Libertarianism, classical liberalism, and gambling restrictions

Andrew Norton has some interesting posts distinguishing between classical liberalism (to which he regards himself as an adherent) and libertarianism (to which he doesn’t). His explanation of the distinction – at least skimming his posts again quickly – is that libertarianism is rights based whereas classical liberalism is more intellectually eclectic. I agree and can’t support a political ideology that’s as simple as libertarianism – there are too many things to consider to encompass them in a single principle, as important as that may be.

Be that as it may the issue of gambling is a good touchstone.  It’s hard to justify heavy curbs on it from either tradition, but at least IMO being more eclectic allows one to be more pragmatic. I don’t know what Andrew’s views on casino regulation are.

Though one can acknowledge the force of Mill’s test – which is that one should allow adults to make their own decisions to do things if they’re not hurting others – I’m afraid I don’t feel that strongly about the right to gamble at a casino – it’s a pretty trivial right.  Who am I to judge?  No-one in particular, but it’s a free world and I’m happy to put strong curbs on the kind of gambling that generates the social problems that casinos do. I was reminded of this by a tweet by Matt Cowgill referring to the diagram above.  “When gambling regs are debated, remember this graph from The Economist”. To which I tweeted back – having recently visited Singapore – “@MattCowgill And in Singapore gambling is for visitors only – locals must pay $100 to get into the casino!”

I remember how amazed I was when I heard the kinds of figures in the diagram bandied about in the wake of the PC reports. If the annual figure quoted is the best part of $1,300, that’s an average figure so the average amount lost by regular gamblers is a lot more – and it’s losses not expenditure or turnover which must be at least five times more.

My last serious interaction with a poker machine was decades ago in Queanbeyan where residents of Canberra went to gamble.  I had two dollars and decided to play on ten cent machines to spread out the joy of gambling. Then I started winning – my winnings went up to the huge sum of $5. But I’d already decided I’d keep pulling the lever until I lost it all or the night ended and I had a huge haul.  I kept pulling that lever and as I hovered around $5 for quite a while I caught myself hoping I would lose so I could stop doing something so boring. And so I left the machines and the purple shag pile carpets on the walls and ceilings and went back to Canberra comfortable in the knowledge that I was unlikely ever to get addicted to those horrible machines.

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28 Responses to Libertarianism, classical liberalism, and gambling restrictions

  1. Marek says:

    My issue with many forms of gambling(in particular the pokies) is that the games are designed in such a way that you can’t actually work out what the odds are. How are adults meant to be able to make their own decisions in these circumstances?

  2. Michael says:

    Who am I to judge? No-one in particular, but it’s a free world and

    What did you intended to mean by “it’s a free world”.

  3. The Prod Comm proposals seem to allow people to put constraints on their future behavior. Isn’t that what we do with contracts all the time?

  4. Nicholas Gruen says:

    Michael, sorry – that was more paradoxical than I intended – what I mean is that my vote is free and I’m free to impose constraints on my own and others’ behaviour according to law.

  5. conrad says:

    “My issue with many forms of gambling(in particular the pokies) is that the games are designed in such a way that you can’t actually work out what the odds are. How are adults meant to be able to make their own decisions in these circumstances?”

    Marek, I think you might be under the false assumption that people generally gamble to make money — some do, but you’ll find that people gamble for any number of reasons (lonely, something to do, escapism, etc.) and so even if the odds were prominately displayed in the centre of the screen, it wouldn’t make that much difference to many people (including most problem gamblers — I don’t think there are many that seriously believe the odds of winning are better than 50:50, cf. think they are going to win).

    My solution is to only allow 10c bets, bring back the lever you have to pull, and make the lever stiff. This way people would get RSI before losing too much money. More seriously, I don’t mind the idea of having to specify a limit that you can lose before you enter. It will be interesting to see how well it works (I work with some people who just got a tender to evaluate the new changes, so I’m sure I’ll find out!).

  6. desipis says:

    one should allow adults to make their own decisions to do things if they’re not hurting others

    I tend to draw the line where there is evidence to indicate that people aren’t making rational (i.e. their own) decisions, such as with gambling addiction. That graph is interesting given that Australia has 20% of the world’s poker machines and that 70% of problem gambling is associate with poker machines.

    I’ve also been put off watching sport lately as the constant pushing of better and updating of the odds is maddening.

  7. Pedro says:

    I like my freedoms as much as the next man, but gambling sure is off-putting. I wonder though whether some snobbery is at work here. On my part that is.

    I certainly disagree with anyone who thinks a precommittment regime would be illiberal or, more stupidly, a licence to gamble.

  8. Patrick says:

    I like gambling (on sport, mainly) even if I almost never do it, and I generally like some pretty libertarian principles, but I also support regulation of pokies.

    I vehemently oppose banning them or over-regulating them, because I understand from people who used to work in fair trading in Victoria that the legal versions even today are a vast improvement on the black market versions.

    But I strongly support regulations such as the pre-specified maximum bets discussed and banning credit-betting on pokies (I think we already do this?).

    I am even very open to arguments in favour of banning all coin- or card-operated machines in favour of shop tokens, and requiring such tokens to be only convertible on presentation of driver’s licence/passport/id card and even requiring tracking of such withdrawals and once-a-day-all-state limits on conversions.

    In fact I can’t think of an area in which I support stronger or more invasive regulation than pokies.

  9. Nicholas Gruen says:

    Patrick, we’ve got to stop meeting (of minds) like this. People will talk.

  10. Labor Outsider says:

    Of course, there is a different spin that you can put on gambling – which is that it is simply a form of entertainment. The loss then becomes an indicator of the price that Australians are prepared to pay to consume this particular service or type of entertainment. There is a lot of implicit snobbery in the debate about gambling, as there often is about the consumption choices of the poorer classes. To the extent that there is a social cost from particular types of gambling, the solution is fairly simple – tax it at a high enough level to force users to internalise those social costs and then use the revenue to address the associated costs. Sin taxes. The same argument applies to alcohol and cigarettes.

  11. murph the surf. says:

    I had developed the impression that casinos and gambling outlets were convenient places to launder the proceeds of crime.
    One outstanding worker for the triads was famous for playing in the high rollers area at Star City and churning through millions a week.He was well known to the police and the casino operators and was maintained by them to a lavish standard.
    It is probably impossible to measure the extent of laundering going on but this sort of input might skew our results to this extent?
    I mean if we aren’t really the world biggest losers at gambling maybe we are the most successful money launderers?

  12. conrad says:

    “tax it at a high enough level to force users to internalise those social costs and then use the revenue to address the associated costs.”

    Do you mean reimburse compulsive gamblers the money they’ve lost, the lives they’ve destroyed etc. ? Don’t you think it would make more sense to try reduce the problem in the first place, which is what betting limits and the like are supposed to do? I might point out here that you are going to have about as much luck trying to get compulsive gamblers to internalise social costs as you would with many other types of addiction (i.e., not much).

  13. Labor Outsider says:

    Actually, most evidence is that “sin” consumer goods like gambling are somewhat price sensitive, but they do have to be set at an appropriate level. The aim of such taxation is not to reimburse compulsive gamblers for their losses, just as taxation of alcohol does not stop alcoholics from getting liver disease. However, most people that gamble are not compulsive and the social costs are a small proportion of the total revenue generated by the industry. People paying the tax don’t have to understand that they are internalizing social costs (just as polluters don’t with regards to carbon taxes), they just have to change their behaviour at the margin. If it turns out that price incentives aren’t up to the task of inducing behavioural change alone, then sure, make use of things like betting limits.

  14. Pedro says:

    I thought that the worst form of gambling for causing problems is the pokies and the tax take is already a very big part of the total losses. It is difficult to see how tax could be used to reduce problem gambling unless you use the tax to reduce the percentage of gambled funds that can be won, thus penalising the entertainment spending gamblers.

  15. Paul Frijters says:

    gambling is a tax on stupidity. At its core the policy debate has almost nothing to do with rights, liberalism, or libertarianism, but with tax revenues. If you dont approve of taxing via gambling because of the fact that it taxes the stupid for being stupid then you have to say what other tax you want to increase.

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  17. Nicholas Gruen says:

    Thanks for the stern words Paul. I want to increase other taxes. :)

  18. Patrick says:

    LO, I think you need to visit a pokies den; whilst Nick’s ideas might suck in theory I am very sure that they are well-grounded in practice.

    Paul Frijters, that is one aspect of the debate but perhaps your perspective is a little narrow. First, of course, your last phrase is nonsensical. The other tax I want to increase is none, ‘revenue-neutrality’ is a stupid idea as you happily acknowledge when we talk about infrastructure programs.

    Secondly, your use of ‘stupidity’ might be interpreted as demonstrating deep lack of familiarity with the issue at hand, or in other words, as stupid. Gambling is a light tax on poor mathematical abilities, irrational expectations and different entertainment preferences, but it is a very heavy tax on mental disorder. I am not sure anyone supports taxing the mentally unwell for being mentally unwell (well I might support taxing greens and communists for as much, but that is a specific subset and not on point here).

    Building on that, thirdly, but most importantly, gambling also destroys families and feeds on the vulnerabilities of some of the borderline mentally ill who are already barely-catered for by our health/welfare system.

    Speaking as one of the most libertarian people on this site I have to admit that I can see how there is plenty of room for debate about destroyed families, mental health and preying on the vulnerable, in addition to, and separate to, any debate on tax.

  19. Labor Outsider says:

    Patrick – what proportion of gambling in Australia is done by people with a mental disorder? Your statement seems a bit extreme to me. Are taxes on alcohol and cigarettes taxes on people with mental disorders as well? There are many activities, that, taken to their extremes, destroy families. However, the vast majority of those that gamble are not mentally ill, are not addicts, and are not destroying their families. So, how far do you want to push regulation to protect the vulnerable few?

    Finally, in practical terms, the debate is related to tax revenue. As you well know, Australia’s federal governance structure has a significant vertical fiscal imbalance embedded in it. Revenue from pokies and other types of gambling are one of the few legitimate sources of revenue for state governments and, from a Ramsey, perspective, arguably a fairly efficient tax. So, in this case, for a state government with a given spending commitment, how would you have them raise revenue if they gave up gambling revenues? I presume you don’t think they should just run up large budget deficits instead to fund current spending (as opposed to debt financed infrastructure spending).

  20. conrad says:

    “So, how far do you want to push regulation to protect the vulnerable few?”

    Well, for most drugs, we put large numbers of people in prison, have a police force set up to catch them, make international treaties to help etc. . Given this, I don’t find betting limits on gambling very harsh. If State governments can’t get enough tax because we have denied compulsive gamblers the ability to spend all their money (including stuff they steal from others), then they’ll just have to think of other ways to collect it.

  21. Paul Frijters says:

    Patrick,

    no need to get the hackles up too much about my liberal use of the word stupid. I was paraphrasing a well-known economic saying for maximum effect, but no hurt intended.

    I cannot remember relinquishing my long-held position that economists always have to think about the opportunity cost when they advocate spending on something or foregoing taxation. When was i supposed to say something like that on infrastructure spending? (sounds more like Nick than me). Besides, whilst you can make the case that you will get more future tax revenues if you spend more on infrastructure now (i.e. its an investment) the same case is harder to make for gambling.

  22. Does anyone know how the Economist’s figures were calculated? The ABS industry figures for gambling in 2008-09 put total revenues at $14 billion, well short of what I would expect to generate losses of $1,200+ per capita.

    Caveat: I don’t know how the ABS calculates these figures or whether it captures all gambling revenue.

  23. Nicholas Gruen says:

    Andrew, If you want to get any purchase on any number, you have to put it in a ‘top ten’ list. Just as online outfits find this a very powerful formula for generating click-throughs, it’s a reflex action these days to arrange everyone on a ladder – this is probably literally the latest manifestation of it – albeit to a good cause. But we seem to love uncritical lists.

    Puts me in mind of Woody Allen’s character’s comment in Annie Hall (about LA) “All this town does is give awards! Best Fascist Dictator, Adolf Hitler!”

  24. desipis says:

    Andrew, these ABS stats indicate gambling revenue was $15B in 2004-05 at “$996 per head of adult population”. If you take $996 and increase by GDP growth you get closer to the $1200 figure.

  25. desipis says:

    “GDP growth” should be “wage growth” there.

  26. Lindsay says:

    they’re not hurting others … generates the social problems that casinos do.

    They are hurting others and themselves, “social problems” are not an abstract. Why do we put so much effort into sucide prevention? They are adults and can make utility nullifying decisions if they want to.

    There is a place for group regulation for instances of information asymetry and market failure (an economic actor acting counter to their best interest I would class as failure).

    The negative externalities of gambling compared to revenue – I believe the PC report covered this and recommended tighter restrictions. I am happy to defer to people who have researched this in depth. The PC is hardly anti-market and anti-choice.

    Besides there are easy substitutes to gambling – just give me all of your money, or failing that, maximise social good and give all of your money to charity.

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