If therefore we are to understand the very elements of political economy, we must get rid of the impression, that if the contract be voluntary and the service be mutual, one man’s gain is another’s loss.*
This view of human society, and of international commerce, has been the cause of infinite evils to mankind.* It has introduced into the laws of various countries, regulations intended to grant privileges to certain classes, and to restrict the action of others by way of protection or compensation. It has induced a jealous foreign policy, and put a multitude of restrictions on trade.* It has been so inveterate a fallacy, that it affected the judgment of men like Bacon:* it still misleads the energies of communities which are otherwise intelligent. The real truth is exactly the reverse; for one man’s gain in all acts of free exchange is another man’s gain.
* This is known today as a ‘zero-sum game’, because when all the players’ scores are added together the total is zero — to every winner there is a corresponding loser. Admittedly, when the baker does a deal with the dairyman, the baker gains a pint of milk and the dairyman loses one. But Rogers’s point is that (assuming an honest and free transaction) the dairyman lost something of which he had too much for his personal use, and gained a loaf of bread; whereas the baker gained a pint of much-needed milk, and offloaded some of his excess bread. Both men feel like winners.
* “Most economic fallacies” confirmed Nobel laureate Milton Friedman in Free to Choose (1980), commenting on a passage in Adam Smith’s Wealth of Nations (1776), “derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.”
* See David Hume on The Jealousy of Trade.
* Francis Bacon (1561-1626) stated the fallacy succinctly in his essay On Sedition and Troubles: “whatsoever is somewhere gotten, is somewhere lost”. He assumed that ‘want and poverty’ cause sedition, and that Government should police citizens’ spending and forcibly redistribute wealth to ensure loyal contentment. Any demagogue or totalitarian dictator would heartily applaud the sentiment.