Greg Mankiw takes on Jacqueline Passey

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?


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