How many times have you paid $1 for a cup of coffee and after the clerk said, "thank you," you responded, "thank you"? There's a wealth of economics wisdom in the weird double thank-you moment. Why does it happen? Because you want the coffee more than the buck, and the store wants the buck more than the coffee. Both of you win.
Economists have long understood that two people trade because each wants what the other has more than what he already has. In their respective eyes, the things traded are unequal in value. But this means each comes out ahead, having given up something he wants less for something he wants more. It's just not true that one gains and the other loses. If that were the case, the loser wouldn't have traded. It's win-win, or as economists would say, positive-sum.
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That's why I worry when I hear politicians say things like, "I believe in free trade, but it has to be fair trade". That particular quote is from a presidential contender, Mike Huckabee, former governor of Arkansas.
Now if we could only legalize prediction markets and list some GISS-spot global warming contracts, I will be giddy. Spread the word, folks!
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