This post was initially written in French https://freakonometrics.hypotheses.org/87034
The idea that the economy is a zero sum game is remarkably persistent. It comes up almost every time we talk about international trade, taxation, insurance, or redistribution. If someone gains more, someone else must necessarily lose. This intuition feels natural because it matches many everyday situations. When a price goes up, the buyer feels like they are losing what the seller is gaining. When an insurance premium is paid, the policyholder feels like they are funding other people’s claims. This intuition is also deeply anchored in our relationship with accounting. We learn very early that accounts have to balance. For a household, a firm, or a state, what is spent must match what is received. Spending more than revenue is perceived as an anomaly or a fault. Reasoning in terms of balanced accounts naturally leads us to reason in terms of flows that cancel out. Every expense mirrors a receipt. Seen from that angle, the economy looks like a vast system of transfers where the gains of some necessarily correspond to the losses of others.
Accounting reinforces this zero sum idea because it records monetary flows, not the indirect effects of decisions. It is indispensable for financial coherence, but it says nothing about value creation, the reduction of uncertainty, or risks that are avoided. An investment in prevention appears as a cost today, while the losses it prevents will never show up in the accounts. Likewise, a well designed insurance system can stabilize individual and collective trajectories without ever producing a visible accounting profit. This is exactly where the zero sum intuition becomes misleading. The economy is not reducible to accounting, even if it must live with it. Externalities, prevention, and risk management introduce mechanisms through which individual decisions change the size of the pie itself. Insurance is a privileged setting to observe this gap between accounting logic and economic logic. It looks like a zero sum game when we focus on the flows, but it can become a positive sum or a negative sum game when we focus on the behaviors it induces and the risks it avoids or amplifies.
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