One of the most pernicious ideas promulgated by economics textbooks is that the economy is a zero-sum game. That is, that if I win in the free market, then someone else must have lost. But that is not how the free market works.
Here is how it is often described in most textbooks:
Society faces an important tradeoff:
efficiency vs. equalityEfficiency: when society gets the most from its scarce resourcesEquality: when prosperity is distributed uniformly among society’s membersTradeoff: To achieve greater equality, [government] could redistribute income from wealthy to poor.
But this reduces incentive to work and produce, shrinks the size of the economic “pie.”
[All quotes in this post are from the premium PowerPoint of Greg Mankiw’s Principle of Economics teacher resource material.]
Again, we have the mention of society, not individuals. Society does not face any tradeoffs, individuals do. And the free market is not about efficiency, although that is a side benefit, it is about liberty. But, worse than that is the concept of “the economic pie”. This is the essence of the zero-sum game – that there is only one pie, and if you have a bigger piece, it is because you stole some from me.
According to this way of thinking, when this happens, the government must step in.
If the market’s distribution of economic well-being is not desirable, tax or welfare policies can change how the economic “pie” is divided.
the market fails to allocate society’s resources efficiently