Beyond the negative-sum logic: lessons from the economics of conflict
By Lorenzo Bona
The current war scenario in the Middle East, marked by the deeply tragic situation of the recent war in Iran, calls for a reflection that goes beyond geopolitical considerations. The economic and material destruction, and – most of all – the devastating loss of human lives, can suggest that we are witnessing a vivid example of what may be understood, in economic theory, as the ‘Economics of Conflict’.
Unlike free trade, conflict is inherently costly – that is, a negative-sum game. As theorized by Jack Hirshleifer (1991), people – and, by extension, organized groups such as nations – generally face a choice between production (creating wealth) and conflict. When human and technological resources are diverted toward conflict, the global ‘pie’ not only stops growing but actually contracts.
In other words, every dollar spent on conflict is not just a direct loss; it represents an opportunity cost, a resource that could have been invested in technological innovation, infrastructure, or other productive activities that generate long-term value. Conflict thus diverts effort and capital from wealth creation to destructive purposes, deepening the negative-sum logic.
On the other hand, Thomas Schelling (1960) showed that in strategic conflict contexts, actors often adopt costly deterrence strategies (for example, large-scale armaments). These strategies generate inefficiencies and collective risks, while also reflecting an attempt to limit potentially even greater future risks. Yet, they become a heavy burden that hinders the full flourishing of a value-creation-based economy.
These dynamics highlight how the logic of conflict and/or war inevitably produces high costs and net losses for everyone.
Here is how these summarized dynamics may intersect with the pillars of economic development discussed in our previous Insights, in ways that can help us better refocus on the importance of mutually beneficial exchanges:
1. From Organic Networks to Geopolitical Blocks
In the article ‘Networks, Innovation, and Strategy: Preparing For The Next Phase Of Global Trade’ (December 2025), it was highlighted how trade functions as a resilient network that helps overcome entrenched dysfunctional situations. However, the current war scenario in the Middle East acts as a sort of disruptor of these networks. The logic of war, in other words, tends to transform trade nodes into barriers, forcing a return to closed or ‘blocked’ economies. If the strength of a network lies in its openness, war imposes rigidity that stifles spontaneous innovation.
2. Human Intelligence at a Crossroads: Optimization or Creation?
In ‘Human Intelligence and AI: Expanding the Boundaries of Strategic Adaptability’ (January 2026), it was recalled that a fundamental aspect of human intelligence lies in the ability to learn from mistakes to solve complex problems, ideally for welfare-enhancing purposes. In today’s conflict, we see intelligence – both human and artificial – dangerously diverted toward optimizing harm.
This could appear as the paradox of the negative sum logic: we use our highest evolutionary faculties not to ‘strategically adapt’ to the market, but to make geopolitical friction more efficient.
3. Trade as a Barrier Against Regression
Reflections developed in ‘Festive traditions, gift-exchange and Long-distance Trade’ (December 2023) and in ‘International Trade: Reflections On Its Origins and Enduring Relevance For Human Advancement’ (March 2024) reminded us that trade originally emerged as an alternative to dangerous stagnation or potential conflict. Turning trade into a weapon (e.g., destroying energy resources or, worse, human lives) represents a regression from millennia of civilizational progress. War radically transforms the nature of exchange: from reciprocal trade of goods to an exchange of costs.
Conclusions: Returning to a Logic of Resilience
In line with what has been written about businesses’ capacity to navigate uncertainty with new narratives (‘Navigating Uncertainty with Narratives’, July 2025), the conclusion is clear: the economy of war is a dead end. Nobody wins. The only way forward is to foster or restore – everywhere – conditions that allow individuals and groups to progressively expand cooperation, trading relationships, and long-distance commerce.
The hope lies once again in the advent of new creative and productive forms of human entrepreneurship, and in the emergence of new narratives that can help lay the foundations for a more resilient, inclusive, peaceful, and pro-growth future.
References
Hirshleifer, Jack (1991) ‘The technology of conflict as an economic activity.’ American Economic Review 81(2), 130–134.
Schelling, Thomas C. (1960) The Strategy of Conflict (Cambridge, Massachusetts: Harvard University Press).