Triply stupid policies

Doubly stupid policies are pretty common, but here is a triply stupid one:

Unique to racino legislation is the allocation of a statutorily set percentage of gaming revenue to purses to support racing and breeding operations in the state.

So what are the three layers of stupidity here?  First, there shouldn’t, as a special legal category, be racinos (that’s casino-style gaming at racetracks).  Second, this legislation is a response to competition from state lotteries, which in general I do not favor.  Third, the money from a dubious policy should not be spent “to support racing and breeding operations in the state.”  Those operations can pay their own way: how about spending the money on poor people, rather than on sectors which extract money from a disproportionately lower income clientele?  Or spending money on animal welfare without at the same time having to subsidize a “legally privileged against competitors” commercial sector?

So what is the background here?

A key theme of the enabling legislation in most states permitting casino-style gaming at racetracks [i.e., racinos] is preservation of the racehorse and greyhound racing and breeding industries in light of competition from other forms of gaming, such as state lotteries and casinos.

In other words, the racinos receive special legal exemptions to help the racetracks compete with state lotteries.  (Why not opt for the simpler solution of no state lottery in the first place?  Or some other notion of a regulatory level playing field?  Oh, how my brain HURTS to ponder how this “problem” arose in the first place.)  But it gets worse.  Often “racino gaming devices” are placed under the state lottery’s regulatory authority.  (Note to self: when attempting to protect B against competitive ravages from A, do not appoint A as regulatory overseer of B.)

So might we have a quadruply stupid policy here?

But wait, on second thought government lotteries, while I do not favor them, perhaps should not be described as “stupid” policies, since there are some reasonable albeit in my view misguided arguments on their behalf.   So maybe we are just back to triply stupid after all, I am not sure.

That is all from Richard Thalheimer’s “The Economics of Racetrack-Casino (Racino) Gambling,” from The Oxford Handbook of the Economics of Gambling, edited by Leighton Vaughan Williams and Donald S. Siegel.

Dear readers, can you think of examples of triply or even quadruply stupid laws and policies?


I usually find this site a breath of fresh air for its data-driven, objective view on economic topics. Then I read a post like this.

What kind of empirical study do you expect of "artificially privileging some forms of gambling and then propping up ailing competitors with mandated subsidies"? The chance that such a policy is harmful and quite high.

Tyler, I don't disagree with what you're saying at all--but when I see vitriolic and clearly emotionally-motivated posts like this, it ever so slightly chips away at your authority and reliability as a social scientist motivated by reason.

Not that me saying it means anything, but it is such flashes of common sense that don't need "empirical study", that actually give the authority. The intuition in right such that when he actually invests time on numbers you have to listen.

"Be more of a robot" he told the Aspie

Did not see that coming.

Careless, good point. Maybe I'm just annoyed that my robot isn't acting like a robot?

It seems perfectly reasonable to me to call stupid things stupid. Someone who equivocated about such to maintain a penumbra of alleged objectivity would strike me as pretty untrustworthy.

Agree, I mean seriously, find me a 'social scientist' that has not been frustrated at the unforced errors and stupidity in their area of study. Where do you think the passion to study things in detail and at length comes from ... and not get upset when you see a mess of it? I would be more skeptical at the always unemotional researcher (not engaged or not real).

'I usually find this site a breath of fresh air for its data-driven, objective view on economic topics.'

Then this link will be eye-opening indeed -

Big fan of calculatedriskblog--I have a feeling reading that is going to save me a LOT of money in the next few years.

I read it every day. How exactly do you think it is going to "save you a lot of money"??

CR reposts a lot of publicly available data and some third party proprietary data. McBride doesn't even bother to update the accompanying text much, and he's completely unreceptive to corrections of blatant errors of fact.

When the blog talked mostly about housing finance, it provided something somewhat rare and unique. Often claimed to be a portent of the crisis, it too was years late (albeit earlier than most 'experts'). Now, it is just resting on its laurels, with nothing particularly useful to say.

CR's message board is flooded with socialist zombies who, lately, have been finding their way over here. Not content to relax in their echo chamber, they need to troll other websites polluting a diversity of civil and educated discussions with tiresome, two-century old slogans and diatribes.

Interesting - 'McBride doesn’t even bother to update the accompanying text much, and he’s completely unreceptive to corrections of blatant errors of fact.' Care to give three examples?

'CR’s message board is flooded with socialist zombies' Really? Seems like the same bunch of primarily white male boomers talking to each over that has been there since the start of the message board. From my understanding (from when it is being set up, and before it went password protected), is that McBride has nothing to do with the bulletin board - apart from posting on it, instead of in the main text, as he used to, ca. 2006.

Personally, I like my data presented straightforwardly, over longer time spans, with a bit of individual insight -coming from someone who has never been paid by taxpayers to function as an economist. Or paid by donors to function as an advocate (since sensitivities are so tender here sometimes, let us use Dean Baker as a relevant example, so that those who feel that dismissing the donors du jour is adequate to completely dismissing the way that such advocacy works are happy).


Absolutely. I don't have many folks in the senior civil service of any country in my 'People I admire' list, but there was one in Canada, the senior Finance Ministry official. When the Liberals at the time were trying to find some fiscal sanity and hopefully avoid the fate of Argentina and Mexico, they would float the usual cockamamie schemes that incidentally are considered serious policy today in the US. In these meetings, he would respond with 'That's bullshit', then explain why. The Minister listened, and now is going around the world telling countries what they need to do to find fiscal sanity. Not sure if he suggests finding a potty mouthed but smart senior finance minister.

This gentleman went on to being governor of the Bank of Canada, and if you want some very good insight, on the ground reality insights on how to deal with the realities of an economy correcting the distortions of years of stupid fiscal and monetary policies, google David A Dodge.

This is one of my favorite MR posts ever.

How did he manage to write all that without once using the word "trifecta"?

How about the Universal Service Fund? Why does a statutorily set percentage of my cellphone bill go to subsidizing cheap phones for some remote rural farmer?

My point is, yes, this racino legislation is hilarious but hardly unique. A lot of lawmaking is devoted to cross subsidizing one activity by another.

Why, yes. Nobody should look at gross shit, because cellphone legislation is also is fucked up! Why should my phone bill cost so much?

Apply this to health care, and on the margin, we should also care about the stunts going on with domain names. Or cancer causes, or HIV reduction.

NB- I care about some of these, and mark my thoughts to market.

Get a pre-paid cell phone and you avoid all of the taxes and fees. While it is possible that those fees are all invisibly rolled into the price, the lower price tag suggests that at least some costs have not been passed along from carrier to consumer.

I'm not exactly how this regulatory arbitrage came about, but I save about $40 per month compared to my old service.

It is probably price discrimination in the same sense as clipping coupons and discounts - the poor have a low opportunity cost for seeking bargains and a good network for communicating about them.

I used to think pre-paid was for drug dealers. Not any more. You can even set up automatic payment. I can't see the downside. Buying a $125 phone instead of a $600 phone is a good savings too. Several good phones under $200.

Aren't the plans much worse though? I always thought post-paid / billing gave me more talktime-per-dollar & texts-per-dollar, roaming, data-per-dollar etc.

I have long favored state lotteries as being a tax on stupidity, which is then used to fund education. Other taxes should so directly link problem and solution. Unfortunately, the desired effect is not yet apparent in this instance.

States don't use lottery proceeds to *increase* funding to schools. They tie the lottery to education as a marketing gimmick, both to sell it to the voters initially, and then to deflect criticism (what do you mean you don't like the lottery --- are you anti-education?) See

We're told we need lotteries because people would gamble anyway, and yet a large fraction of lottery revenues go toward advertising, presumably so that people don't lost interest in it.

Earmarked funds do actually increase expeditures, but not the whole amount since the earmarked funds displace general fund revenues. It is similar to an in-kind transfer, such as food stamps.

“…state lotteries as being a tax on stupidity, which is then used to fund education.”

That’s pretty good! But maybe, just maybe the term “stupid” needs further deployed. How so?

Edited version:

State lotteries as being a tax on stupidity, which is then used to fund a stupid education system to perpetuate the stupidity needed by state lotteries.

Begin at state and end at state!

Perhaps they should subsidize stupid teacher unions a bit too and help spread the stupidity all around......

Two problems with your claim that this is a tax on stupidity.

First, "smart" people might play lotteries--if by smart you mean someone who is fully aware of the odds and who has preferences consistent with rational choice (e.g., von Neuman-Morgenstern, expected utiltity.)

Second, even if there is good evidence that lots of stupid people play, don't you then have to argue that stupidity creates negative externalities and that the lottery tax is an efficient way to remedy the problem. Taxing stupidity doesn't lead to a reduction in stupidity. Subsidizing education doesn't lead to an increase in smart people.

I would disagree with you regarding "[s]ubsidizing education doesn't lead to an increase in smart people." Speaking of my own personal experience in Georgia, the state lottery has funded the wonderful HOPE scholarship that has paid for many students to attend universities. Admittedly the benefits tend to skew more towards helping middle class students whose would have almost certainly gone to college anyway, but there seems to be a substantial portion of the student population that would not get post-secondary education without it. Interestingly, as HOPE and Pell grants have been cut over the past few years, enrolment has dropped in the overall University System of Georgia. Some of this might be because the economy has improved and more people are entering the labor force instead of getting additional education, but the skew of enrolment changes among different universities show a striking discrepancy. Enrolment has increased at the research universities, but tended to decrease at community colleges and less selective public schools. The students going to Atlanta Metropolitan College or Fort Valley State University might not be the next bunch of Einsteins, but they still are generally above average and capable of learning skills to make them more productive in the future.

the question wasn't whether subsidizing education leads to more education

Thanks for the reference. I looked on Wikipedia, and I think I get it. Is the real world description, I can spend $10/week on the lottery, and that doesn't change anything about my life (has no utility to me) - but winning the lottery would. So I prefer to play, even if there expected cash value is less than my ticket cost (so it's not irrational)?

(Note you ignore entertainment/dreaming - see my post below)

Yes, but then realize that those 'stupid' people being taxed have children, children who now miss out on, for example, the opportunity to go to a better school district (b/c their parents don't have the money to move), the nutrition provided by more fruits/vegetables (b/c pasta is cheaper than cruciferous veggies), etc., etc..

Of course, now you might argue that the increase in education funding can offset these problems. Or that the lotto is not as burdensome a 'stupid' tax as my examples make it out (but see and others, showing that in some dirt-poor counties in NC, the average yearly expenditure on the _state_ lotto exceeds $400!). And you might also argue that those 'stupid' people will do something else stupid if the lotto is unavailable, and so it's better to have the lotto capture these 'stupid' funds, diverting them to education, rather than have some other 'stupid' diversion that doesn't feed into the education budget. (Relatedly, is there evidence for a set volume of 'stupid' expenditures, or does the state lotto create/expand the market for such 'stupid' spending? As John S. noted, "We’re told we need lotteries because people would gamble anyway, and yet a large fraction of lottery revenues go toward advertising, presumably so that people don’t los[e] interest in it.")

This ( suggests that the appeal of racinos is being able to bring in slot machines to an existing race track. After reading only a few pages of 'Addiction by Design' I can see why. The smart machines are now subsidizing the humans and the horses. The horses are probably the hook that convinces voters to allow horse tracks to expand into slot machines ('we have had the hose track for many years and that has worked out ok, and they are already regulated and already in the gambling business, so let's let them expand into slot machines, which is not a huge leap from betting on horses').

The racino industry can be seen as a legacy of the process of breaking down state laws against gambling. In Des Moines our local racino was originally set up as a stand-alone horse track in the 1980s. Somehow that was perceived as less troublesome than a casino. It soon got into financial trouble and lobbying began to allow slot machines to "save the racing industry." Before long it went down the slippery slope from slots to full casino operation, and Prairie Meadows is now a big moneymaker for Polk County government, but they still have a largely-ignored racing season to prop up a local thoroughbred industry.

Your Comment is Most Instructive.

Disgusting for sure but not stupid. States assert an absolute right to control gambling--that's the disgusting part. They exploit that "right" in exactly the way any good monopolist exploits their monopoly--that's not stupid.

"Racinos" are there to exploit economies of scope. (Footnote: if the tracks and racing industry had not already developed a large fixed infrastructure, it's not clear that a different form of full-service gambling location would have developed. Maybe something like sports-books in college football stadiums.)

Racinos are not any more a response to competition from lotteries than Bud Light is a response to competition from Bud. A good monopolist wants offer a full range of products to attract new customers and to more effectively price discriminate between existing customers.

The subsidy to racing interests is probably best understood in terms of the usual public choice arguments. (Although you might argue that it is simply a mechanism the monopolist (e.g., the government) pays for an essential input.

USAID has a nice little racket going.

Tax K-selected people to fund high-protein Pepsipaste for r-selected countries that breed beyond their carrying capacity, so companies have more markets for their electronic gewgaws.

Subsidies to homeowners (mortgage interest deduction, unrecognized cap gains, HELOCs) which incentivise excessive leverage based only on the existence of a tax deduction. Then, put the questionable mortgages in a CDO, wait for the collapse, and bail out the banks.

Don't forget the free put option of foreclosure, the moral hazard of bankruptcy, the adverse selection caused by antidiscrimination laws, the principle-agent problem of housing politics.

US housing policy, in toto, is a ticking time bomb that goes off once every decade or so. The next one is ticking now.

Tyler asks:

Dear readers, can you think of examples of triply or even quadruply stupid laws and policies?

Why, yes! How about borrowing very large sums of money to lend out to individuals with a very high risk of defaulting upon the loans they take out for the actual purpose of trying to collect more income taxes from them, while also propping up failing businesses that require ever increasing subsidies to remain afloat, and who use the subsidies to crank up the amount of money that the people taking out the loans need to borrow?

Did I mention all this is happening as the "lender" is running massive deficits?

Welcome to the modern world of government-issued student loans.


EVERYONE should go to college and borrow money to do so - it's only fair!

I thought you were writing about housing tax deductions.

Probably too close to home.

Me too. Scary how thing replay.


More seriously, I tried to write the text as generically as possible, so only the last sentence needs to be changed to fit a particular program. It's a technique that's proven to be very efficient at the government's Department of Redundancy Department.

1. Illegal drug policy raising prices, creating crime and a criminal class and a gigantic prison population
2. Middle East interventionism with attendant blowback, endless military responses to blowback and NSA spying to monitor the blowback

Seems to me that one should first be for or against legal gambling, and the support all (many) or none.

A "level playing field" with government barred isn't really level, is it?

And if you have already said you are pro gambling, using gambling in place of tax is fine, excellent even.

"A “level playing field” with government barred isn’t really level, is it?"

Government participation wouldn't destroy a level playing field if government did not pass regulations, taxes, or subsidize itself, that is, if it refrained from everything that makes it government.

Democratic government in the US seems to have moved toward more total gambling and less monopoly.

It has moved toward pockets of localized monopolies that pay off local politicians. Look how quickly it shut down online gambling.

Complex webs of interlocking (and potentially conflicting) regulations and subsidies ARE stupid, but from a public choice perspective they're also an effective way to generate contributions from the various subsidized and regulated industries as well as votes and organizing help from workers in those industries. And actually where there are conflicts between regulations and subsidies for differing groups, that can be a political benefit as well -- the conflicts acting to create a zero-sum game where interest groups must compete to curry the greatest favor.

On the question, many states raise trout, and dump them in rivers to be caught within the week. That the fish are all quickly caught makes them like supermarket trout, but with ritual.

Just banning fishing would be better for stream environment, would discourage wasteful spending, and ultimately nonproductive industry.

But ... I am not really opposed, even though this might be 3 or 4 ways stupid. It seems to make people happy.

So it's against the law to fight one rooster against another but the state actually enables the torture of fish by encouraging catch and release. Since you can't hear the fish scream apparently it's OK. to "play" them on a sharp hook and then drag them into a boat, take their picture, and then send them back into the deep. But when bears do it to humans, they're killed. Go figure.

I think catch and release is much less violent than dog or rooster fighting, but it is fish bothering at the very least.

(And why I contrasted to full bans above)

Some people argue for a paternalistic State that will protect us from ourselves, but one of the most protective acts many a State could take at present would be to dismantle their omnipresent gaming apparatus. Sorry Sir, you have to be 21 to purchase those beverages. But please blow your whole paycheck on Mega Millions! Look at our commercials: it's basically a sure thing!

I guess I'd be fine with a return to the limited gambling of my youth, but even then people could blow their paycheck at the track or on a trip to Vegas. Are you suggesting we go further than that, and outlaw gambling? I might be fine with that too. But if there are TV ads for the nearby "Indian Resort", why not for Mega Millions?

(It's probably harmless to spend pin money on gambling, and probably better than spending pin money on alcohol, tobacco, or large sodas.)

I wouldn't ban lotteries either. But state monopolies have significantly worse payoff rates than casinos or bookies. If there were legal competing private lottery companies, we would certainly have much less than the ~50% vigorish that state lotteries impose and then lotteries would be much less exploitative of poor people (they'd be less a 'stupidity tax' and more of a 'stochastic savings plan').

I am not a gambler (I was told to put $5 on Mega Millions, which I did, but haven't even checked), but I think people tend to leave casinos having spent what they planed to spend, rather than leaving with stochastic earnings.

(I did joke with the guy, what would I do with $400M ... run for president?)

BTW, don't forget that the lottery "nudges" people away from gambling, by consistently taking all their money. Are there any studies on how kids raised in the lottery age approach gambling vs older cohorts? I'd suspect that it is more boring to them.

Dear readers, can you think of examples of triply or even quadruply stupid laws and policies?

Yes, but I am not allowed to divulge company secrets ;)

How about the healthcare ecosystem. First restrict supply (accredited monopoly), second subsidize supply (student loans), third stifle innovation (approvals and patents) and fourth insurance required and then subsidized (ObamaCare)

Universities pay Professors to do research. Universities pay publishers to be allowed to read same research. Some Professors also pay publishers to facilitate publishing same research. Publishers get Professors to review research mostly on resources paid for by University.

I lost count of the stupidity-factor.

That's a good one, and related, government grants university money to create technology, university patents technology, and then blocks access until a fee is met. (I know that some patents are licensed and fund further research, but I think that most "public patents" sit in neverland until they expire.)

You should look at law journals where law students are the editors and most research is published by your own institution. Most of it is total garbage.

Initially I was always confused why important lawyers' biographies always say they were editors of BlahBlah Law Review in their student years. Never made sense to me to have a Student edit a Journal.

I agree with much of the original post (about protectionism/the irony of having the monopoly regulate the upstart competitor), but not sure I understand the "lotteries are stupid" part. By that if you mean that states shouldn't have a monopoly, I get that. But if you mean "it's stupid to play" - I used to think that, but if you look at it as a form of entertainment (for $1, you get to dream what your life would be like if you won - even fully understanding the math) it makes a lot of sense. My wife and I get a lot of enjoyment out of spending $20 when the pot gets big (fully knowing it's a bad "bet" (expected cash value of ticket clearly less than cost)). You could say "we don't want the poor spending $ on this" - but that doesn't seem consistent with the tone of this site or most economists - who I would think would prefer a safety net of cash and let the poor figure out what they want to spend it on (as was discussed in the recent post about the Swiss proposal).

Another thought, looking at all the posts on "lotteries are a tax on stupidity" - posting on websites is an incredibly stupid activity - if you think you're going to have an effect on the world. I really think on most sites it has become an echo chamber or complete waste of time (I even think in some ways it's become the new "opiate of the masses" - if all the crackpots who post on the WSJ (with their "Obama Tourettes syndrome" - if the original article was about knitting, they somehow throw random references to Obama in, starting with the first comment) did something productive to try to change the world to their view, I'd be scared). On the other hand, if you're doing it just for your own entertainment, it makes sense (why else would someone post to be the 1500th post?). (Note, I think this website is one of the few exceptions, where I feel like I learn something from most of the posts, at least the ones I can follow.)

How about letting politicians sell their votes for modest campaign contributions - thousands or at most millions can get you billions in return. That seems to be an additional 1X stupidity on top of (and at the root of) many of the examples.

Horse tracks have been around for awhile. Their biggest competition isn't state lotteries but Indian casinos, evidently there are a finite number knumbskulls and dividing them up hasn't worked out well for the tracks. However: The state has no business regulating gambling, period. I should be able to have a couple slot machines on my back porch if I wish so the neighbors can drop a coin now and then. Government entities of various sizes have enthusiastically embraced public financing of sports stadiums, using the argument that they create jobs. Lots more jobs exist around horse tracks. Horses are neat, NFL players are thugs.

Two words: "farm subsidies"

You will get better traction if you say "agribusiness subsidies"

Here in TN state lotteries tend to buy up an inordinate amount of radio advertising - I wouldn't be out of line calling it "incessant" advertising. I'd be in favor of the states limiting advertising of the lotteries.

Good point. Advertising agencies and radio TV stations have skin in the lottery game, as they did when there were cigarette settlements, where some of the major beneficiaries were not the sick, but the advertising agencies and TV stations which created or played anticigarette ads.

State lotteries are regular advertisers in small town newspapers as well. They've consciously bought their way out of media criticism. If the lottery was such a great idea it wouldn't need to be advertised.

Triply-stupid policies? (Pardons and mea culpa: I've not read beyond the top posts of this thread):

1) public elementary education

2) public secondary education

3) state-supported post-secondary education.

[If "4) state-supported doctoral and post-doctoral education" amount to anything, I might have a quadruply-stupid policy to cite.]

Dude, you are trippin'

No, he is right. There is zero reason for the State to concern itself with the continuing education of legal adults.

Public education is stupid? This is probably one of dumbest posts I've ever read. Would you rather we return to the 1850s where a majority of children will not have any opportunity for economic mobility? Because "Capt' Ed don't like education from the Buberment"?

The ignorance, stupidity and demagogy of right wing America will be your own country's downfall. Your inability to have compassion towards other human beings and masturbatory self righteous ignorance would almost be comical, if it wasn't so sad.

Do you really think it is possible to return to the 1850s in any meaningful sense? Pretty much everything has changed since then. # of children per family, median income, legal environment etc.

If public schooling in the USA were removed overnight, I wouldn't expect any drastic changes in the total results. The middle class would still do their helicopter parenting thingy and the children of the underclass would probably still be barely literate. The reasons for the differences are much more deep-rooted than just availability of a house named school*, which is why even 50 years of effort and lots of money being thrown on the problem haven't made any visible difference in social mobility.

Now ending the war on drugs *might* have some observable effect, but hell knows.

* Debating effects of schooling is in principle the same error as debating effects of "food". There is a lot of food, beneficial, neutral, junk and even some spoiled/poisonous. The same with schooling. The worst schools are, from what I have heard, little more than pre-prison institutions, where the kids are simply kept for half a day under guards.

My municipal council in Britain organized free summer coach trips for senior citizens. Then some seniors complained that they were unable or unwilling to take advantage of these trips, so the council began to offer a cash alternative. Except that it wasn't cash but a voucher for grocery shopping, a specially printed voucher with a hologram for security purposes. (Obviously this favored larger stores, who would get enough custom to make it worthwhile dealing with them.) Later the requirement to opt out in order to get the vouchers was abolished, and you had to opt in to get to go on a trip. Eventually common sense somehow prevailed and the whole thing was scrapped.

I'm skeptical that the problems the racing industry is facing are really the result of competition from state lotteries. Is there data to back that up? Seems more likely that it's just declining interest in racing.

Also, I don't see any problem inherent problem with having other forms of gaming at the track. You're already allowing the gambling, so I'd call it only doubly stupid.

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