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Monday, June 15, 2009
From Money, Greed, and God:
The Zero-Sum Game Myth is believing that trade requires a winner and a loser.

Everything I Needed to Know About the Market I Learned in Kindergarten

It was sixth grade. We played the "trading game"... The teacher passed out little gifts to all of the students... [she] probably picked them all up in the dollar aisle at the local Kmart.

After giving every kid one gift, our teacher split the class into five groups of five students each. She then asked us to write down, on a scale of one to ten, how much we liked our gift. That was it. We didn't talk to anyone else. We just decided how much we liked our toy. Our teacher then compiled all the scores and added up the total.

Then she said we could trade with the other kids in our group. No one had to trade... Of course, a few students kept or got stuck with their original gift, but many ended up with a toy they liked more. Again, we graded our toys and the teacher added up the scores. The total score went up.

Then she told us that we could trade with everyone in the room. Now we all had twenty-four possible trading partners rather than just four...

After everyone had a chance to trade, we again graded our toys and added up the scores. The total number had gone way up. Almost everyone ended up with a toy he liked more than the one he started with. No one had a score that had gone down. The only kids whose scores didn't go up were the ones who happened to get gifts they really liked at the beginning...

I didn't get the point of the game until I played it again twenty-five years later. As it happens, the game teaches some of the most important lessons of economics.

Lesson One: Trading freely can add value even though the traded items remains physically unchanged.
Lesson Two: Normally when trading freely, the more trading partners there are, the better.
Lesson Three: A free exchange is a win-win game.
Think about it. The trading partners wouildn't trade if each did not perceive himself as better off as a result. [This is what John Stossel calls the "double thank you."]
Lesson Four: The game is win-win because of the rules set beforehand.

The players aren't allowed to coerce or steal from each other. A free market is not a free-for-all in which everybody can do what they want... Ideally, the players would be virtuous enough to play by the rules. But in the trading game, as in real life, you can't count on the virtue of others... So you need an outside enforcer. In the game... the teacher played this role. In real life, it includes parents, teachers, churches... and the government.

Lesson Five: Scarcity is almost always real.
The peaceable kingdom of God with limitless plenty isn't one of the options. The basic options are a win-lose society based on the laws of the jungle, a lose-lose society of coercive socialism..., or a market where win-wins are possible...

Lesson Six: Opportunity costs.

[N]o one gets to have more than one toy. In the real world, if I only have ten grand, I can't buy both a ten-thousand-dollar Chevy Impala and a ten-thousand-dollar first-issue Tales from the Crypt comic book... Trading can make me better off than I was before, but it can't give me everything.

Lesson Seven: Economic value is in the eye of the beholder.
I have to say, we need more of those teachers today as mentioned above. She was brilliant. Unfortunately, you're probably more likely to find a teacher who derides capitalism than actually understands it.


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Darius' book montage

The Cross Centered Life: Keeping the Gospel The Main Thing
Crazy Love: Overwhelmed by a Relentless God
Overcoming Sin and Temptation
According to Plan: The Unfolding Revelation of God in the Bible
Disciplines of a Godly Man
Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem
When Helping Hurts: Alleviating Poverty Without Hurting the Poor. . .and Ourselves
The Prodigal God: Recovering the Heart of the Christian Faith
Respectable Sins
The Kite Runner
Life Laid Bare: The Survivors in Rwanda Speak
Machete Season: The Killers in Rwanda Speak
A Generous Orthodoxy: Why I am a missional, evangelical, post/protestant, liberal/conservative, mystical/poetic, biblical, charismatic/contemplative, fundamentalist/calvinist, ... anabaptist/anglican, metho
Show Them No Mercy
The Lord of the Rings
Life at the Bottom: The Worldview That Makes the Underclass
The Truth War: Fighting for Certainty in an Age of Deception
Cool It: The Skeptical Environmentalist's Guide to Global Warming
The Chronicles of Narnia
Les Misérables

Darius Teichroew's favorite books »