Is wealth merely a fixed pie to be divided, or can we bake a bigger pie for everyone? This question has divided thinkers for centuries. Early mercantilists treated wealth (in the form of gold and silver) as a fixed stock – one nation’s gain had to be another’s loss. In their view, international trade was a cutthroat competition: if Spain’s galleons came back laden with New World silver, England or France must be worse off for it.
This zero-sum mindset dominated until Adam Smith shattered the illusion. In The Wealth of Nations (1776), Smith argued that trade is not a zero-sum game at all, but can be mutually beneficial. Wealth shouldn’t just be measured in gold; it’s the total of goods and productive capacity a nation has. In other words, trade and specialisation allow everyone’s slice to grow.
The Fixed Pie Fallacy vs. The Bigger Pie Vision
Modern economists sometimes nickname the belief in a fixed amount of wealth the “pizza pie fallacy.” If one person grabs a bigger slice, less remains for others. It’s an intuitively appealing but misleading idea that refuses to die. As the Adam Smith Institute’s Madsen Pirie quips, “We can bury it with a stake of logic through its heart…but still it rises from the dead.” The Industrial Revolution is a case in point: Britain created new wealth through innovation. Millions were lifted from poverty not by redistributing existing money, but by generating entirely new value through mass production and trade. This is the positive-sum vision of the economy.
Adam Smith & David Ricardo: Making Win-Win Trades
Smith’s insight that voluntary exchange benefits all parties was later reinforced by David Ricardo with his famous theory of comparative advantage. Ricardo illustrated in 1817 how two countries could both come out ahead, by focusing on their respective strengths and trading with each other. His classic example showed England and Portugal each giving up trying to make what they’re relatively inefficient at – England stopped trying to produce wine; Portugal stopped trying to weave cloth – and instead began trading English cloth for Portuguese wine. The result? Both nations got more of both goods than if each had insisted on doing everything themselves. It was a win-win deal – a positive-sum game in which cooperation makes everyone better off.
Ricardo’s logic demonstrated that even if one country is absolutely more productive at everything, there are still gains from trade. This flies in the face of zero-sum thinking. It means global commerce isn’t inherently about winners and losers; under free trade, everyone can gain in wealth and welfare. (In fact, economists often point out that when countries retreat behind tariffs and beggar-thy-neighbour policies, they’re reverting to a zero-sum mindset – recent trade wars have reminded us how that can hurt all sides.)
Von Neumann & Morgenstern: The Zero-Sum Game Theory
So if economics can be positive-sum, where did the idea of “zero-sum game” come from? For that, we turn to the realm of game theory and two mid-20th-century thinkers: John von Neumann and Oskar Morgenstern. In 1944, they wrote the pioneering book on game theory (Theory of Games and Economic Behavior), introducing the term “zero-sum game” to formalise situations where one person’s gain is exactly another’s loss. The total payoff is fixed – if you win £100, your opponent loses £100, netting out to zero. Classic examples are chess, poker, or splitting a pie: only how the pie is divided changes, not its size.
Von Neumann proved mathematically that in any two-player zero-sum game, there is an optimal strategy each side can take (his famous minimax theorem). This concept had a huge influence, especially in military and economic strategy during the Cold War, where conflicts were often seen through a zero-sum lens. If one superpower gained influence, the other must be losing influence – a dangerous worldview when nuclear stakes were on the table.
But crucially, not all games (or economic interactions) are zero-sum. Game theory eventually expanded to non-zero-sum games, which allow for win-win outcomes (or unfortunately, lose-lose outcomes too). In fact, economists would argue the entire market economy is a non-zero-sum game: through cooperation, specialisation and innovation, the “game” can produce net winners without equivalent losers. Adam Smith vs. John von Neumann isn’t a matter of who was right – they were analysing different aspects of human interaction. Smith saw that voluntary exchange creates new value; Von Neumann modelled fiercely competitive scenarios where value was merely transferred. Both perspectives matter. Money can be a ruthless tug-of-war, but it can also be a tool for mutual gain.
When Money Is Treated as Zero-Sum
Despite the long-run wealth-creating power of markets, in practice, we often slip back into zero-sum patterns. Parts of the modern economy really do resemble a zero-sum contest. A striking argument by former banking regulator Adair Turner is that more and more jobs today “perform a zero-sum distributive function” – they’re about grabbing a bigger slice of existing wealth, not creating new wealth. Consider high-frequency trading on the stock market: when one trader profits from a quick buy-and-sell, it’s usually another trader on the losing end of that trade. Large swathes of the financial industry, from speculative trading to certain derivatives, are essentially wealth-redistribution mechanisms rather than wealth creation engines. Options and futures markets are a clear example – for every bet that pays off, someone else takes the opposite side and loses.
It’s not just traders and private equity. Turner gives everyday examples: advertising and marketing often just shift market share from brand X to brand Y without increasing overall consumption. The effort a company pours into poaching customers from a rival is aimed at a zero-sum goal. Likewise, much of the work done by legions of tax accountants vs. tax officials merely redistributes money between private pockets and the public purse, depending on who has the upper hand in the tax code at the moment. Even charitable fundraising, Turner notes wryly, can be zero-sum: a brilliant campaign that doubles donations to your charity might just mean another charity gets less than it otherwise would have.
Anthropologist David Graeber, the writer of Debt: The First 5,000 Years, also pointed out how many modern professions feel pointless or “bullshit” – perhaps because they’re trapped in these zero-sum roles that wouldn’t be missed if they disappeared, rather than producing something of real value. Graeber’s deeper critique, however, was about our understanding of money itself. He sought to debunk what he called “false views of money,” including the notion of debt as a zero-sum resource. In today’s debates, people often assume that if a debt is forgiven for one party, someone else (taxpayers, for instance) must foot the bill. But Graeber pointed to historical debt jubilees – kings or governments periodically just wiped the slate clean. A debt can, in theory, be cancelled without exacting an equal and opposite pound of flesh from someone else. It’s a radical idea: money, credit, debt – these are social constructs, not fixed laws of physics. We can choose to structure them in ways that aren’t zero-sum. His anthropological lens reminds us that money isn’t a finite commodity like gold anymore; since the end of the gold standard, money has been largely created by central banks and commercial banks out of thin air. The supply can grow, and debts can be restructured. In simple terms, the game can be redefined.
Crypto: New Money, Same Old Game?
No discussion of money today is complete without asking: what about crypto? Cryptocurrency enthusiasts pitch Bitcoin and its kin as a revolutionary new positive-sum game – a technological leap creating wealth and financial freedom. Critics, on the other hand, see a dangerous zero-sum casino – or worse, a Ponzi scheme – where naïve latecomers fund the early adopters’ riches. Is crypto a zero-sum game? The answer seems to be that it depends on how you play it.
In the realm of short-term speculation, crypto often is zero-sum. If you buy Bitcoin this week (or something even more legitmate like Fartcoin), hoping to sell at a higher price next week, your gain essentially comes out of the pocket of whoever buys it from you (or whoever held it while the price fell). In the derivatives markets – Bitcoin futures, leveraged trading, etc. – one trader’s gain is exactly another’s loss. These are pure bets on price swings with no new asset created; it’s as zero-sum as betting on a football match. And the crypto world has seen its share of downright negative-sum scams, where the outcome is worse than zero-sum. For instance, the infamous rug-pull scams in decentralised finance: developers hype up a new coin, people invest, then the devs vanish with all the funds. Investors lose everything while the scammers keep the loot – a total lose-win scenario that is effectively zero-sum theft. Thousands of dubious tokens have been created solely to siphon money from the public in this way. It’s hard to argue that any net value is created there; it’s a bloodbath of winners and losers.
Yet, there’s another side to the crypto story. If we look beyond the speculative trading floor, Bitcoin and other cryptocurrencies have inspired the creation of entire new industries and technologies – from blockchain-based finance platforms to digital art markets (NFTs). This broader crypto ecosystem can be seen as a positive-sum game. When Bitcoin rose from an obscure experiment to a trillion-dollar asset class over a decade, it wasn’t just a transfer of wealth; new wealth was in fact created for many, especially those who leveraged the technology to build useful services. As Bitcoin achieves wider adoption, it enables innovations like the Lightning Network, cross-border payments, and decentralised finance – all of which generate real economic value. In this view, Bitcoin’s growth has spurred job creation, new startups, and financial inclusion in some regions, fostering a “positive-sum ecosystem” where wealth comes from innovation, not merely from someone else’s loss. Even a simple crypto trade can be win-win in the spot market: if Alice sells Bitcoin to Bob, Alice might be cashing out a profit and Bob might be acquiring an asset he believes will appreciate – both walk away happy, as often happens in long-term investing. Crypto, then, exemplifies the dual nature of money: it can be either zero-sum or positive-sum depending on how people engage with it.
So, Is Money Zero-Sum or Not?
It’s time to revisit our question. Is money a zero-sum game? The evidence suggests that money itself is not inevitably zero-sum, but instead it’s a tool that can be used in zero-sum ways or positive-sum ways. At its best, money is a facilitator of cooperation: it’s hard to imagine the modern global economy, with all its astounding growth in living standards, without the positive-sum dynamics of trade, investment, and innovation that money enables. Smith and Ricardo would remind us that voluntary exchanges and specialisation produce new wealth out of human ingenuity and effort, not by stealing from someone else.
However, at its worst, money can feel like a zero-sum scramble: in a market crash, for every investor who times it right and cashes in, there’s another who watches their 401(k) evaporate. In a society with stagnant growth, groups might fight over how to divide a static pie – cue political battles of rich vs. poor, labour vs. capital, one nation’s gain vs. another’s. It’s no coincidence that periods of economic stress fuel zero-sum rhetoric. As Graeber observed, our financial system is riddled with zero-sum thinking (and misthinking), yet history shows it doesn’t have to be that way.
In the end, whether money is zero-sum comes down to the game we choose to play. If we treat economics like a cutthroat poker match – a few big winners, lots of losers – then yes, it becomes a zero-sum game in practice. But if we shift focus onto fostering developments and investments that create value, we’re playing a different game entirely, one where everyone can come out ahead. The real world of money contains elements of both: John von Neumann’s hard-nosed zero-sum strategy and Adam Smith’s optimistic positive-sum outlook coexist in our markets. Recognising which situation we’re in – and not falling for the zero-sum fallacy when positive-sum potential exists – is key. Money isn’t a zero-sum game by nature. It’s more like an ever-evolving multiplayer game where we write the rules. And if we play it right, we can keep increasing the pot so that nobody needs to lose for others to win.
