The Case for Small Government

A Libertarian Perspective on Economic and Social Policy

March 12, 2006

Corruption, Gambling, and Abramoff

What causes corruption?

Most people’s answer is greed. That is a necessary condition, but it is not the whole story. The other critical ingredient is government policies that create the incentive for corruption in the first place.

A perfect example is the Jack Abramoff corruption scandal. Abramoff is a lobbyist recently convicted of multiple felonies in connection with Indian tribes seeking federal authorization to operate casinos.

If state governments allowed anyone to operate casinos, rather than imposing substantial barriers that can only be overcome with Federal intervention, the Indian tribes would never have needed Abramoff’s services. So this type of corruption would never have occurred.

The fact that government restrictions breed corruption does not by itself make such laws undesirable. A law against murder gives those who are caught an incentive to bribe police, judges, and jurors. Yet this does not suggest repeal of the laws against murder.

In the case of gambling, however, the government restrictions make no sense. Gambling is entertainment that millions enjoy every day; the fact that some gamblers do not control their impulses is no reason to bar the activity. Most problem gamblers will find alternative ways to gamble, like internet gambling or day trading, if legal gambling is not available.

The appropriate policy response to the Abramoff incident is therefore not more restrictions on lobbying; that simply creates more reason for people to break the law. The right response is to eliminate legal restrictions, such as those on gambling, that make little sense in the first place.

58 Comments:

At 7:26 AM, Blogger Mike Huben said...

"In the case of gambling, however, the government restrictions make no sense."

That's right: just another one of those random things that governments are prone to do out of sheer maliciousness. Nobody could have possibly wanted those laws. There's no history of people knowing of problems due to gambling. Just like drinking, smoking, drugs, and sex. No problems there. Atomic individuals have no connections to each other, and thus bear all the costs of their decisions themselves. Externalities are a ruse by statists to justify their random evil.

If libertarians were honest enough to face up to the objectives of such laws, then they might be able to make an argument about whether the laws were effective. But it's so much easier to simply declare "our enemies must be crazy!" That way you can simply bring up one problem and ask "why don't our enemies just roll over and play dead -- look, we're assuming this problem is insurmountable and completely defeats them!"

 
At 9:07 AM, Blogger Acad Ronin said...

Mike: Ask yourself, why do we have laws against gambling, and then have our state governments run lotteries with grossly negative expected values? We also permit betting at racetracks, and in some cases OTB. But the big issue is state lotteries. Much anti-gambling legislation appears to exist to protect monopoly margins on the state lotteries.

The damage, including externalities, that gambling causes comes from losses. If gambling were deregulated, competition would erode the margins on state lotteries, and margins would reduce to a level close to a fair (i.e., harmless) bet. I could imagine someone setting up a website on which parties could bet against each other with the siteowner taking only pennies per hundred dollars bet, or a small flat fee (think discount brokerages) for running the site.

Furthermore, there are many activities that produce negative externalities, driving for one. The possibility that drivers will be inept, careless, inebriated, etc., does not lead us to ban driving, but rather to address those problems directly, though admittedly imperfectly.

 
At 9:00 PM, Blogger James said...

Miron : "Most problem gamblers will find alternative ways to gamble, like internet gambling or day trading, if legal gambling is not available."

Huben: "If libertarians were honest enough to face up to the objectives of such laws, then they might be able to make an argument about whether the laws were effective."

I think someone might try reading the posts before commenting...

 
At 9:03 PM, Anonymous vtconomist said...

Perhaps you have a case for how to avoid corruption in another case just like this, but I doubt all corruption is merely government regulation gone wrong. What about Duke Cunningham and his "menu" of bribes? Or the Ohio "Coin-gate" scandal?

 
At 10:49 PM, Blogger Mike Huben said...

Acad writes: "Much anti-gambling legislation appears to exist to protect monopoly margins on the state lotteries."

Unfortunately for your theory, state lotteries are much more recent than anti-gambling legislation. So you don't seem to understand the objective of those laws.

James: even if problem gamblers sometimes find ways, restrictions could significantly affect recruitment into gambling. That could achieve the goals of the laws despite Miron's unquantified claim of evasion. And we might note that most of this legislation predates easy access to interstate gambling. It may have worked quite well for decades or more, and might need to be updated now. So please don't presume I haven't read the article: I merely leave out some of my analysis.

 
At 5:18 AM, Blogger Jeffrey Alan Miron said...

In reply to vtconomist:

Let me clarify my position. I am arguing that corruption occurs, more or less tautologically, because of government policies that some people wish to evade or avoid. This does not mean we should eliminate all government policies; in some cases, we have to tolerate a certain amount of corruption because the policies in question are beneficial.

Overall, however, my claim is that a large fraction of corruption results from policies that are not desirable in the first place; or, from polices that could be modified so as to dramatically reduce the scope for corruption.

One example is drug prohibition. I will argue in future blogs that prohibition has many undesirable consequences, and it gives drug traffickers an incentive to bribe police, judges and jurors.

A second example is government housing projects for the poor. These spawn corruption over the contracts to build the housing. A better approach is housing vouchers for the poor. This gives recipients more choice about where to live, and it reduces corruption since there are no construction contracts to be awarded.

 
At 2:41 PM, Anonymous vtconomist said...

Thanks for the clarification.

 
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