How Limit “Gambling”?
While every choice under certainty is in some sense a “gamble”, humans have often gone out of their way to create “gambling” contexts where they can more quickly make many uncertain win or lose choices. This gives participants action, fun, social engagement, and a chance to prove themselves.
Many others morally disapprove of such fun, disliking its rowdy assertive style, acceptance of greed, pleasure and play orientation, potential status-hierarchy disruptions, regrets of losers, and suffering of loser associates. They have made many kinds of such gambling widely illegal.
Many societies have tried to channel such inclinations into more socially valuable directions, such as horse-based societies encouraging gambling on horse-races. Today most of the world sees value in more accurate and liquid markets in financial assets like stocks, commodities, options, and currencies, and allows most folks to gamble in such markets.
Alas, this allows a “bootleggers and baptists” coalition of moral disapprovers of gambling, together with those who financially profit by trading against gambling-loveres in these contexts. This coalition blocks wider access to other financial assets that gamblers might like, even when that seems unlikely to increase the total amount of gambling. Especially if you consider how we allow many kinds of big non-financial “gambles” like pursuing careers in acting, music, or sports.
Such legal limits have blocked many kinds of innovation, especially in finance. Most familiar financial products were once illegal as gambling, including stocks, options, futures, and insurance. For 35 years, I’ve been saying we might achieve big social value from allowing betting markets on more topics, and making new tech to help.
So how can we make wise tradeoffs between promoting innovation and dislike of gambling? I’m personally not much bothered by gambling for fun, but policy is often set by those who are bothered much more than I. In that case, I suggest: consider the factors that increase possible harms and gains, and allow when harms seem less than gains, while restricting otherwise.
Gambling has more potential harms, at least to those who dislike it, when bets are easy to make, quickly resolved, on topics that ordinary people feel they understand, and when people can’t commit to not be allowed to gamble. Gambling has more potential gains on topics that are more technical and take longer to resolve, and when it can serve substantial risk-hedging and information aggregation functions.
Thus: allow betting on long-term technical topics that matter, so that important risks can be hedged, or important actions better informed by market odds. And lean toward allowing new types to be tried for a while, even if you doubt their net value, to see if they might find a way to overturn your initial doubts.
Added: I’m fine with giving people tools to commit to avoid future gambles, and to empower associates to limit such gambles, as long as that is implemented close to the person limited, instead of in all possible places one might gamble.
I think there's good reason to ban "gambling" if we're just talking about games of chance where the house always has an edge. It's a type of business that preys on people who have high time preference and there's good reason to protect such people from themselves.
That said, like you, I wish we allowed more forms of financial risk taking that are today illegal, such as real money prediction markets. One policy I'd like to see try is a very simple rule: allow any form of gambling, but only if the result takes at least 24 hours to resolve.
There's likely some nuance to this I haven't thought through, but my thinking is ban things that involve quick feedback loops that suck in people with high time preference and rapidly separate them from their money and in exchange allow arbitrary bets on anything so long as there's a minimum 1-day waiting period on the result. This should allow roughly the best of both worlds.
I need to be able to put myself on a list, where I will be forcefully prevented from gambling. Not everybody's psychology is as invulnerable to traps as yours is.