The power of positive sum thinking

A congressman attributes opposition to the proposed 125-peso wage increase to a pro-business bias. This is a classic sign of "zero-sum" thinking: that business generates a fixed income, which is divided at will by the business owner into a labor share and a profit share. Of course the greedy business owner would leave only the barest minimum for the labor share; hence such greed must be restrained by benevolent government intervention.

However the zero sum formulation is incorrect. Running a business is a positive-sum game. That means the combination of exchanges between factor owners and entrepreneur, and between entrepreneur and consumers, generates a value in excess of what existed prior to the combination. Capital acting alone, or labor acting alone, or households acting alone, would not be able to realize the total benefit realized through the market. Think of it this way: if you are just acting alone, magtanim ka na lang ng kamote (just go plant sweet potatoes).

Forcing the business owner to pay higher wages would reduce the total value generated by the whole process. Artificially higher costs mean they will cut back on production as well as hiring labor. Lower production means fewer goods for consumers and fewer jobs for workers. This brings us closer to a world where all we can do is plant kamote.

Zero sum thinking is pervasive and pernicious. Positive sum thinking on the hand allows us to see the truth behind the following equation: antibusiness = antilabor.