The setting for the finding that legalized gambling doesn’t reduce illegal gambling is the lottery. The current setting is legalized SPORTS betting. It seems much more plausible to me that legalized sports betting will reduce illegal sports betting in a much more significant way. “More plausible to me” is not the same thing as “true,” of course, but much of your argument seems to rest on the lack of illegal-to-legal substitution. I think there are good reasons to question whether the lottery finding is generalizeable to other types of gambling.
One unexpected downside of gambling being illegal is that it makes prediction markets illegal. AFAIK they are the most promising way we have of predicting the future, so that’s a shame.
More broadly, arguably betting is good for epistemic health; it’s more expensive to believe crazy things if you put money on your beliefs. These are somewhat niche considerations, but IMO that just goes to show that banning things has unpredictable costs.
More broadly: I’m too libertarian to accept this case for banning gambling. Let consumers decide if gambling is good for them or not. I’d support a tax to fund anti-addiction treatment *for people who seek it out*, but an outright ban seems too paternalistic.
It’s pretty messed up IMO that the main form of gambling that is legal (state lotteries)
*is run by the government* and has terrible payouts. Makes gambling bans look less like well-intentioned consumer protection and more like enforcing a monopoly.
As Mr. Paulson succinctly points out below, the argument is framed as one of costs and benefits, but the actual CBA is missing. The author ignores (and assigns no value to) the hedonic benefit derived by the gambler. By this logic, eating at fine-dining restaurants and drinking fine wine are harmful to the consumers because the consumers get fat, destroy their livers and kill brain cells (I do that a lot); no value is ascribed to the enjoyment of consumption. In the absence of market failure, we generally assume that the price paid is equal to the value received. The proportion of lottery revenue spent on schools is not a measure of consumer harm.
Although I’m not a libertarian, I think any time you want to ban something people like doing then you have to conclusively prove that it does significant harm to both individuals and society at large. The fact that some people become addicted (which is a really overused term) isn’t enough.
People become addicted to all sorts of things -- gambling, television, sex, alcohol, fishing etc. Addiction can be treated as a public health or medical issue without the use of state violence to prevent everyone from doing something they enjoy.
Besides has anyone concerned about the cost of an activity like gambling also calculated the cost of enforcing a ban?
Shorter version: Someone is doing something that is bad for them. Government must make that thing illegal. And then enforce the ban with the threat of violence or incarceration.
Strong disagree. If the state is going to monopolize the lottery , which returns 50% or less of wagers to players, it simply doesn’t have the moral authority to ban gambling that returns 90% (or more) of wagers to players.
This sort of terribly inconsistent and sloppy thinking is rampant on the right wing, let’s not import it.
And states that want to ban lotteries and sport wagering are at least consistent, if fascist in their regulation of one of humanity’s oldest recreational activities.
I agree with this take and think the comments thus far are a bit disingenuous. There's plenty of research on the negative effects of gambling addiction. I don't buy that a "Netflix addiction" even exists; video game addiction is also not well supported by the research despite scaremonger headlines about people never leaving the basement. There's controversy about whether or not marijuana is actually addictive, certainly it doesn't seem to be physically addictive the way alcohol, cigarettes, and heroin are, and you don't hear about people losing their houses to support their marijuana addiction (which does happen with gambling). If you're libertarian and don't believe in any restrictions on anything, it's at least ideologically consistent, but don't pretend there's no difference in regulating gambling and regulating watching Netflix.
As a compulsive gambler and alcoholic in recovery (10+ years of abstinence for both) I feel compelled to weigh in.
This piece starts out with a chart showing a dramatic recent increase in sports wagering, but then references studies that are relatively older, and focus solely on data related state sponsored lotteries. From a compulsive gambling perspective, a distinction needs to be drawn between these two types of gambling (not all wagering is created equal). Think state lottery vs. online sports betting as cocaine vs. crack, but worse. When similar studies are done detailing the impact of widely legalized sports betting, the results will be staggering.
Anecdotally, I have seen a significant increase in new "members" in a certain 12-step recovery program I attend, where people are coming in after having their lives destested by mobile phone sports betting. The ubiquity of sports betting is certainly producing a lot more compulsive gamblers in aggregate.
From a societal perspective, I don't think prohibition is the answer. Compulsive gambling does not pose the same societal risk as other addictions. Compulsive gambling is personally devestaing (imagine losing five figures while sitting on your couch or sitting in front of your computer), but has a small direct impact on others in comparison to something like alcohol. Crimes stemming strictly from compulsive gambling are more of the white collar variety (embezzlement, check fraud, etc.).
As an addict, I appreciate pieces like this because it brings compulsive gambling to the forefront. In comparison to alcohol and drug addiction, it has always been a little misunderstood by people who have no propensity to addiction. If any "good" came come from this explosion in sports betting, it's a broader understanding of addiction in general, and hopefully a proportionate explosion in treatment programs for people suffering from addiction.
OK, so let's ban stuff you don't like, and legalize addictive, harmful things like smoking pot that you do like. I have a proposal: let's just let you tell the rest of us how to live our lives? Let's also ban video games, which are addictive, social media, which is addictive, online porn, which is also addictive. Also, a lot of people are addicted to the gym. Let's ban it. Alcohol, let's ban that too. Sorry, but a lot of people are addicted to marijuana, for sure should be banned as it's also harmful.
Implicit in your post is the idea that additional spending on education is actually harmful! And the right wing position that additional tax revenue is wasteful. Enough with this neoliberal BS.
The book “Addiction By Design” by Natasha Dow Schull is amazingly good (and depressing). It’s about the slot machine industry.
It makes a convincing case that slot machines are a different (and probably more pernicious) kind of gambling than table games or sports betting. Unlike sports betting, people aren’t playing slots for a thrill or because they convince themselves they can win back their losses.
Generally speaking, serious slot machine addicts understand that they will lose money, but they play anyway to get into a state they call “the zone” (almost like a flow state).
Casinos developed all kinds of advanced analytics techniques to maximize “time on device” which the book goes into. Disturbingly, a lot of this stuff has been adopted by the app and f2p game industry — same tricks people use to drive engagement, same mental state.
So what really worries me is sports gambling becoming an app where people can use engagement tricks to get people to compulsively use the app. Then you’ve got both kinds of gambling addiction combined into one, probably uniquely bad.
I don't think I would ban sports betting necessarily, but Matt Bruenig made a good point on Twitter a while ago, which is that "innovation" in gambling can never be particularly good.
Similarly, I don't think the trend that huge amounts of sports media is now oriented around wagering is great and a lot of this arises because DraftKings, etc. are allowed to sponsor events and media properties. So I think if you are going to have legal gambling you just have it run by the state to prevent "innovation" or keep regulations in place that crack down on permissible sponsorships and widespread marketing.
LOUIS XIV’S FINANCE minister, Jean-Baptiste Colbert, famously declared that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” Legalized gambling is irresistible to states because the goose won't hiss at all. There is a literature that suggests that poor individual's rationality is more bounded than wealthier individuals which might explain the prevalence of in that demographic.
I agree that gambling is a bigger problem than people realize. But I think a harm reduction approach is appropriate. Mark Kleiman had a proposal for marijuana regulation that seemed good - the first time someone goes to buy marijuana, they set a limit on their own monthly purchases that gets entered into the system. At any point they can change the limit for future months, but not for the present month. A similar self-made limit on gambling expenditures seems helpful.
Singapore has a rule that anyone entering a casino must either show a foreign passport, or pay a $100 fee. That makes it clearly a recreational activity you do on travel or for a special occasion rather than an activity you get hooked on.
Milan, I have a couple small criticisms and I'm going to let em loose
> If one assumes that the lucky store effect wears off after a while (and mostly applies to the winning store itself) then it seems likely that some of this long-term increase in consumption reflects people starting to play the lottery during the initial shock and then getting hooked.
This is a very poor way to support any kind of claim about addictiveness. Compare the idea of people "getting hooked" with people just finding out that gambling is a hobby they enjoy. We have no way of telling how much of this effect is which, so whatever amount you think is the former depends entirely on how much you *already* thought gambling would make people addicted.
Also, I think your comparison to free trade could have been a bit clearer on a key point. The reason that free trade is good and gambling is bad is that free trade is *positive sum*, and so we can turn it into a pareto improvement with good redistribution. Meanwhile, gambling is *zero sum* (or you could even say negative sum considering the overhead costs of a casino), so legalizing it then redistributing is just extra stuff-shuffling for no benefit. You allude to this, and I imagine most readers understood you, but I still don't feel like the piece ever puts this key distinction clearly in its sights.
Thanks for the piece though, I haven't seen this issue covered much and I think gambling is a clear example of something socially harmful, and we should be thinking carefully about that when deciding to legalize it. I'll also just point out the whole controversy of loot boxes in video games, it's a close parallel discussion that you might find interesting if you don't already have an ear on it
The setting for the finding that legalized gambling doesn’t reduce illegal gambling is the lottery. The current setting is legalized SPORTS betting. It seems much more plausible to me that legalized sports betting will reduce illegal sports betting in a much more significant way. “More plausible to me” is not the same thing as “true,” of course, but much of your argument seems to rest on the lack of illegal-to-legal substitution. I think there are good reasons to question whether the lottery finding is generalizeable to other types of gambling.
Milan, I genuinely applaud your willingness to put your ideas out here to the SB crowd, even if they give you crap about them.
One unexpected downside of gambling being illegal is that it makes prediction markets illegal. AFAIK they are the most promising way we have of predicting the future, so that’s a shame.
More broadly, arguably betting is good for epistemic health; it’s more expensive to believe crazy things if you put money on your beliefs. These are somewhat niche considerations, but IMO that just goes to show that banning things has unpredictable costs.
More broadly: I’m too libertarian to accept this case for banning gambling. Let consumers decide if gambling is good for them or not. I’d support a tax to fund anti-addiction treatment *for people who seek it out*, but an outright ban seems too paternalistic.
It’s pretty messed up IMO that the main form of gambling that is legal (state lotteries)
*is run by the government* and has terrible payouts. Makes gambling bans look less like well-intentioned consumer protection and more like enforcing a monopoly.
As Mr. Paulson succinctly points out below, the argument is framed as one of costs and benefits, but the actual CBA is missing. The author ignores (and assigns no value to) the hedonic benefit derived by the gambler. By this logic, eating at fine-dining restaurants and drinking fine wine are harmful to the consumers because the consumers get fat, destroy their livers and kill brain cells (I do that a lot); no value is ascribed to the enjoyment of consumption. In the absence of market failure, we generally assume that the price paid is equal to the value received. The proportion of lottery revenue spent on schools is not a measure of consumer harm.
Although I’m not a libertarian, I think any time you want to ban something people like doing then you have to conclusively prove that it does significant harm to both individuals and society at large. The fact that some people become addicted (which is a really overused term) isn’t enough.
People become addicted to all sorts of things -- gambling, television, sex, alcohol, fishing etc. Addiction can be treated as a public health or medical issue without the use of state violence to prevent everyone from doing something they enjoy.
Besides has anyone concerned about the cost of an activity like gambling also calculated the cost of enforcing a ban?
Shorter version: Someone is doing something that is bad for them. Government must make that thing illegal. And then enforce the ban with the threat of violence or incarceration.
Strong disagree. If the state is going to monopolize the lottery , which returns 50% or less of wagers to players, it simply doesn’t have the moral authority to ban gambling that returns 90% (or more) of wagers to players.
This sort of terribly inconsistent and sloppy thinking is rampant on the right wing, let’s not import it.
And states that want to ban lotteries and sport wagering are at least consistent, if fascist in their regulation of one of humanity’s oldest recreational activities.
I agree with this take and think the comments thus far are a bit disingenuous. There's plenty of research on the negative effects of gambling addiction. I don't buy that a "Netflix addiction" even exists; video game addiction is also not well supported by the research despite scaremonger headlines about people never leaving the basement. There's controversy about whether or not marijuana is actually addictive, certainly it doesn't seem to be physically addictive the way alcohol, cigarettes, and heroin are, and you don't hear about people losing their houses to support their marijuana addiction (which does happen with gambling). If you're libertarian and don't believe in any restrictions on anything, it's at least ideologically consistent, but don't pretend there's no difference in regulating gambling and regulating watching Netflix.
As a compulsive gambler and alcoholic in recovery (10+ years of abstinence for both) I feel compelled to weigh in.
This piece starts out with a chart showing a dramatic recent increase in sports wagering, but then references studies that are relatively older, and focus solely on data related state sponsored lotteries. From a compulsive gambling perspective, a distinction needs to be drawn between these two types of gambling (not all wagering is created equal). Think state lottery vs. online sports betting as cocaine vs. crack, but worse. When similar studies are done detailing the impact of widely legalized sports betting, the results will be staggering.
Anecdotally, I have seen a significant increase in new "members" in a certain 12-step recovery program I attend, where people are coming in after having their lives destested by mobile phone sports betting. The ubiquity of sports betting is certainly producing a lot more compulsive gamblers in aggregate.
From a societal perspective, I don't think prohibition is the answer. Compulsive gambling does not pose the same societal risk as other addictions. Compulsive gambling is personally devestaing (imagine losing five figures while sitting on your couch or sitting in front of your computer), but has a small direct impact on others in comparison to something like alcohol. Crimes stemming strictly from compulsive gambling are more of the white collar variety (embezzlement, check fraud, etc.).
As an addict, I appreciate pieces like this because it brings compulsive gambling to the forefront. In comparison to alcohol and drug addiction, it has always been a little misunderstood by people who have no propensity to addiction. If any "good" came come from this explosion in sports betting, it's a broader understanding of addiction in general, and hopefully a proportionate explosion in treatment programs for people suffering from addiction.
OK, so let's ban stuff you don't like, and legalize addictive, harmful things like smoking pot that you do like. I have a proposal: let's just let you tell the rest of us how to live our lives? Let's also ban video games, which are addictive, social media, which is addictive, online porn, which is also addictive. Also, a lot of people are addicted to the gym. Let's ban it. Alcohol, let's ban that too. Sorry, but a lot of people are addicted to marijuana, for sure should be banned as it's also harmful.
Implicit in your post is the idea that additional spending on education is actually harmful! And the right wing position that additional tax revenue is wasteful. Enough with this neoliberal BS.
The most important reason for a ban is that gambling ads are tacky.
The book “Addiction By Design” by Natasha Dow Schull is amazingly good (and depressing). It’s about the slot machine industry.
It makes a convincing case that slot machines are a different (and probably more pernicious) kind of gambling than table games or sports betting. Unlike sports betting, people aren’t playing slots for a thrill or because they convince themselves they can win back their losses.
Generally speaking, serious slot machine addicts understand that they will lose money, but they play anyway to get into a state they call “the zone” (almost like a flow state).
Casinos developed all kinds of advanced analytics techniques to maximize “time on device” which the book goes into. Disturbingly, a lot of this stuff has been adopted by the app and f2p game industry — same tricks people use to drive engagement, same mental state.
So what really worries me is sports gambling becoming an app where people can use engagement tricks to get people to compulsively use the app. Then you’ve got both kinds of gambling addiction combined into one, probably uniquely bad.
I don't think I would ban sports betting necessarily, but Matt Bruenig made a good point on Twitter a while ago, which is that "innovation" in gambling can never be particularly good.
Similarly, I don't think the trend that huge amounts of sports media is now oriented around wagering is great and a lot of this arises because DraftKings, etc. are allowed to sponsor events and media properties. So I think if you are going to have legal gambling you just have it run by the state to prevent "innovation" or keep regulations in place that crack down on permissible sponsorships and widespread marketing.
LOUIS XIV’S FINANCE minister, Jean-Baptiste Colbert, famously declared that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” Legalized gambling is irresistible to states because the goose won't hiss at all. There is a literature that suggests that poor individual's rationality is more bounded than wealthier individuals which might explain the prevalence of in that demographic.
I agree that gambling is a bigger problem than people realize. But I think a harm reduction approach is appropriate. Mark Kleiman had a proposal for marijuana regulation that seemed good - the first time someone goes to buy marijuana, they set a limit on their own monthly purchases that gets entered into the system. At any point they can change the limit for future months, but not for the present month. A similar self-made limit on gambling expenditures seems helpful.
Singapore has a rule that anyone entering a casino must either show a foreign passport, or pay a $100 fee. That makes it clearly a recreational activity you do on travel or for a special occasion rather than an activity you get hooked on.
Milan, I have a couple small criticisms and I'm going to let em loose
> If one assumes that the lucky store effect wears off after a while (and mostly applies to the winning store itself) then it seems likely that some of this long-term increase in consumption reflects people starting to play the lottery during the initial shock and then getting hooked.
This is a very poor way to support any kind of claim about addictiveness. Compare the idea of people "getting hooked" with people just finding out that gambling is a hobby they enjoy. We have no way of telling how much of this effect is which, so whatever amount you think is the former depends entirely on how much you *already* thought gambling would make people addicted.
Also, I think your comparison to free trade could have been a bit clearer on a key point. The reason that free trade is good and gambling is bad is that free trade is *positive sum*, and so we can turn it into a pareto improvement with good redistribution. Meanwhile, gambling is *zero sum* (or you could even say negative sum considering the overhead costs of a casino), so legalizing it then redistributing is just extra stuff-shuffling for no benefit. You allude to this, and I imagine most readers understood you, but I still don't feel like the piece ever puts this key distinction clearly in its sights.
Thanks for the piece though, I haven't seen this issue covered much and I think gambling is a clear example of something socially harmful, and we should be thinking carefully about that when deciding to legalize it. I'll also just point out the whole controversy of loot boxes in video games, it's a close parallel discussion that you might find interesting if you don't already have an ear on it