Why the online-poker crackdown makes sense

May 18, 2011
Steven Levitt isn't very good at introspection.

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Steven Levitt isn’t very good at introspection. “I was outraged a few weeks back when the U.S. government cracked down on internet poker,” he writes, adding that “it took me a while to figure out why.” Well, I can tell him why he was outraged: he’s a gambler (he’s especially fond of the horses), and gamblers don’t like it when the government cracks down on gambling.

But no — after all that while thinking on the question, it turns out that Levitt’s own proclivities aren’t the reason he was so outraged. Instead, it’s the Daughter Test:

It wasn’t until the U.S. government’s crackdown on internet poker last week that I came to realize that the primary determinant of where I stand with respect to government interference in activities comes down to the answer to a simple question: How would I feel if my daughter were engaged in that activity?

If the answer is that I wouldn’t want my daughter to do it, then I don’t mind the government passing a law against it. I wouldn’t want my daughter to be a cocaine addict or a prostitute, so in spite of the fact that it would probably be more economically efficient to legalize drugs and prostitution subject to heavy regulation/taxation, I don’t mind those activities being illegal…

The “daughter test” makes it clear why I find the U.S. government’s stance against internet poker so ridiculous. When I imagine my daughter growing up to be a professional poker player, my reaction is to think that would be a great outcome!

Off to the side, in a photo caption, Levitt says that he’d love it if his daughter “became a poker champion.” But it’s insane to legalize an activity on the grounds that some tiny fraction of the people doing it are very successful at it. After all, the vast majority of poker players never go pro, and the vast majority of poker pros never become champions. Overall, the number of people who lose money playing poker is much larger than the number of people who make money at it.

Meanwhile, Levitt says that he wouldn’t want his daughter “to be a cocaine addict” if such activity were legalized. He says nothing about her becoming a gambling addict — just as he says nothing about her becoming a successful legal cocaine merchant who makes lots of money selling the stuff and who doesn’t use it herself.

The point here is that it’s the job of the government to look after the weakest members of society. Ultimately, if someone becomes a drug addict or loses their life savings gambling, it’s society as a whole which has to pick up the pieces and support that person. And so the government has an incentive to circumscribe such activities and even make them illegal — even if a handful of people could engage in them successfully.

I’ve tried playing online poker myself, and didn’t enjoy it all that much: for me, the pleasures of a poker game are first and foremost social ones, rather than being mainly gambling-related. Gambling serves very little in the way of public utility, and it makes sense to regulate it. Should online poker be banned entirely? Unless and until there’s a robust regulatory infrastructure in place, yes. Casinos are very carefully regulated, and I’m not sure it’s even possible to regulate online poker sites that assiduously. But certainly up until now those sites have been operating more or less outside any regulation at all. Which is why it makes sense to me that they were shut down.

Update: Some very smart pushback in the comments, none more so than a great entry from QuantPoker. Here’s some of it:

Realistically, depending on whose numbers you like, we can look at the players that make up the poker world in these pieces:

1%-5%: People at risk for being problem or addicted gamblers — Indeed these people should not be playing poker, and we should want regulations that help them control their harmful relationship with the game (I’ll get to this later).
10-15%: Players who derive significant income from poker — Not much to say here, but note that these profits are not necessarily unduly at the expense of the 1%-5% of addicted gamblers, but mostly against like-minded strategic competitors who happen to be slightly weaker at the game than them.
80%-89%: People who responsibly enjoy poker — Whether they are slight winners or slight losers, poker is a unique strategic competition that offers many social and personal benefits to its players (for one, certainly that the average person is bad at pricing and managing risk, and poker teaches that quite well). When a rational, well-minded, non-addicted person chooses to play poker, as economists, we should infer that they’re doing so *because they are deriving benefits in excess of the costs*!

Even if you take the worst-case-scenario assessment of poker as potentially harmful to too high a percentage of society, the risks are still much, much lower than other things that our society and government has already approved of. Alcohol is the obvious example. The majority of people enjoy alcohol responsibly and gain social and personal benefits from it, but a minority of people do significant harm to themselves and others through it.


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