Fight Zero-Sum Bias

multifoliaterose

This is the first part of a mini-sequence of posts on zero-sum bias and the role that it plays in our world today.

One of the most pernicious of all human biases is zero-sum bias. A situation involving a collection of entities is zero-sum if one entity's gain is another's loss, whereas a situation is positive-sum if the entities involved can each achieve the best possible outcome by cooperating with one another. Zero-sum bias is the tendency to systematically assume that positive-sum situations are zero-sum situations. This bias is arguably the major obstacle to a Pareto-efficient society. As such, it's very important that we work to overcome this bias (both in ourselves and in broader society).

Here I'll place this bias in context and speculate on its origin.

Where this bias comes from

It's always a little risky to engage in speculation about human evolution. We know so little about our ancestral environment that our mental images of it might be totally wrong. Nevertheless, the predictions of evolutionary speculation sometimes agree with empirical results, so it's not to be dismissed entirely. Also, the human mind has an easier time comprehending and remembering information when the information is embedded in a narrative, so that speculative stories can play a useful cognitive role even when wrong.

Anatomically modern humans appear to have emerged 200,000 years ago. In the context of human history, economic growth is a relatively recent discovery, only beginning in earnest several thousand years ago. The idea that it was possible to create wealth was probably foreign to our ancestors. In The Bottom Billion, former director of Development Research at the World bank speculates on the motivation of rebels in the poorest and slowest growing countries in the world who start civil wars (despite the fact that there's a high chance of being killed as a rebel and the fact that civil wars are usually damaging to the countries involved)

[In the portion of the developing world outside of the poorest and slowest growing countries...] growth rates may not sound sensational, but they are without precedent in history. They imply that children in these countries will grow up to have lives dramatically different from those of their parents. Even when people are still poor, these societies can be suffused with hope: time is on their side...If low income and slow growth make a country prone to civil war, it is reasonable to want to know why. There could be many explanations. My guess is that it is at least in part because low income means poverty and low growth mans hopelessness. Young men, who are the recruits for rebel armies, come pretty cheap in an environment of hopeless poverty ...if the reality of daily existence is otherwise awful, the chances of success do not have to be very high to be alluring. Even a small chance of the good life as a successful rebel becomes worth taking, despite the high risk of death, because the prospect of death is not so much worse than the prospect of life in poverty.

Neither the developed world nor the countries that Collier has in mind are genuinely good proxies to our ancestral environment, but like the people in the countries that Collier has in mind, our ancestors lived in contexts in which growth of resources was not happening. In such a context, the way that people acquire more resources for themselves is by taking other people's resources away. The ancient humans who survived and reproduced most successfully were those who had an intuitive sense that one entity's gain of resources can only come at the price of another entity's loss of resources. Iterate this story over thousands of generations of humans and you get modern humans with genetic disposition toward zero-sum thinking. This is where we come from.

For nearly all modern humans, the utility of zero-sum bias has lapsed. We now have very abundant evidence that the pie can grow bigger and that win-win opportunities abound. Both as individuals and as representatives of groups, modern humans have a tendency to fight over existing resources when they could be doing just as well or better by creating new resources that benefit others. Modern humans have an unprecedented opportunity to create a world of lasting prosperity. We should do our best to make the most of this opportunity by overcoming zero-sum bias.

This is the first part of a mini-sequence of posts on zero-sum bias and the role that it plays in our world today.

Here I'll place this bias in context and speculate on its origin.

Where this bias comes from

[In the portion of the developing world outside of the poorest and slowest growing countries...] growth rates may not sound sensational, but they are without precedent in history. They imply that children in these countries will grow up to have lives dramatically different from those of their parents. Even when people are still poor, these societies can be suffused with hope: time is on their side...If low income and slow growth make a country prone to civil war, it is reasonable to want to know why. There could be many explanations. My guess is that it is at least in part because low income means poverty and low growth mans hopelessness. Young men, who are the recruits for rebel armies, come pretty cheap in an environment of hopeless poverty ...if the reality of daily existence is otherwise awful, the chances of success do not have to be very high to be alluring. Even a small chance of the good life as a successful rebel becomes worth taking, despite the high risk of death, because the prospect of death is not so much worse than the prospect of life in poverty.

JenniferRM:

But unless I'm mistaken, you're going overboard by pairing "more realistic assumptions" with outcomes that are bleak to the point of absurdity.

The point is that unlike what one commonly hears from the proponents of free trade, including many economists, comparative advantage by itself does not prove that everyone, or even a great majority, will end up better off -- since it says absolutely nothing about how the wealth produced in the new equilibrium will be distributed. Moreover, when the spherical cow assumptions are relaxed in some arguably realistic ways, not even the conclusion that the total produced wealth will increase is certain.

Mind you, I am not making an argument against free trade here, but merely pointing out that the theory of comparative advantage is typically used as a nearly thought-free shibboleth, not a sound argument. It simply cannot prove what its fans commonly claim it does. To make a valid argument for a free-trade position on any realistic economic issue, much more is necessary.

That essay by Krugman you linked is a typical example. It sounds as if a mathematician complained that people are incapable of grasping the Pythagorean theorem, smugly scolding them for their lack of understanding, while casually assuming that it applies to every triangle, not just the right-angled ones.

Horses were property. They didn't have property rights over anything, not even property rights over their own bodies to prevent a predatory species (humans) from using their body parts in more efficient ways when it suited us. Horses didn't have the ability to negotiate or trade so they are not the kind of entities which are capable of personally leveraging comparative advantage. Moreover, they don't have a deep and generic capacity to learn new skills the way humans do, so their "economic function" was fixed.

Horses are an extreme example that elucidates the basic problem. In the new equilibrium after the appearance of motor vehicles, most horses were no longer capable of earning their subsistence even by practicing their best comparative advantage. Even if they had been able to trade and negotiate, it wouldn't have helped them at all, and if they had been protected by law from slaughter, it still means that they would have starved to death unless someone decided to keep them alive out of charity. Note that all this holds regardless of the fact that the total amount of wealth produced went up tremendously.

Of course, humans are more flexible than horses, and even the most unskilled human labor nowadays can earn more than subsistence in all but the most messed up parts of the world. But even if they can't realistically fall below subsistence, this still doesn't mean that large numbers of people can't be badly hurt by losing their absolute advantage. Now, who would lose and gain what under various scenarios is a complex question, and it may be that free trade is brilliantly vindicated in practice -- but again, this is a question that demands further argument, and a mere invocation of comparative advantage can't even begin to answer it.

(Not to mention the issue of what will happen if machines start reaching human-level intelligence and other skills at some point. This would put increasing numbers of humans precisely in the position of horses. On this topic, one often hears awfully naive optimistic arguments based on comparative advantage.)

I'm not a trained economist, but the more I study this the more it looks to me like comparative advantage may be a good example of a "non-zero sum truth" that many people systematically misunderstand in a zero sum direction.

That may well be true for the general population. However, I'd say that among economists and many other elements of the intelligentsia, the prevailing bias is actually in the opposite direction -- noticing that some important things actually are close to zero-sum under certain realistic assumptions will commonly provoke scorn instead of rational argument. And their opinions matter much more than what common folks believe.

I feel relatively comfortable deploying "knee-jerk invocations of 'comparative advantage' as a trump card" if that leads to URLs that have the kinds of evidence and reasoning I'm finding in an attempt to understand it better.

Well, here's a fun URL for you then -- "Reassessing the Theory of Comparative Advantage" by one R.E. Prasch:
http://www.econ.tcu.edu/harvey/5443/prasch.pdf

I don't agree with everything in the paper, but it's definitely a sobering look at the actual state of the comparative advantage arguments.

Well, here's a fun URL for you then -- "Reassessing the Theory of Comparative Advantage" by one R.E. Prasch: http://www.econ.tcu.edu/harvey/5443/prasch.pdf I don't agree with everything in the paper, but it's definitely a sobering look at the actual state of the comparative advantage arguments.

It took me about a week to find the minutes to read this and process it, but once I was done, it felt like one of those cases where there was some new and relevant things in it, but the new stuff wasn't relevant and the relevant stuff wasn't new.

To be cl... (read more)

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Fight Zero-Sum Bias

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Fight Zero-Sum Bias

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