Football (my many American friends refer to this game as soccer) is fondly known as the beautiful game. It is the world’s most popular sport with an estimated following of roughly four billion people.
The World Cup is the pinnacle of the game. It is only held once every four years. Needless to say, it is a huge thing. Last Sunday—July 15th—France was crowned the 2018 winner.
Out of 32 countries that managed to qualify for the Cup, only 16 go through the knockout stages where the matches are an all-or-nothing affair. The last two countries standing play the grand final where the winner is decided.
In sports, as in any other game, there is only one winner and many losers. It is cruel stuff.
In sports, as in any other game, there is only one winner and many losers. It is cruel stuff. The winner holds the trophy and triumphantly looks down on those defeated while being cheered by the crowd. Victory or defeat! Naturally, all this brings about strong emotions.
Winston Churchill, a man with a reputation for many drinks, surely knew a few things about victory or defeat. As Mr. Churchill cleverly noted, “Champagne: in victory we deserve it, in defeat we need it.”
How about market economics? Is this also a mere game of victory or defeat, the winner takes it all? Look down on the losers? Or, perhaps, is there something very different at play.
The great economist Ludwig von Mises provides a sharp insight.
“Games are civilised man’s outlet for deeply ingrained instincts of enmity. When the game comes to an end, the victors and the defeated shake hands and return to the reality of their social life, which is cooperation and not fighting” – Ludwig von Mises, The Ultimate Foundation of Economic Science
In other words, sports and games are not reality but merely play. All the moves are regulated by the rules of the game. There are winners and losers. The one party that first reaches a position that the rules define to be success is crowned winner, the others are declared losers.
Market economics is fundamentally different from sports or games.
Exchange is an essential part of market economics. The very reason exchange takes place in the first place is precisely because each party expects to benefit. An exchange is always advantageous for both sides.
In market economics, there is no victory or defeat. A baker is not out to “defeat” his customers; he serves those for whom he bakes bread.
Each party values more highly the good it gets than the good it gives up. Both sides exchange only because both intend to increase their value. If not, neither side would enter into a deal.
In market economics, there is no victory or defeat.
A baker is not out to “defeat” his customers; he serves those for whom he bakes bread. In return, he receives money from his customers which he values higher than the bread he bakes. In fact, people would be sad if the baker stopped producing bread. That’s because they would have to do it themselves.
A carmaker may devise a strategy to outperform competitors. But no carmaker devises a strategy in order to “defeat” customers by supplying them with cars.
In a business deal, no one is crowned winner or declared loser. No supplier receives a trophy for “defeating” his customers. Similarly, no customer is crowned winner for “defeating” his supplier.
Market economics is essentially about social cooperation. The larger outcome is that when everyone serves his interest under conditions of competition, everyone also serves the interest of his fellow men. Ultimately, this leads to a more prosperous economy and a better society.
In market economics, unlike in sports and games, everybody is a winner.
And, many congratulations to France, the eventual winner of this year’s World Cup. On a personal note, I am still annoyed you beat my country Belgium in the semi-finals. I will need many bottles of your excellent champagne to overcome this defeat. Thank you.