Explain What Is Meant by a Zero-Sum Game, and Why

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The Answer is A zero-sum game is a situation in which one person's gain is exactly balanced by another person's loss. In other words, the total amount of wealth or resources in the game remains constant, and any gain by one party must come at the expense of another party. This concept was central to Mercantilist thinking, which was an economic theory prevalent in Europe during the 16th to 18th centuries. Mercantilists believed that a nation's wealth and power were determined by its accumulation of precious metals, such as gold and silver. They viewed international trade as a zero-sum game, where one country could only gain at the expense of another. Therefore, the goal of Mercantilist policies was to export more than import in order to accumulate precious metals and gain an advantage over other nations.

Adam Smith's idea of absolute advantage altered the nature of the "game" by introducing the concept of mutual benefit in international trade. Smith argued that countries should specialize in producing goods in which they have an absolute advantage, meaning they can produce those goods more efficiently than other countries. By specializing and trading with other countries, both parties can benefit from the exchange, leading to an overall increase in wealth and resources. This idea challenged the zero-sum mentality of Mercantilism and laid the foundation for the theory of comparative advantage, which suggests that even if one country is less efficient in producing all goods, there are still gains from trade for both parties. Smith's ideas shifted the focus from hoarding precious metals to promoting free trade and cooperation, ultimately changing the nature of international economic relations.

Explain What Is Meant by a Zero-Sum Game, and Why

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