Sunday, December 25, 2016


Populist election results in 1892 (from Wikimedia Commons). Coincidentally, the same year as Irving Fisher's thesis.

Simon Wren-Lewis has an interesting post dissecting and defining populism (mostly in light of Brexit and UK austerity). However I think I have a simpler definition: populism is just the zero-sum heuristic applied at the macro scale.

Trade protectionism, immigration restrictions, and even free silver from the populism of yore are all policies that aim their negative effects at some "other" (foreign countries, foreign people, big city banks) and hope to positively impact the group advocating the policy (native country, citizens, rural farmers). What makes them populist is that the positive impacts are "derived" via the zero-sum heuristic from the obvious and direct negative impacts; no constructive argument is made in favor of the positive impacts. Tariffs purportedly benefit e.g. domestic steel by making imported steel less competitive, not by making domestic steel better, increasing domestic steel productivity, or incentivizing entrepreneurship in the steel industry [1].

Since zero-sum bias is easy for humans (especially with regard to desirable resources like jobs) while many positive macroeconomic policy impacts are not zero-sum, the end result of populism is a tendency towards bad policy.


[1] In particular, steelworkers in favor of tariffs on Chinese steel would likely also dislike the idea of another steel start-up undercutting prices and paying lower wages.


  1. Zero sum certainly describes the last election!

  2. I am not at all sure that populism is a necessarily a zero sum position, as I am not well versed in political theory. However, it often seems that politics devolves into people holding zero sum positions, where one side wins and the other, of necessity, loses. Also, populism, it seems to me, is often the result of people feeling that they have been wronged, so they seek redress. What the people are objecting to may have been the result of zero-sum thinking, which led to bad policy, but was simply considered the way things are, or should be, and so was not given a name. It seems to me that the current multi-national wave of populism is largely a result of the feeling of having been wronged, and the desire to make one's enemies pay.

    I doubt if the free silver movement was the result of zero-sum thinking. When the US changed from a system of dual coinage of both gold and silver to one of gold coinage, money drained from the economy. In terms of the pie metaphor, the economic pie suddenly shrank. The main victims of that were debtors. The free coinage of silver would have enlarged the pie for everyone. That is not zero-sum thinking.

    1. RE: free silver

      While the actual effects of a gold or silver standard may or may not have been disastrous or wonderful, the free silver movement was promoted (e.g. Bryan's Cross of Gold speech) on the basis that bankers were wealthy, wanted a gold standard, and lower inflation, and the masses (or at least various factions thereof) wanted to redistribute that wealth, wanted a silver standard, and higher inflation. This comes from three zero-sum ideas:

      1. there is a single lump of wealth and if bankers get it, the masses do not
      2. silver mining (and the value of silver) comes at the expense of gold mining (and the value of gold)
      3. inflation helps debtors and hurts creditors

      I'm not saying any of these things are right or wrong, but the various factions of the populists that promoted "free silver" saw it as helping the population at the expense of big city bankers. They didn't really see it as enlarging the pie for everyone, but it's true they did see it as enlarging the pie for most people -- just not bankers. The idea was not to enlarge the pie for farmers, laborers, and silver miners as well as bankers (in contrast to what the more modern versions of pro-inflation arguments say -- i.e. more inflation is also about more economic growth in some theories).

    2. Byran's Cross of Gold speech at the Democratic convention in 1896 was late in the day for the free silver movement. It was more than 20 years after the US went off bimetallism. The intervening Long Depression, which may or may not have been what we call a depression today, coupled with new discoveries of gold, had perhaps have allowed the economy to adjust adequately. But I do not detect zero-sum thinking in it, except as I have outlined above. A couple of quotes from the speech:

      "When you [turning to the gold delegates] come before us and tell us that we are about to disturb your business interests, we reply that you have disturbed our business interests by your course."

      Populism may arise out of grievance, and the desire for restorative justice. Bryan was arguing for a return to the practice of coinage before 1873. To the extent that political contests may produce winners and losers, I suppose that we can consider that zero-sum thinking. As I said above.

      However, Bryan states that he is not after revenge. In the next paragraph he goes on to say that miners, farmers, and workers are also businessmen. This is uniting rhetoric, even though he admits the competition between the two factions. He also states that a return to free coinage of silver would not affect current contracts which require gold or gold backed dollars.

      "We do not come as aggressors. Our war is not a war of conquest; we are fighting in defense of our homes, our families, and posterity."

      Again, the political battle is for redress, not conquest.

      "my friends, the question we are to decide is, upon which side will the Democratic party fight -- upon the side of "the idle holders of idle capital," or upon the side of "the struggling masses"?"

      Bryan identifies the enemy as the bankers and financiers. It is hard to say that Vanderbilt or Carnegie were idle. After the US went off of bimetallism in 1873, which was sharply deflationary, who was it who restricted the supply of money for the struggling masses? There is the original zero-sum idea, on the part of the bankers and financiers.

      Bryan then rejects zero-sum thinking. And trickle down economics, for that matter. ;)

      "There are two ideas of government. There are those who believe that if you will only legislate to make the well-to-do prosperous their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous their prosperity will find its way up through every class which rests upon them."

      Bryan's main idea is that prosperity for the masses means prosperity for all. That is anti-zero-sum thinking. Politically there is a contest, but economically every class benefits.

      "You come to us and tell us that the great cities are in favor of the gold standard; we reply that the great cities rest upon our broad and fertile prairies. Burn down your cities and leave our farms, and your cities will spring up again as if by magic; but destroy our farms, and the grass will grow in the streets of every city in the country."

      Bryan makes it concrete. General prosperity depends upon the farmers and ranchers.


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