Report
Patrick Artus

The futility of a zero-sum game between groups of economic agents in a country, or when taking from one to give to another achieves nothing

We use the example of current economic policy in France. The environment is the following: There is a supply-side constraint: production is limited by a shortfall of modern capital and by hiring difficulties among companies . T he level of production is therefore capped by this supply-side constraint; There is an external constraint: endless distribution of external debt-financed incomes throughout the country is inconceivable . Given this dual constraint: If one category of economic agents receives more income, another category of economic agents must receive less income, since the overall level of income is given ( capped by the supply-side constraint). This means, for example, that if the incomes of workers (those with a job) are increased, job seekers will not get back into employment; If the government lowers a tax, it has to increase another tax or reduce public spending, since it cannot have a higher fiscal deficit , which, if production cannot increase, would lead to a higher external deficit that it would not be able to finance. There is therefore a zero-sum game: if one group of economic agents has more income, another group of economic agents must have less income. Setting in motion a zero-sum game between economic agents (between employed workers and the unemployed, between workers and pensioners, etc.) does not alter the economic equilibrium in the first order. It therefore creates income transfers of uncertain macroeconomic utility , with the except ion of the specific case where positive incentive effects appear.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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