Not a Zero-Sum Game - Ludwig von Mises Institute
Not a Zero-Sum Game - Ludwig von Mises Institute
Not a Zero-Sum Game - Ludwig von Mises Institute
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The only thing that changed was that SuperJack and InferJoe allocated their<br />
time according to comparative advantage.<br />
flow the increased production will be shared will depend on each one's<br />
negotiating ability.<br />
Following the division of labor, a possible exchange might be that<br />
SuperJack gives 2 GARMENTS to InferJoe, in exchange for 5 BREADS.<br />
The result would be as follows:<br />
AFTER THE DIVISION OF LABOR<br />
6 garments 1 7 breads<br />
Each benefits from the exchange because his substitution ratio<br />
(or comparative cost) between BREAD and GARMENTS is different<br />
from the other's.<br />
Who gained the most?<br />
If we measure the gain in terms of BREAD, both end up with<br />
1 more BREAD. . .<br />
" SuperJack gains 1 B by giving the equivalent of 4 B (2 G) in<br />
exchange for 5 B.<br />
" InferJoe gains 1 B by giving 5 B and receiving 2 G, the equivalent of 6 B.<br />
Since they both gain 1 BREAD, we can measure the benefit in terms<br />
of time. . .<br />
" SuperJack has gained one hour and InferJoe two hours.<br />
And if we measure the gain in terms of GARMENTS . . .<br />
" SuperJack has gained 112 G and InferJoe 113 G.<br />
Is there such a thing as a "fair" way to measure gain?<br />
<strong>Not</strong>e that SuperJack and InferJoe's respective gains change according to<br />
how we measure them . . .<br />
In BREAD: they gained equally.<br />
In time saved: InferJoe gained more.<br />
In GARMENTS: SuperJack gained more.
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