More than a century ago, economists noted that the general public’s understanding of economics significantly diverged from scientific conclusions. Over recent decades, researchers have begun to look into these popular ‘folk’ views in more detail. It turns out that the problem is not just the lack of knowledge about individual facts or principles. People often base their views on a naïve economic theory, which, though contradicting scientific economics, has its own internal logic and is surprisingly similar among residents of different countries.
Economist Paul Rubin called this phenomenon ‘folk economics’ in 2003. Its central postulate is the firm belief that resources are strictly limited. In other words, people tend to believe that any act of exchange is a zero-sum game: if a person benefits, it is always at another person’s expense. For example, growth in the well-being of a person or a country is interpreted as a loss for others, and the creation of a new job is seen as making another person jobless.
Intuitive logic
What is the origin of such naïve beliefs, given that economic science has long shown that exchange and trade can benefit all parties involved? The roots lie in cognitive and cultural peculiarities of thinking. Anthropologist George Foster noted that within traditional peasant societies of the mid-20th century, all vital goods (land, livestock, property) were perceived as existing in a finite quantity, the supply of which would not increase no matter how hard one might try. Therefore, someone else’s gains are always your losses. The same logic has been observed in other cultures, for example, the perception of economics as a static system of wealth distribution was historically rather widespread.
Modern science adds evolutional psychology to this picture. According to Pascal Boyer and Michael Petersen, people developed special ‘intuitive’ mechanisms already in prehistoric small groups, when our ancestors lived by hunting and gathering. Under those conditions, the supply of almost all goods was strictly limited, and survival often meant redistribution of fixed resources.
These evolutionary cognitive biases continue to influence us even today, when we think that impersonal market transactions are dangerous and that international trade is good for some people and harms others. In other words, our mind tends to simplify complex processes into a formula: ‘if there are gains in one place, there must be losses in another place’.
This simplification is a convenient cognitive heuristic making it possible to form quick judgements about economic phenomena using ‘common sense’. However, these judgements are often incorrect.
Simple answers to complex questions
Naïve economic beliefs appear everywhere – in conversations at the kitchen table, on social media, and on television. They are very appealing, as they give simple answers to complex questions.
One can often hear that if a large foreign company opens a plant in one country, then the same number of jobs are lost in another country. Alternatively, that the influx of migrants means fewer jobs for the local population. Under these assumptions, international trade also appears suspicious, as exporters’ gains are inevitable losses for their foreign partners. Intuitively, it is easier for us to believe in a clear story of a ‘limited resource’ than to find out how to create more resources or how mutually beneficial exchange works.
Research demonstrates that the content of these views is similar for different people and that these views form an interrelated system. In mass public consciousness, there exist similar intuitive interpretations of poverty, wealth, unemployment, and inequality, which do not often coincide with the conclusions of economic theory.
Moreover, these beliefs often tend to be very resilient even in the face of facts. If a person is sure that wages are not rising ‘because immigrants are ready to work for lower wages’, it is very difficult to convince them otherwise using official statistics or an economic lecture. A naïve theory replaces a scientific one, as it seems to be closer to reality because it relies on intuition and familiar moral judgements (fair / unfair, one’s own / someone else’s own). Unfortunately, such alleged understandability may come at a very high price.
The danger of the ‘zero-sum’ worldview
It might seem that common economic myths are not frightening. Does it really matter if a person misunderstands the cause of inflation or the essence of trade? In reality, the ‘zero-sum’ worldview influences not only private decisions of individuals but also the state of society and even policy.
First, the belief in limited resources encourages inefficient behaviour. If entrepreneurs believe that the market is a zero-sum game, where one wins only at the expense of others, they will avoid cooperation. People that tend to see exploitation and deception around them are more likely to refuse to collaborate and distrust their partners. In experimental research, participants with strong zero-sum assumptions even scaled down their efforts in joint work, believing that their colleagues would still benefit at their expense.
Such a pessimistic outlook leads to social apathy, mistrust, and unwillingness to act. It does not come as a surprise that international surveys record a link between naïve beliefs and subjective well-being: the stronger a person’s belief in a zero-sum game, the lower his life satisfaction is assessed.
Second, distortions of ‘folk economics’ aggravate social conflicts. If one person’s success is perceived as someone else’s loss, any disagreement risks turning into a fierce struggle. Compromise under such a worldview looks suspicious: as weakness or defeat. This is conducive for radicalism, as people may demand that their leaders take a tough position, because expectations of this position are often based on the mentioned simplified scenarios, such as punish the ‘guilty’ and redistribute resources. In contrast, any programmes implying mutual benefits may arouse scepticism as, in the public mind, they lack drama and punishment for ‘enemies’. As a result, social polarisation is rising: instead of seeking balance, groups begin to view each other as competitors for a scarce good.
Finally, naïve economics is an ideal tool for demagogues. Politicians worldwide successfully exploit intuitive fallacies. The simple pattern, such as ‘us / them, friend / enemy, win / lose’, underlies numerous populist narratives. Within this framework, protectionism (link in Russian), economic barriers, and redistribution are typically perceived as positive phenomena, whereas competition and integration into the global economy look suspicious: according to the folk theory, ‘this game is not in our interests’.
Prevalence of naïve economic theories: an empirical assessment
At the beginning of the 21st century, social psychology introduced the concept of social axioms, i.e. general beliefs about how society functions, which forms the perception of social phenomena and influences the way people evaluate them. In this way, social axioms function as a productive alternative to the social value systems actively used to characterise national cultures (link in Russian).
Although naïve beliefs have been included in the list of axioms relatively recently, several waves of surveys conducted in various countries (1, 2, 3, 4) have already made it possible to derive first empirical estimates of their prevalence. For example, in the study of 37 countries the highest average level of agreement with statements reflecting the belief that life is a zero-sum game was shown by residents of Angola, Taiwan, and Vietnam, while the lowest was shown by residents of Israel, Russia, and the Czech Republic.
A recent pilot survey of Russian university students conducted by the Institutional Analysis Laboratory, Faculty of Economics, Lomonosov Moscow State University, demonstrated that only around 10–15% respondents agree with the majority of statements associated with a zero-sum game (findings of the first round of the study are published in the recent issue of the journal Voprosy Ekonomiki).
Approximately half of respondents completely disagree with the ideas of ‘folk economics’, while the rest take an intermediate stand. In other words, only one in seven students can be considered as a strong supporter of the folk economic myths, whereas the rest have at least some doubts about such beliefs.
It is interesting to note that the inclusion of economics courses in the curriculum does not guarantee immunity: the prevalence of naïve views among future economists was not lower than among students taking other courses. Some students majoring in economics demonstrate a paradoxical dual conscience: on the one hand, they know from textbooks about the mutual benefits of trade, but on the other hand, they continue to believe that life is ‘impossible without losers’. This raises the issue of the quality and content of economic education itself.
Supporters of economic fallacies also exist in the sphere of public policy. Our analysis of transcripts and speeches by high-ranking Russian officials (members of parliament, governors) revealed elements of naïve economics in their narratives. According to our estimates, at least 8% of speeches contain rhetoric based on the zero-sum axiom. Though this proportion is lower than among students (which may be associated with the fundamentally different methodology applied, see the box below), the situation is still much more worrying, because in absolute terms, it means dozens of instances when high-ranking officials publicly explain economic and social processes through the lens of fixed resources.
Due to limitations in sample size and the comprehensiveness of the compiled dictionary, we propose interpreting results not as a quantitative assessment, but as a qualitative conclusion: public officials are ready to rely on naïve beliefs notwithstanding possible negative consequences.
This logic is most often seen in topics related to budget allocation, social support, migration policy, import substitution, and regional inequality. Some speakers set ‘winning’ and ‘losing’ groups against each other, as if they cannot win together. Budget discussions often involve the image of ‘communicating vessels’, as if money could be easily channelled from one government programme to another.
In reality, the idea that government programmes compete for fixed and limited resources simplifies and distorts the actual logic of the budget process. Government policy priorities are set in advance, even before programmes are formulated, and a significant portion of expenditures – primarily social obligations and long-term infrastructure projects – are not subject to reallocation within the current budget cycle.
Debates about migrants often touch upon concerns that newcomers take jobs from locals and reduce wages. In reality, migrants mainly fill those niches, which are not interesting for locals, thereby eliminating labour shortages. This allows businesses to operate and expand, and the economy to create new jobs, including for locals. Pressures on wages are possible in narrow segments of low-paid work and are chiefly related to poor regulation rather than migration.
Even the issues of interregional development are sometimes presented as a struggle for a fixed resource, where the success of one region implies damage for another. In practice, the economy works differently: the development of certain regions creates demand, jobs and opportunities for other regions through sales markets, supply chains, and the attraction of new workers. Eventually, the problem is not about who gets the biggest share, but about how to increase the overall economic effect from which several regions may benefit simultaneously. The ‘zero-sum’ approach appears simplistic, but apparently is considered convincing for the public.
This is a troubling sign, as it turns out that the zero-sum myth is not only present in the minds of some people but also is actually integrated into the system of public discussions and decision-making.
Knowledge versus myths
If we proceed from the fact that ‘folk economics’ is largely cognitively conditioned and relies on the basic mechanisms of human thinking, does it seem possible to get rid of these misconceptions? It is necessary to combat ‘naïve economics’ using education as the main tool.
This involves not only specialised training for economists, but also economic education at all levels, from school to courses for adults. The ultimate goal is to help people develop a basic understanding of economic principles instead of intuitive understanding, and demonstrate that effective economic decisions imply the possibility of multiple wins and are based on mutually advantageous exchange and not on inevitable losses.
Dealing with public discourse is a separate task. Naïve economic beliefs are fuelled not only by a lack of knowledge but also by dominant conflict narratives. Therefore, the ‘take away and divide’ rhetoric must be counterbalanced by an alternative agenda that consistently demonstrates the possibilities of multiple wins and cooperation, even if this requires considerable communicative efforts.
