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Gambling: Legality and Morality December 18, 2014

Posted by federalist in Economic Policy, Government Regulation.
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My general attitude towards legal gambling has been libertarian melancholy: I don’t consider it a positive means of recreation, but as long as everything is above-board who am I to tell people how to spend their money? The expected losses from gambling are well known. The fact that it is addictive and can financially ruin people is also fairly evident.

But after reading this story I don’t think the way it’s done in America is fair: Yes, the industry and its regulators go to great lengths to ensure that games yield their expected negative outcomes to players — no more, no less. But when a player finds a bug or advantage and exploits it he is treated as a criminal. This takes the industry’s built-in “heads-I-win tails-you-lose” bias one level too far.

Casinos can already eject and ban players they think are playing at an advantage. They have virtually limitless resources to detect what they would term fraud, and are not even legally required to pay out “fraudulent” winnings. The law has no place buttressing the house’s enormous advantages just because the house actually determines the mechanism by which a player manages to “cheat.” After all, when an addict loses his fortune there are no legal repercussions or claims on the casino for having exploited the addict’s mental defect. Why should the law bear on a player who, despite the unlimited scrutiny and safeguards of the house, manages to find and exploit a defect to his advantage?

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Redistribution of Opportunity that Makes Sense December 1, 2014

Posted by federalist in Human Markets, Social Politics.
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Rick Bookstaber points out a way of looking at equal opportunity “ex ante” that makes sense. The problem with progressive social engineering to date has been that it can’t help but reference, and thus try to manipulate, outcomes. (This is ignoring the much larger problem that progressives persist in seeking the coercive force of government to pursue their experiments. To be clear: government should never be involved in social engineering!)

Playing with policies to try to produce more equal outcomes is a futile endeavor: Human outcomes are subject to so many unobservable variables and so much chance that targeting outcomes will inevitably be suboptimal.

But the fact remains that the distribution of human capital — talent, genius, potential — in a free society does not correlate with the distribution of opportunity, which is largely determined by one’s birth endowment (i.e., the station and wealth of one’s parents).

After describing a theoretical framework for optimizing resources given the disparities of these two distributions, Bookstaber offers a sports example: Two children are vying for a tennis scholarship. One child would be called “underprivileged” but has immense potential. The other would be called “advantaged” but has mediocre talent. If our goal is to produce the best tennis players then the scholarship should go to the undeveloped but larger talent of the first child. However, our society is still too superficially meritocratic and so more often than not we see the suboptimal outcome of social resources being added to the second child, who in this example manages to beat the undeveloped but better player and win the scholarship.