Re: Political Sci/Social Sci Term Paper Ideas Available

Warrl kyree Tale'sedrin (
Wed, 18 Sep 1996 03:43:51 GMT

>In article <>,
> (Paul Bernhardt) wrote:

>He previously wrote:

>>>> This is only true if the economy is a zero sum game.

>The Author previously responded:
>>> The United States economy and its society are being mismanaged right into
>>> the ground. Isn't that "zero sum" enough for you?

Most certainly not. That's an extremely NON-zero sum.

A zero sum is when the total of gains and losses is exactly zero.

If you give me a dollar and I give you a dollar, that's zero sum. Why
would we bother?

If I have something that's worth $0.90 to me but worth $1.10 to you,
and you offer to buy it from me for $1.00, then the total wealth under
discussion went from $1.90 (my 90-cent item plus your dollar) to $2.10
(your $1.10 item plus my dollar). That's a positive-sum transaction.

If we do the same transaction, but the government taps us on the
shoulder and takes out 25 cents in taxes to waste, then our
transaction has a negative sum (we lost 5 cents in total wealth). At
least one of us won't be interested in repeating the transaction.

Suppose that I (since I ended up with the money) had to pay all the
tax. In order to end up with the $.90 that I value the item at, I
have to insist that you pay $1.15. Of course, then, why would I
bother to trade? You're going to have to pay more than that -- at
least $1.16. For me to make the same amount of profit, I would have
to ask for $1.25. (This assumes that the higher price does not result
in higher taxes.)

Of course, if the item is only worth $1.10 to you, you WON'T pay
$1.16, let alone $1.25 and we won't trade. (And the government won't
get its taxes on the transaction. Some people seem to think THAT is
the most important issue.)

If something were to change your valuation of the item, so that it was
worth $1.35 to you, then you would willingly pay $1.25 for it. And
again we have a positive sum. Before the transaction we have my $.90
item and your $1.25 cash, total $2.15. After the transaction we have
my $1.00 and your $1.35 item, total $2.35.

Right now, in this state, sales tax alone (ignoring all other taxes)
is about 8.5 per cent, depending on precisely what taxing
jurisdictions one lives in. That is charged on all retail
transactions except grocery-store-type food purchases.

This means that whatever someone might be pleased to sell at $10.00,
someone else must be pleased to buy at $10.85, or no transaction takes
place. Given the massive amounts of retail trade that take place in
spite of this obstacle, I cannot help but think that a great deal of
trade is prevented by it.