid back.
Banks have something called a required reserve ratio, mandated by the Central Bank; (the “Fed” in the US). This is the ratio of reserves to total deposits that banks are supposed to keep as reserves. Banks also have the right to increase the reserve ratio. They lend out the remaining percentage. For example, the bank has a 10% reserve ratio meaning it reserves 10% of its total deposits. It will then lend out the remaining 90%. When a person deposits $100, the bank is able to lend out $90 and keeps $10 for reserves. The $10 does not count as money since it is used as a reserve and may not be used for lending. So far, the bank has $100 and $90 currency loaned out. This is a total of $190 created as opposed to $100 before. Currency held by the public is money.
Of course, the borrower doesn’t simply keep the $90 but he will spend it. For instance, he will spend his money for a pair of soccer cleats at the Nike store. Now the Nike store has $90 but it will then deposit it back into the bank. The cycle then repeats itself. If the bank has more borrowers, it will certainly make a profit. If it lends again, it will lend out $81 and keep $9 on reserves.
The way banks create money is a cycle and over time, the profit compounds on top of each other and the original $100 can be [extended] potentially [to as high as] $1,000.[a]
So the new $900, compared to the original $100, is created from “thin air”.
Surely, you see how this new fractional banking regime is better than the old Gold Standard. If the monetary regime had remained tied to “gold”, the only value that would have mattered would have been an original deposit of $100 in Gold, not the $1000 in Fiat Currency. Rather than a Zero Sum system where that $100 in Gold only changes hands between parties and still amounts to $100, we now have a Non-Zero Sum regime, in which the focus and emphasis is on $1000, not only the $1000 – we now have a much Bigger Pie.
In this series, a reference is made to the need for a comprehensive roadmap for elevating the societal engines of the 30 Caribbean member-states for the Greater Good. We need to ensure that institutional stewardship is in place to manage this new economic regime. The world is already doing this with Non-Zero Sum Thinking. It is time we catch up.
Zero Sum Thinking is actually a bad Community Ethos – the underlying sentiment that informs the beliefs, customs, or practices of society – while Non-Zero Sum Thinking reflects a new Community Ethos.
The dread of Zero Sum
The Go Lean book provides 370-pages of turn-by-turn instructions on “how” to adopt the new Community Ethos we need for progress, plus the strategies, tactics, implementations and advocacies to execute so as to reboot, protect, reform and transform the economic engines of Caribbean society. There is a lot of consideration in the book for establishing the CCB and the Single Currency (Caribbean Dollar or C$) in the region. Plus, there have been a number of previous blog-commentaries by the Go Lean movement that have highlighted the ecosystem of monetary, central banking and currency best practices. See a sample list here:
|http://www.goleancaribbean.com/blog/?p=19452||Big Hairy Audacious Goal: Regional Currency – ‘In God We Trust’|
|http://www.goleancaribbean.com/blog/?p=16530||China seeks to de-Americanize the world’s economy|
|http://www.goleancaribbean.com/blog/?p=16210||In Defense of Trade – The Real Threat of Currency Assassins|
|http://www.goleancaribbean.com/blog/?p=14248||Leading with Money Matters – Almighty Dollar|
|http://www.goleancaribbean.com/blog/?p=13744||Failure to Launch – Economics: The Quest for a ‘Single Currency’|
|http://www.goleancaribbean.com/blog/?p=13365||Case Study from West Africa: Single Currency for 8 Diverse Countries|
|http://www.goleancaribbean.com/blog/?p=10513||Case Study from India: Transforming Money Countrywide|
|http://www.goleancaribbean.com/blog/?p=8381||Case Study on Central Banking for Puerto Rico|
|http://www.goleancaribbean.com/blog/?p=7140||Case Study from Azerbaijan – Setting its currency to Free Float|
|http://www.goleancaribbean.com/blog/?p=6800||Case Study from Venezuela: Suing Black Market currency website|
|http://www.goleancaribbean.com/blog/?p=3858||Case Study from ECB: Unveiling 1 trillion Euro stimulus program|
|http://www.goleancaribbean.com/blog/?p=3814||Case Study from Switzerland: Unpegging the franc|
|http://www.goleancaribbean.com/blog/?p=360||Case Study on Central Banks: Creating Money from ‘Thin Air’|
|http://www.goleancaribbean.com/blog/?p=833||Case Study from the Euro: One Currency, Diverse Economies|
This consideration is bigger than just a discussion on the “Gold Standard” and regional currencies. As related in Appendix below, there are psychological and sociological limitations associated with Zero and Non-Zero Sum Thinking:
- Labor Negotiations – Winners does not have to mean losers.
- Immigration – New Arrivals does not mean “less for the status quo”.
- Academic Grading – On the curve?
- Jury Deliberation – Evidence has point to more than one conclusion
- Job Skills Competence – Jack of all trades, master of …
- Inter-personal relations – Love more than one person (i.e. best friends)
- International Trade – Trade Deficits do not mean losses
See this portrayal in this VIDEO Book Review:
VIDEO – Thomas Sowell – Zero-Sum Thinking – https://youtu.be/5dbrzo5-sdE
Posted June 1, 2017 – Excerpt from Thomas Sowell “Basic Economics A Citizen’s Guide to the Economy 2nd Edition”: http://amzn.to/2quYW9l
- Audible Free Trial: http://amzn.to/2lLpWCm
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- Facebook: https://goo.gl/DpcEkG
Subscribe to The War on Mind and Body: https://goo.gl/mGMe2a
– Video Upload powered by https://www.TunesToTube.com
In summary, it is inexcusable that the Caribbean has failed to adapt to this new monetary, economic, sociological and psychological growth that is associated with Non-Zero Sum Thinking.
Let move forward now!
We hereby urge all Caribbean stakeholders – stewards and subjects – to lean-in to this comprehensive Go Lean roadmap to elevate Caribbean society. This is the work we must do to make our homeland a better place to live, work and play. 🙂
About the Book
The book Go Lean…Caribbean serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU), for the elevation of Caribbean society – for all member-states. This CU/Go Lean roadmap has these 3 prime directives:
- Optimization of the economic engines in order to grow the regional economy to $800 Billion & create 2.2 million new jobs.
- Establishment of a security apparatus to ensure public safety and protect the resultant economic engines.
- Improve Caribbean governance to support these engines, including a separation-of-powers between the member-states and CU federal agencies.
The Go Lean book provides 370-pages of turn-by-turn instructions on “how” to adopt new community ethos, plus the strategies, tactics, implementations and advocacies to execute so as to reboot, reform and transform the societal engines of Caribbean society.
Download the free e-Book of Go Lean … Caribbean – now!
Who We Are
The movement behind the Go Lean book – a non-partisan, apolitical, religiously-neutral Community Development Foundation chartered for the purpose of empowering and re-booting economic engines – stresses that reforming and transforming the Caribbean societal engines must be a regional pursuit. This was an early motivation for the roadmap, as pronounced in the opening Declaration of Interdependence (Pages 12 – 13):
xi. Whereas all men are entitled to the benefits of good governance in a free society, “new guards” must be enacted to dissuade the emergence of incompetence, corruption, nepotism and cronyism at the peril of the people’s best interest. The Federation must guarantee the executions of a social contract between government and the governed.
xvi. Whereas security of our homeland is inextricably linked to prosperity of the homeland, the economic and security interest of the region needs to be aligned under the same governance. Since economic crimes … can imperil the functioning of the wheels of commerce for all the citizenry, the accedence of this Federation must equip the security apparatus with the tools and techniques for predictive and proactive interdictions.
xxiv. Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.
Sign the petition to lean-in for this roadmap for the Caribbean Union Trade Federation.
Appendix – Title: Zero-Sum Thinking
Zero-Sum Thinking perceives situations as zero-sum games, where one person’s gain would be another’s loss. The term is derived from game theory. However, unlike the game theory concept, zero-sum thinking refers to a psychological construct—a person’s subjective interpretation of a situation. Zero-sum thinking is captured by the saying “your gain is my loss” (or conversely, “your loss is my gain”). Rozycka-Tran et al. (2015) defined zero-sum thinking as:
A general belief system about the antagonistic nature of social relations, shared by people in a society or culture and based on the implicit assumption that a finite amount of goods exists in the world, in which one person’s winning makes others the losers, and vice versa … a relatively permanent and general conviction that social relations are like a zero-sum game. People who share this conviction believe that success, especially economic success, is possible only at the expense of other people’s failures.
Zero-sum bias is a cognitive bias towards zero-sum thinking; it is people’s tendency to intuitively judge that a situation is zero-sum, even when this is not the case. This bias promotes zero-sum fallacies, false beliefs that situations are zero-sum. Such fallacies can cause other false judgements and poor decisions. In economics, “zero-sum fallacy” generally refers to the fixed-pie fallacy.
There are many examples of zero-sum thinking, some of them fallacious.
- When jurors assume that any evidence compatible with more than one theory offers no support for any theory, even if the evidence is incompatible with some possibilities or the theories are not mutually exclusive.
- When students in a classroom think they are being graded on a curve when in fact they are being graded based on predetermined standards.
- In a negotiation when one negotiator thinks that they can only gain at the expense of the other party (i.e., that mutual gain is not possible).
- In the context of social group competition, the belief that more resources for one group (e.g., immigrants) means less for others (e.g., non-immigrants).
- In the context of romantic relationships, the idea that loving more than one person at a time means loving each one less.
- Jack of all trades, master of none: the idea that having more skills means having less aptitude (also known as compensatory reasoning).
- In copyright infringement debate, the idea that every unauthorized duplication is a lost sale.
- When politicians argue that international trade must mean that one party is “winning” and another is “losing” when transfer of goods and services at mutually-agreeable prices is in general mutually beneficial, or that a trade deficit represents “losing” money to another country.
- Group membership is sometimes treated as zero-sum, such that stronger membership in one group is seen as weaker membership in another.
There is no evidence which suggests that zero-sum thinking is an enduring feature of human psychology. Game-theoretic situations rarely apply to instances of individual behaviour. This is demonstrated by the ordinary response to the prisoner’s dilemma.
Zero-sum thinking is the result of both proximate and ultimate causes.
In terms of ultimate causation, zero-sum thinking might be a legacy of human evolution. Specifically, it might be understood to be a psychological adaptation that facilitated successful resource competition in the environment of ancestral humans where resources like mates, status, and food were perpetually scarce. For example, Rubin suggests that the pace of technological growth was so slow during the period in which modern humans evolved that no individual would have observed any growth during their lifetime: “Each person would live and die in a world of constant technology and income. Thus, there was no incentive to evolve a mechanism for understanding or planning for growth” (p. 162). Rubin also points to instances where the understanding of laypeople and economists about economic situations diverge, such as the lump-of-labor fallacy. From this perspective, zero-sum thinking might be understood as the default way that humans think about resource allocations, which must be unlearned by, for example, an education in basic economics.
Zero-sum thinking can also be understood in terms of proximate causation, which refers to the developmental history of individuals within their own lifetime. The proximate causes of zero-sum thinking include the experiences that individuals have with resource allocations, as well as their beliefs about specific situations, or their beliefs about the world in general.
One of the proximate causes of zero-sum thinking is the experiences that individuals have with scarce resources or zero-sum interactions in their developmental environment. In 1965, George M. Foster argued that members of “peasant” societies have an “Image of Limited Good,” which he argued was learned through by experiences in a society that was essentially zero-sum.
“The model of cognitive orientation that seems to me best to account for peasant behavior is the “Image of Limited Good.” By “Image of Limited Good” I mean that broad areas of peasant behavior are patterned in such fashion as to suggest that peasants view their social, economic, and natural universes—their total environment—as one in which all of the desired things in life such as land, wealth, health, friendship and love, manliness and honor, respect and status, power and influence, security and safety, exist in finite quantity and are always in short supply, as far as the peasant is concerned. Not only do these and all other “good things” exist in finite and limited quantities, but in addition there is no way directly within peasant power to increase the available quantities … When the peasant views his economic world as one in which Limited Good prevails, and he can progress only at the expense of another, he is usually very near the truth.” (pps. 67-68)
More recently, Rozycka-Tran et al. (2015) conducted a cross-cultural study that compared the responses of individuals in 37 nations to a scale of zero-sum beliefs. This scale asked individuals to report their agreement with statements that measured zero-sum thinking. For example, one item on the scale stated that “Successes of some people are usually failures of others”. Rozycka-Tran et al. found that individuals in countries with lower Gross Domestic Product showed stronger zero-sum beliefs on average, suggesting that “the belief in zero-sum game seems to arise in countries with lower income, where resources are scarce” (p. 539). Similarly, Rozycka-Tran et al. found that individuals with lower socioeconomic status displayed stronger zero-sum beliefs.
Resource scarcity beliefs
Related to experiences with resource-scarce environments is the belief that a resource is scarce or finite. For example, the lump of labour fallacy refers to the belief that in the economy there is a fixed amount of work to be done, and thus the allocation of jobs is zero-sum. Although the belief that a resource is scarce might develop through experiences with resource scarcity, this is not necessarily the case. For example, individuals might come to believe that wealth is finite because it is a claim that has been repeated by politicians or journalists.
Resource entitlement beliefs
Another proximate cause of zero-sum thinking is the belief that one (or one’s group) is entitled to a certain share of a resource. An extreme case is the belief that one is entitled to all of a resource that exists, implying that any gains by another is one’s own loss. Less extreme is the belief that one (or one’s group) is superior and therefore entitled to more than others. For example, perceptions of zero-sum group competition have been associated with the Dominance sub-scale of the social dominance orientation personality trait, which itself has been characterized as a zero-sum worldview (“a view of human existence as zero-sum,” p. 999). Individuals who practice monogamy have also been found to think about love in consensually nonmonogamous relationships as zero-sum, and it was suggested that this might be because they believe that individuals in romantic relationships have an entitlement to their partner’s love.
When individuals think that a situation is zero-sum, they will be more likely to act competitively (or less cooperatively) towards others, because they will see others as a competitive threat. For example, when students think that they are being graded on a curve—a grading scheme that makes the allocation of grades zero-sum—they will be less likely to provide assistance to a peer who is proximate in status to themselves, because that peer’s gain could be their own loss.
When individuals perceive that there is a zero-sum competition in society for resources like jobs, they will be less likely to hold pro-immigration attitudes (because immigrants would deplete the resource). Zero-sum thinking may also lead to certain social prejudices. When individuals hold zero-sum beliefs about love in romantic relationships, they are more prejudiced against consensual nonmonogamists (presumably because the perception of zero-sumness makes consensual nonmonogamy seem inadequate or unfair).