Jacqueline Passey writes:
…gambling is distributive justice, moving money from stupid people to smart people.
Greg Mankiw writes (do note that Greg is not a pure utilitarian):
The utilitarian in me points out that Jacqueline gets things exactly
backwards: distributive justice demands moving money from smart people
to stupid people. Smart people have the potential to make a lot of
money and thus have lower marginal utility per dollar, while stupid
people have less money-making potential and higher marginal utility.
This question is tricky. If gambling leads to little real enjoyment, stupid/poor people are receiving a low marginal utility from these expenditures. If we discourage gambling (whether by taxation or moralizing), might the would-be gamblers spend the money in yet another wasteful and thus low marginal utility way? Short of having government manage the entire budget of poor people, through extensive taxes and subsidies, this problem is hard to avoid.
Alternatively, if stupid people enjoy losing their money through gambling, then it is not wasteful and need not be discouraged.
It is hard to say that both a) marginal expenditures are wasted, and b)
marginal expenditures bring a high marginal utility. Perhaps once
gambling is removed as a temptation the poor will spend those marginal funds on tofu and vitamins, but I would not count on that.
Readers, how do you score Greg vs. Jacqueline?
Interpersonal utility comparisons are impossible, so they’re both wrong.
I don’t think that Jacqueline was equating smart with rich. In the poker
world that she seems to be involved in, there are a lot of rich people who aren’t good poker players but who still like to bet heavily. Transfering money from these folks to relatively poor poker sharks probably increases total utility. Some forms of gambling are good training for business, and I’ve heard of people who have staked businesses with winnings from card counting or poker.
“Interpersonal utility comparisons are impossible, so they’re both wrong.”
Meaningless mantra.
I score both Greg and Jackie at 82.36813, using the rule
of thumb that made-up numbers look much more convincing
if you give them a lot of decimal places.
But seriously, C-ipher makes a good point. In fact, we should explore this
point in more detail.
I’m guessing there’s plenty of law and even more social
approbation against taking advantage of the mentally
handicapped. But what about laws against really smart
people taking advantage of average or slightly-below
average people?
For the sake of argument, I’ll treat IQ numbers as a
linear measure of intelligence. If they’re not, then just rescale and my argument still holds.
If it should be illegal for a person with an IQ of 95 to
take advantage of a person with an IQ of 69, why should
it be legal for a person with an IQ of 140 to hatch a
scheme (or “business plan”) that takes advantage of
people with IQs of 95?
One old classic libertarian formula says that
government should only intervene against “force and
fraud.” We now understand a lot about selection mechanisms (like “extended warranties”) that essentially make
the stupid/ignorant defraud themselves. It seems like we
might then open up to paternalistic and semi-paternalistic regulation that stops these selection mechanisms.
Recently, Greg Mankiw expressed his moral objection
to gambling, basically saying that people who devote
their energies to winning at poker could be doing more
social good by doing something else.
I agree to some extent, but let’s take Greg’s argument
to the next stage: I’d rather have our smart and talented people dedicating their energies to making better products and services rather than hatching ideas that essentially take money from the unwitting and unsuspecting.
Of course, given public choice considerations, the government power to make
these distinctions may not work out like I’d want…
When I think about the
preference that many leftists
have for small-town monopolists over Wal-Mart’s
law prices, it doesn’t give
me much hope for this kind
of paternalistic regulation.
I think Jacqueline is losing with the distributive justice/her boyfriend
gives the money to charity argument. The gambling itself is a zero-sum
game — somebody wins, somebody loses. There’s no overall wealth creation
from the activity of gambling.
But I think Mankiw loses with the gambling has no social (ugh, I hope he
means economic) value overall. The most obvious example is how over the
last five years professional poker has become a spectator sport, and the
stars of professional poker are now essentially entertainers in the same
fashion as actors or professional atheletes, so the extent those sort of
entertainers create economic value, the professional gamblers who help
drive ratings on ESPN do too.
Then of course there is the fun. Cards, dice, coin flips, who cares.
My personal favorite is rock paper scissors for $5 a throw. But the fun
is worth something right? When humans dream they dream of money…not the
cubicles & commutes it usually takes to get money.
Kenny Rogers nails it: Gambling may not create wealth but the most popular forms of gambling (i.e. not coin flips or something similarly trivial) create fun.
Most people at a given casino (or in a given sports pool: choose your favorite form of wagering) are losing a bit of money but having a grand old time. At opposite ends you have the people making money (aside from the house itself) and the degenerates who have an addiction and are miserable. Obviously the latter need to be helped, but criminalizing gambling won’t cure their addiction and so won’t help them enough to be worth taking away everyone else’s fun.
“If Jackie has a substantive normative commitment that people are deserving in virtue of their intelligence…”
I think that’s the plain meaning of Jackie’s original statement. She’s saying the smart deserve to be rewarded and the stupid deserve to be punished. Think of it as the “fool and his money are soon parted, and should be” principle. Now, she might not have been totally serious about that, because she was just making a jocular statement (or rather, quoting someone else’s). But I think that was the sentiment. Maybe there’s a evolutionary logic to it, akin to the logic of the Darwin Awards (given each year to people who have done the species the biggest favor by removing their genes from the gene pool through their own stupidity).
C-Cipher does make a very good point. So good that I mulled over it while out for a walk, and I think I have an answer. Every society has, in some loose sense, the strictest morality that it can afford. For example, we were willing to tollerate slavery when slaveholding was the only way to be rich, but when that was no longer the case we stopped tollerating it.
We can afford to have a morality that regards an IQ-100 person taking andvantage of an IQ-60 person as wrong, because there are so few IQ-60 people that it’s not a big incpnvience to confer this special status on them. But there are scads of IQ-100 people, so to confer upon them a special moral status and guard against their exploitation by IQ-140 people would be a bigger burdeon than our society can afford. Perhaps one day, when our society is even richer than it is today (and we all regard eating non-free-range-chicken as unimaginably barbaric) we will have the resources to worry about the exploitation of the IQ-100s.
Great points Blink and David Wright.
Tyler or Alex should give Greg Manikew some pointers on how to attract intelligent comments. The contrast between the comment quality on the two blogs is astounding.
It’s immoral to let a sucker keep his money.
Readers, how do you score Greg vs. Jacqueline?
I score it ridiculous.
As I know Jackie, and share similar views on things, I’m naturally leaning toward her. I shall note that “Taxes on Stupidity” are not unique to the gambling world. Beyond state lottery commissions, which offer prizes with absurdly low returns on the risk of 10-15% under most circumstances, particularly considering inflation and income tax, while at the same time hypocritically insisting casinos offer an average 95% return on risk of all games they run, academic scholarships for smart kids and full boat tuition for rich dumb kids is a similar form of distributive justice practiced by the university system. Those who eat and exercise smart (and thus stay thin and attractive) beat out those who eat poorly and don’t exercise in the race for wealthy spouses, better jobs, and political offices.
Finally, I’ll note that gasoline taxes, energy taxes, and carbon taxes, which I suspect are all things that Mankiw supports implicitly, punish those who stupidly waste fuel, energy, and pollute, and rewards those who are efficient with cleaner air and lower energy costs for less than an equal capitation of inhaled O2 and temperate climate. I suppose Mankiw believes that some kinds of stupid are more equal than others.
Do poor people enjoy gambling more than they dislike being poor? Come on. Opportunity costs. You’re an economist. You’re supposed to ask these types of questions from the outset.
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