Wanna Bet?

My man Eli has some musings on the role of bets (Adam Gurri's notes here). In very very brief, Tyler Cowen says he won't make OTC bets with folks for essentially two reasons: he's made his bets by the kaleidoscope of life choices he's already made (career, family, research agenda, et al) and that beliefs are insufficiently separable to make one-off bets anyway. The thing that strikes me funniest here is that the very last person I'd think of upbraiding for refusing to wager would be Tyler Cowen. Seriously. I've racked my brain to think of someone else I personally know, and I keep coming up blank. Tyler has spent decades cultivating a rich personality that thrives on provoking provocateurs. He's the only guy I've met who can out-Strauss Strauss. Contrast this with your typical pontificatrix. Many economists are content to stuff a bunch of terms into a panel regression and use the results to make claims about the future. They use Bayes' formula as a tool to update their beliefs. Tyler wields it as a pair of hedge clippers, composing unforgettable topiary in other people's gardens. Truth is something else entirely in his hands. Asking Tyler to bet is like asking Jiro Ono to pan-fry a trout. Sure he could do it, but it's a waste of his talents and more to the point, it misses his purpose as an economist by a country mile.

But that's all a bit of a digression. You come here to read about euvoluntary exchange, not about economics professors' betting peccadilloes. The curious thing about betting is its remarkably low status. Why, just look at the mood affiliation of gambling. Las Vegas and Atlantic City are virtually synonymous with "sleaze", whether that affiliation is deserved or not. Even Monaco is where old Continental money goes slumming, gauche American imaginations notwithstanding. To get voter to swallow state-run lotteries, political elites had to rhetorically bundle it with the highest-status of all public expenditures: education. And that's just for betting over random outcomes! When we're talking about bets over beliefs, we're betting on (T)ruth (I'm not sure whether that deserves a capital 'T' or not).

Isn't that amazing? Truth is unarguably more important than how many pips on a pair of dice face up, and bets help separate wheat from chaff, yet not only are people loath to put their money betwixt their dentures, but regulatory agencies and even Congress actively and viciously shut down real-event betting markets on the most absurd grounds: incentive to cause grief (for example). This is amazing to me, steeped as I am in the EE conditions. If anything, betting markets provide a positive externality by spreading truth and corralling bloviation. Such markets should, under EE reasoning, be subsidized, not banned. Surely there's something else going on here.

And I think it's something to do with mixing the sacred and the profane. Sure, Robin says it's all about hypocrisy, and I don't think that's necessarily wrong, but I also don't think most folks would describe it that way, even after clear and careful consideration. I think most folks view the search for truth in terms of escaping from a benighted state of ignorance and the search for money as a base, necessary pursuit that keeps folks alive and comfortable. Mixing these two is like when a toddler gets gravy on her peas. You just ruined dinner.

As for why it worked for lotteries, I think that that sort of ad campaign had a nice firewall separating the mercenary from the scholar. Schools need money anyway, so why not just take advantage of some "harmless" fun? Alex is sort of right when he says that bets are a tax on bullshit, and I'm confident that he'd agree with me in saying that the lottery is a tax on stupidity. Still and all, I think that betting markets fall a bit outside the EE considerations and into the realm of Haidt's disgust dimension. Recall that life insurance used to be illegal on the grounds that it was tantamount to a wager on the arrival of the Grim Reaper.