Wednesday, July 30, 2003
Oh, look, Eli Lehrer agrees, too.
Which brings me to the following question: why shouldn't parimutuel betting on everything be legal?
I have written in the past against the extraordinary explosion in gambling in America, which I think is a clear index of social decline. But parimutuel betting is different from casino gambling in that the gambler is not betting against the house. There's an obvious conflict of interest in casino gambling. The casino is trying to induce you to do a negative-expected-value trade, on which you can have no possible information edge (with the exception of some card games like black-jack, and casinos are very vigilant about throwing out card-counters). The only way to do this successfully is to mislead you: get you drunk, disorient you with sights and sounds, create an environment that encourages poor decisionmaking. Markets - and parimutuel betting schemes are types of markets - are completely different. They are mechanisms for processing information, and by doing so they produce a real social benefit. How beneficial depends on what information is being processed. If it's the value of companies, the information is enormously valuable, as it assures to the best of our ability the efficient allocation of scarce capital to maximize total value. If it's the relative value of race-horses, well, that information is of somewhat more limited social utility. Weather markets, natural-disaster markets, political markets and, for good measure, terrorism markets fall somewhere in between. But why should the government have to approve the establishment of these markets? Why shouldn't the private sector be able to create these markets whenever there is demand for the information output they produce?
I think casinos, slot machines, and the lottery are pernicious and evil, taxes on the stupid, weak and gullible - just the people society should protect rather than prey on. They produce no direct social benefit and feed a number of direct social evils. But parimutuel and other market-like betting schemes can produce real, direct social benefits, which I strongly suspect would more than balance the evils that any gambling brings. Why is the one increasingly legal, the other largely forbidden? Beats me.