Zero Sum game and Specialization

The Zero Sum Game

Adam Smith believed in economic freedom.

According to his theory, the government should not care about who trades with whom. Producers, and all consumers, should be free to make their own decisions. If consumers decide to buy from a certain company rather than another, then the other company would be better to specialize in something else. The governments at the time of Adam Smith believed only a certain amount of wealth was available in the world, like poker, when players only bring a certain amount of money to the table. It is a zero sum game. If I win, you lose, and vice versa. According to Smith and other economists, that is not how the world works. Rather, when the nations and corporations of the world begin to trade with each other, the result is a gain for everyone.

Specialization

If specialization works for individuals, why not for countries? The world does not have a finite amount of wealth. If the people of each country specialize in what they are best at, then everyone will be wealthier. Countries are trading with one another as never before, and, as Smith would have predicted, the world became 2.5% richer in 2016 alone and is predicted to continue to get richer. This is called economic growth. Of course, 2.5% economic growth is an average. Countries have different levels of economic growth. For example, the economic growth in Canada in 2016 was 1.5%, according to the World Bank. Economic growth is also not continuous. In 2009, the world economy shrank by 1.7%, and Canada's economy shrank by 2.95%. But most years, the world economy continues to grow. (Source: World Bank)