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Are other libertarians as disturbed as I am by our government's corrupt gambling schemes?

Our government's role in gambling is a textbook on how to run an anti-libertarian state.

Consider the following:

1)The government restricts our individual liberties by banning most forms of gambling.

2)In order to compensate Native Americans for past injustices, the government then issues gaming licenses only to certain Native American tribes. Yeah, as if adding some more racial discrimination will fix a problem.

3)The government then starts its OWN gambling enterprises in the form of lotteries while restricting the right of MOST citizens to do so.

4)Then, more states selectively allow legal gaming in order to increase tax revenues.

5)In doing so, it assumes the right to selectively tax gaming profits at any rate they choose.

6)They also bestow gaming licenses on a SELECT FEW rather than the general public.

What gives government the right to selectively tax a business at any arbitrary rate?

What gives government the right to seize freedoms taken from individuals and then arbitrarily hand them out to favored individuals?

Where's the public outcry at this blatant trampling of individual freedoms?

wolvy



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I'm from Michigan, and a new disturbing government trend is going on. The state is monopolizing pull tabs in bars. These are similar to scratch off tickets. This gives the state plenty of info about a bar's customer volume from pull tabs for any given day. Not only is the government monopolizing gambling, but they can use the information from the pull tabs to check validity of tax returns and bar income. If that isn't government intrusion, I don't know what is.

Are other libertarians as disturbed as I am by our government's corrupt gambling schemes?

I think the government already has the ability to take our money as it pleases. Why should it need to take a perfectly good private business and take it over?

srundell
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wolvy,

Good thought provoking post and unfortunately accurate.

What gives government the right to selectively tax a business at any arbitrary rate?

What gives government the right to seize freedoms taken from individuals and then arbitrarily hand them out to favored individuals?


Those were rhetorical, right?

Where's the public outcry at this blatant trampling of individual freedoms?

IMHO, the public doesn't get it. If the average shmo on the street read what you just wrote, I suspect you'd get a "huh?"

And why stop there with the inconsistencies? The government outlaws Ponzi schemes but runs the biggest one on the planet (Soc. Sec.). No public outcry there for the same reason.

Just more double-standards from the rulers.

Matt.

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Not only is the government monopolizing gambling, but they can use the information from the pull tabs to check validity of tax returns and bar income.

I don't think using this information to check the validity of tax returns is a legitimate gripe.

Whether the government should be monopolizing the pulltab industry, or collecting location-by-location pulltab business data by other means, is a legitimate question. (My answer: the government shouldn't be conducting business, and probably shouldn't be collecting the data.)

Whether the government ought to be taxing the bar's receipts or profits, is another legitimate question. (My answer: probably not - unless the bar is owned by a corporation.)

But if there is (assumed for the sake of argument) no problem with the government having location-by-location info on pulltab business, and there is no problem with the government taxing the bar, then I don't see any issue with the government cross-checking the data to see if the bar's declarations of how much business it's doing are reasonably consistent with the pulltab business.
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But if there is (assumed for the sake of argument) no problem with the government having location-by-location info on pulltab business, and there is no problem with the government taxing the bar, then I don't see any issue with the government cross-checking the data to see if the bar's declarations of how much business it's doing are reasonably consistent with the pulltab business.

I see it as the government using it's monopoly to invade privacy. To me it is similar to the government sending a representative in each bar and opening the cash register to approximate the cash in the drawer. It seems pretty shady to me. But then again, I don't think the government should tax business at all, so I might be a bit biased :)

srundell
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2)In order to compensate Native Americans for past injustices, the government then issues gaming licenses only to certain Native American tribes. Yeah, as if adding some more racial discrimination will fix a problem.

I've always disliked the government granting special consideration to Indian tribes. I say they are American citizens and they should be subject to the same laws and restrictions as any other American.

Rope
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I've always disliked the government granting special consideration to Indian tribes. I say they are American citizens and they should be subject to the same laws and restrictions as any other American.

Rope


I agree.

If you can identify a particular aggrieved group which happens to be of one race or ethnicity, they deserve compensation if they were personally victimized.

Their racial heirs do not deserve ongoing preferential treatment. This is a form of racism.

I strongly oppose any form of government racism. Its unconstitutional and unjust. It is one of the gravest violations of individual rights.

Its not even accurate to separate humanity into different "races." So-called "races" intermarry and produced people of mixed "race" who defy classification. There's only one race - human.

wolvy

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I've always disliked the government granting special consideration to Indian tribes. I say they are American citizens and they should be subject to the same laws and restrictions as any other American.

I say that the moon is made of cheese. You wanna make any bets on the wisdom of starting a cheese harvesting operation there?


Tribes are sovereign nations and are allowed the sovereignity associated with that status. something about treaties negotiated with the United States or something...

Yours truly,
Mr. X

...jeez...
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Tribes are sovereign nations

Either tribal members are US citizens or they're not. If they are not, then they should not recieve the benefit of US taxes or the justice system. Just because the government makes a treaty out of guilt doesn't mean it's a good one. Call it what it is: foreign aid.

srundell
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Either tribal members are US citizens or they're not. If they are not, then they should not recieve the benefit of US taxes or the justice system. Just because the government makes a treaty out of guilt doesn't mean it's a good one. Call it what it is: foreign aid.

Tribes are sovereign nations. Tribal members are US citizens as well as members of their tribe.

Let me try to explain in terms that are simple to understand. For the most part, a tribal nation is the same as a state. All the citizens are still citizens of the larger country. The state/tribe is exempt from paying federal taxes, but the citizens are not.

In many cases, tribes create corporations within the state that their reservation is in, and these corporations are taxable under state and federal law.

Those are the facts. Please feel free to ignore them and start posting your knee-jerk opinions again.

Yours truly,
Mr. X

...clarifying...
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Those are the facts. Please feel free to ignore them and start posting your knee-jerk opinions again.

That they are facts is likely true, and I've no reason to doubt that they are.

'How things are' and 'how things should be' are quite often two completely different things though.

Regards,

Eldrehad

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Those are the facts. Please feel free to ignore them and start posting your knee-jerk opinions again.

No problem. Since I'm posting an opinion anyway, I'll keep doing that. I think three paragraphs to define US citizen/expemtion is a bit much. But of course, that is my opinion. The choices should be citizen/non-citizen. Anything else is creating a citizen of a different class, and I believe those shouldn't exist.

srundell
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No problem. Since I'm posting an opinion anyway, I'll keep doing that. I think three paragraphs to define US citizen/expemtion is a bit much. But of course, that is my opinion. The choices should be citizen/non-citizen. Anything else is creating a citizen of a different class, and I believe those shouldn't exist.

I thought I had made it clear, but it's obvious I haven't. Members of the tribal nations are citizens of the same class as every other citizen of the U.S. There are no exemptions for individuals.

States and tribes are both legal entities on a par with each other. Just like certain powers are Federal and certain powers are State, certain powers are Federal and certain powers are Tribal.

I'm pretty sure your special citizen straw man is dead now, but you can keep beating on him if you'd like.

Yours truly,
Mr. X

...individuals and governments are different...

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'How things are' and 'how things should be' are quite often two completely different things though.

Do you have a better proposal for how to recognize a sovereign governmental entity within a larger one than the model we are currently using in the U.S. for states/tribes?

Yours truly,
Mr. X

...all ears...
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Do you have a better proposal for how to recognize a sovereign governmental entity within a larger one than the model we are currently using in the U.S. for states/tribes?

Sure... either make them a completely sovereign nation, or make them part of the United States the same as any other. In fact, it should be they who make the choice between the two.

Regards,

Eldrehad


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Sure... either make them a completely sovereign nation, or make them part of the United States the same as any other. In fact, it should be they who make the choice between the two.

They are a part of the United States just as much as the state of Maryland is a part of the United States. A governmental body with limited sovereignity. Cf. http://www.first-americans.net/FAQs.htm for facts about the nature of tribes and tribal members.

Yours truly,
Mr. X

...not sure what the problem is...

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...not sure what the problem is...

Thanks for clarifying the status of American indians and their relationship with the US government.

In my opinion, the 'problem' is that recognized indian tribes are allowed to operate casinos. They suck money out of nearby communities and flaunt their exempt status in the face of non-indian Americans.

Perhaps it wouldn't be so bad if their casinos were at least confined to their reservations, but they are allowed to build casinos anywhere.

There is an issue currently pending in Northern California (not sure of current status). A local tribe is planning to build a casino within city limits. A lot of people (myself included) are opposed to the project for a variety of reasons.

The main reason being that casinos degrade the prosperity of the region in which they are located.

One may say how do they effect prosperity? They only offer minimum wage jobs, tourism money goes mainly to the casino rather than to local businesses, and, as stated previously, they suck money out of the local community. Money that would be better spent building sound industry and good families.

Rope
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Thanks for clarifying the status of American indians and their relationship with the US government.

You're welcome.

In my opinion, the 'problem' is that recognized indian tribes are allowed to operate casinos. They suck money out of nearby communities and flaunt their exempt status in the face of non-indian Americans.

When the casinos are operated on tribal land, this is really no different than Nevada or New Jersey choosing to operate casinos. It's within their purview as a state.

Perhaps it wouldn't be so bad if their casinos were at least confined to their reservations, but they are allowed to build casinos anywhere.

There is an issue currently pending in Northern California (not sure of current status). A local tribe is planning to build a casino within city limits. A lot of people (myself included) are opposed to the project for a variety of reasons.


This is not entirely the case. In order to build and operate a casino off of tribal land, there must needs be an agreement made with the jurisdiction in which the casino will be operated. I'm willing to bet (no pun intended) that there is a public hearing process involved with them operating a casino in the city limits. Most states require tribes that would like to operate casinos off tribal lands to form corporations subject to the laws of the state, including payment of state and Federal taxes.

The main reason being that casinos degrade the prosperity of the region in which they are located.

Las Vegas has been the fastest growing metropolitan area in the country for many, many years now. This is not entirely due to the presence of the gaming industry, but it has been a positive force for economic growth and prosperity of the whole region. I'd be willing to speculate that the libertarian attitude towards gambling in Nevada, and the broader libertarian sentiment there has created a climate that's very livable and full of opportunity.

One may say how do they effect prosperity? They only offer minimum wage jobs, tourism money goes mainly to the casino rather than to local businesses, and, as stated previously, they suck money out of the local community. Money that would be better spent building sound industry and good families.

If the casino is on the reservation (or in Vegas), I can see how it's not a local business (though it's local where it is). However, if the casino is opened within the city limits, it is by nature a local business. Wherever you go, there you are.

Yours truly,
Mr. X

...should get back to work...
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In my opinion, the 'problem' is that recognized indian tribes are allowed to operate casinos. They suck money out of nearby communities and flaunt their exempt status in the face of non-indian Americans.

The problem isn't that the indian tribes are allowed to operate casinos but, rather, that everyone else is prohibited from doing the same. It is the government's restrictions that create the monopoly, not the indians. Personally, I think it's sort of funny to watch the indians use this to their advantage. I read one article on the Seminoles here in FL indicating that every memember of the tribe gets $45K/annually from the casino operations.

FoolNBlue (Off to look for a cute single Seminole....)
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Either tribal members are US citizens or they're not. If they are not, then they should not recieve the benefit of US taxes or the justice system. Just because the government makes a treaty out of guilt doesn't mean it's a good one. Call it what it is: foreign aid.

srundell


I agree wholeheartedly. Any arrangement which assigns different rights to US citizens based on a treaty is asinine and grossly unfair.

wolvy
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I thought I had made it clear, but it's obvious I haven't.

Your have made your point agonizingly clear. Unfortunately it doesn't match what I'm saying. I understand what is. I am saying what I think should or should not be.

Tribal = State
State citizen = no race restriction
Tribal citizen = race restriction

State citizen != Tribal citizen

That is my arguent. It's the same as exempting a country club from taxes.

srundell
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One may say how do they effect prosperity? They only offer minimum wage jobs, tourism money goes mainly to the casino rather than to local businesses, and, as stated previously, they suck money out of the local community. Money that would be better spent building sound industry and good families.

What wage jobs were casino employees making before the casinos came in? Were they even employed? What level of tourism was Shreveport/Bossier City experiencing before they opened up casinos? How about almost none! Tourism has opened up hotels all over those towns. Tourists buy gas and food all over town. Tourists use taxis and shuttle buses as well. Casinos pour TONS of tax money into local and state coffers. Shreveport looks like a boom town compared to its former self.

That 'creates poverty' argument doesn't really wash.
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"That 'creates poverty' argument doesn't really wash."

=======================================================================

In fact, it's laughable. Increasing business activity cannot cause poverty, except when the increase in competition far outweighs the increase of business activity, and that's only a transitory state. (Once that happens, no one wants to be in that business anymore...)

-JAR

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That 'creates poverty' argument doesn't really wash.

It really depends on how you look at it.

Assume I'm considering opening one of two possible businesses. I'm either going to build a furniture plant and make wooden chairs, or alternately, a casino.

If I open a furniture plant, there's no question that this is an economically generative act. I take raw materials, like wood and screws and glue, and transform them into a chair. In the process I am creating something more valuable to society because it is more useful.

A casino, however, doesn't create wealth - or at least certainly not in the same way (limiting ourselves to the gambling, excluding the restaurants on the casino grounds, for example). All casinos do, or casino games do, is redistribute wealth. Casino gambling is a strikingly clear example of a zero-sum game.

Now, I don't have a problem with legalized gambling... the way I look at it, it's a service, an entertainment service, and it just happens to have a unique billing system which is known as the 'house edge'. Heck, I even enjoy the occasional trip to Vegas, so don't misunderstand me here... I'm not one of the 'gambling is evil' crowd.

By the same token, though, we need to look at casino gambling for what it is... a zero-sum game, and as such, not economically generative. Since it's a zero sum-game, though, it's not economically destructive either.

So... do casinos create poverty? Well, they certainly redistribute wealth, and they might create poverty if those who are least able to afford to lose money are the ones who gamble most often. In the macroeconomic sense, though, casino games don't destroy wealth.

But... your seeming contention that they create wealth is also, in my view, in error. Zero-sum games are zero-sum games, period.

Regards,

Eldrehad

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If I open a furniture plant, there's no question that this is an economically generative act.

There's no question in a command economy; however, in a market economy the question is answered by whether folks buy furniture from the plant or go to the casino. If there's plenty of furniture on the market then the casino is the business that will generate economic activity sufficient to produce a profit while the furniture plant might go under or displace some other furniture plant.

Regards,
Prometheuss
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If there's plenty of furniture on the market then the casino is the business that will generate economic activity sufficient to produce a profit while the furniture plant might go under or displace some other furniture plant.

You'll get no argument from me. I was just trying to point out that casino games are zero-sum... and I don't see how it can be argued otherwise.

Now... as I said before, I view gambling as a form of entertainment which happens to have a unique billing system known as the 'house edge'. Given this viewpoint, could an argument be made for casinos being economically generative?

I sure think so.

The casino is taking resources, table, felt, playing cards, dice, etc., and using them in a way that casino patrons find useful - they are creating entertainment - for which they get to charge. And subsequently the market participants get to decide which is more useful to them... a few hours at a craps table or a new chair.

Again, I'm not against casinos.

Regards,

Eldrehad

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All casinos do, or casino games do, is redistribute wealth.

That's probably why they're against the law in so many places--they're musceling in on government's job of wealth redistribution. (Comment is only half sarcastic).

Arguably any buying/selling transaction can be looked at as wealth generation/redistribution. Person/Entity A traded thing X (most likely dollars) to person/Entity B for thing Y. Barring coercion on either side, this transaction was implicitly mutually beneficial to A and B (otherwise A wouldn't have bought or B wouldn't have sold).

Using this example, for the casino's gambling arm, thing Y is most likely one of two things with relation to A: (1) entertainment and/or (2) a "chance". Granted, a "chance" doesn't amount to anything tangible (if you lose), but then I don't have anything to show for sitting through a 3-hour movie other than stiff joints. So yeah, the casino may not have created wealth for everybody (A) that walked through the door; but then any form of passive entertainment probably didn't either.

If there is a "problem" with casinos it is likely that a good portion of the people that are there shouldn't be there--just like many of the folks playing the lottery. However if this problem is real it has everything to do with personal responsibility (I recognize that's unfortunately a scarce commodity in our society anymore) and nothing to do with wealth generation.

Just some thoughts...

Matt.
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Hi Eldrehad,

But... your seeming contention that they create wealth is also, in my view, in error. Zero-sum games are zero-sum games, period.

Economically, building wood & screws furniture, or providing past-time entertainment is equal either way. The CRITICAL wealth supporter is the CIRCULATION of value, which Casino's currently inarguably succeed at.

We could go on & on, deeper & deeper into the employment created, the gambling addicts created, etc. etc.... but the bottom line is that more money FLOWS without coercion (and those last two words are critical as well!)

ANYTHING that creates & supports trade & value flow is a net-creator of wealth in a free market.

Dave
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I was just trying to point out that casino games are zero-sum... and I don't see how it can be argued otherwise.

Easily argued;
They improve living experience, which is a distinct & marketable value...
EXACTLY like having a fluffy chair to sit on!

It can be further argued that the experience some get from gambling/entertainment, even just a single event, can provide a longer-lasting and greater value than a stick & cotton sofa.

In the rest of your post you seem to graps this... but it's odd to deny it at the outset.

Dave

PS. I've always marveled at the folks who think "anything non-manufacturing" isn't adding real value to the world.... as though "everything manufacturing" actually automatically is.
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Dwdonhoff: ANYTHING that creates & supports trade & value flow is a net-creator of wealth in a free market.

I agree. Some economist categorize business activity as primary, secondary and tertiary where:

1) extractive is primary (farming, mining, harvesting, etc.)

2) manufacturing is secondary (packaging, processing, assembly, etc.)

3) services are tertiary (moving, storing, trading, selling, etc.)

There is nothing inherently good or bad about any of the three.

Eldrehad: A casino, however, doesn't create wealth - or at least certainly not in the same way (limiting ourselves to the gambling, excluding the restaurants on the casino grounds, for example). All casinos do, or casino games do, is redistribute wealth. Casino gambling is a strikingly clear example of a zero-sum game.

This could be said of every form of entertainment and even stretched to most services. Does watching a movie redistribute wealth from the viewer to the theater owner and so forth? Does a massage redistribute wealth from the client to the masseuse? Does an consultation with a lawyer redistribute wealth from client to attorney? Does a tarot reading redistribute wealth from the client to the reader? Does a tutoring session redistribute wealth from the student to the tutor? Does a ticket to a football game redistribute wealth from the buyer to the owner? Does a piano lesson redistribute wealth from the teacher to the student?

I think not. In every case someone walks away with nothing in hand, but willing parts with the money. The essence of any purchase of goods and services is a willing buyer and seller. A casino is no different from any other service business. Now consider a more tangible example, the furniture factory. Does the factory create wealth? If so, how? They just add value to raw materials that someone else produces through labor. Is that really different enough to claim that the furniture factory creates wealth and the casino does not? If there is a difference, what about the dry cleaner? Is he adding wealth when he takes my clothes and cleans them or are we just redistributing wealth? Is the maid redistributing wealth or creating wealth when she cleans a room?

Regards,
Prometheuss
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ANYTHING that creates & supports trade & value flow is a net-creator of wealth in a free market.

Agreed.

The only problem is that in the real world, there's no such thing as a free market.

Regards,

Eldrehad

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In the rest of your post you seem to graps this... but it's odd to deny it at the outset.

Allow me to explain myself. When I wrote that the game was zero-sum, that's exactly what I meant... the game. The entire 'casino experience', if you will, isn't.

Does that help clear things up?

Regards,

Eldrehad

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This could be said of every form of entertainment and even stretched to most services.

Agreed... I think you'll find that I addressed that in a follow-up post.

Regards,

Eldrehad
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PS. I've always marveled at the folks who think "anything non-manufacturing" isn't adding real value to the world.... as though "everything manufacturing" actually automatically is.

Oh, I agree wholeheartedly.

This often ties into the problem I have with people who think manufacturing jobs are a panacea for our economy and scream loudly when they're replaced with service jobs in our economy.

How many times have I heard, "But... but... if this trend continues, our country won't make antying! Our economy will have no value!" I'm sure you well know that the entire reason our economy is transitioning from manufacturing jobs to service jobs is precisely because the service jobs are of greater value.

Just a pet peeve of mine... rant over. :-)

Regards,

Eldrehad

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Hi Eldrehad,
The only problem is that in the real world, there's no such thing as a free market.

In the BIG picture, where can you ESCAPE the free market? Ultimately, "free market" is merely synonymous to "natural economics" and you can alter a natural flow, but never stop the flow. That there IS flow is an ongoing natural given... and there is no such thing as being "marketless," thus, no escape from the Free Market.


Allow me to explain myself. When I wrote that the game was zero-sum, that's exactly what I meant... the game. The entire 'casino experience', if you will, isn't.

ACTUALLY... a Casino game is a NEGATIVE sum game, due to the house vigorish...
</nitpick> ;~)

Cheers,
Dave

(Are you feeling the love? ;~)
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In the BIG picture, where can you ESCAPE the free market? Ultimately, "free market" is merely synonymous to "natural economics" and you can alter a natural flow, but never stop the flow. That there IS flow is an ongoing natural given... and there is no such thing as being "marketless," thus, no escape from the Free Market.

I beg to differ.

A free market is a theoretical construct. The definition of a free market is, for example, one in which labor is perfectly mobile.

Said market does not exist.

ACTUALLY... a Casino game is a NEGATIVE sum game, due to the house vigorish...

As long as we're nit-picking... no, it isn't.

The house vigorish is part of the redistibution, from the bettor to the casino.

Regards,

Eldrehad



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That 'creates poverty' argument doesn't really wash.

I'm not a gambler, but I have eyes.

I remember once long ago a friend was telling me how he had lost his entire paycheck in an after work card game (I was present but did not participate). Money that he needed to provide for his family.

My ex-father-in-law used to live in Las Vegas. He told me how the locals would describe someone as having 'the fever' when the gambling temptation hit them. How they generally managed to lose significant assets before the fever broke.

My sister and brother-in-law live in the midwest, near the Mississippi river. Several years ago they legalized riverboat gambling in the hope that it would rejeuvanate the local economy. My brother-in-law (who is in wholesale produce) told me that business suffered as a result of the new trade in town. Tourists and locals tend to spend their money gambling (losing) rather that spend the money on other pursuits.

I haven't really followed the case, but yes, the local tribe that wants to build the casino in northern California did come to an agreement with the city council. However the payoff was minimal. If I recall correctly, several of the city council members were recalled (ala Grey Davis) because of the outrage of the community.

I think a basic stance of the Liberterian model is that government should stay out of the way when the people are in pursuit of happiness. But why should I have to tolerate having those 'places of pursuit' in my backyard?

I am kind of neutral on legalizing drug use, prostitution, gambling, etc. But I believe that if those forms of entertainment are legalized they should be legal for all citizens and the location of those activities should be confined to certain delegated areas.

Rope



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I'm not a gambler, but I have eyes.

I remember once long ago a friend was telling me how he had lost his entire paycheck in an after work card game (I was present but did not participate). Money that he needed to provide for his family.


And I know folks who gamble and take bets for a living. The money they make provides for their family. Even if the guy were playing in a casino, a good part of the money he lost would go to pay the people who work at the casino. So his (temporary) poverty does not necessarily increase or decrease overall poverty. His money does not fall out of the economy just because he gambles it away.

Regards,
Prometheuss
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I beg to differ.
A free market is a theoretical construct. The definition of a free market is, for example, one in which labor is perfectly mobile.
Said market does not exist.


"Perfectly Mobile"???? Where did you come across such a restrictive definition?
Here's Merriam-Webster's online definition;

One entry found for free market.

Main Entry: free market
Function: noun
: an economic market operating by free competition


ACTUALLY... a Casino game is a NEGATIVE sum game, due to the house vigorish...

As long as we're nit-picking... no, it isn't.
The house vigorish is part of the redistibution, from the bettor to the casino.



In order to keep integrity in your argument, you'd have to believe there is no such thing as ANYTHING but a zero-sum game. "All energy is stable in the universe." In EVERY set of transactions all funds can be traced to their ultimate recipients... that doesn't determine whether something is positive, negative, or zero-sum.

The determination is the perspective of who/what is considered participants.

A neighborhhod poker game is "zero sum" if 5 pals walk in with an aggregate of $500, and at the end of the night they walk away with an aggregate of $500, regardless of who carries what balance.

In a Vegas game, they walk in with an aggregate of $500, and walk away somewhat short of $500... THAT is why it's considered "zero sum."

Cheers,
D
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But... your seeming contention that they create wealth is also, in my view, in error. Zero-sum games are zero-sum games, period.

That was not my contention, per se. I was responding to a post that claimed that casinos degrade prosperity in a region. I argued that they create many jobs and increase tourism. Yes, they also redistribute wealth like government tax. Just like a lottery they are often referred to as a poor man's tax. Unlike a lottery they create many more jobs and related business for their local area.

Now, individual games are definitely mostly income for the house, but if the casinos disappeared people would generally find somewhere else to blow that money. Maybe strip clubs and liquor stores suffer when casinos come in? I'd be interested to find out. :o)
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"Perfectly Mobile"???? Where did you come across such a restrictive definition?

In every one of my economics courses in college. Free markets are a theoretical construct, and perfect mobility of labor isn't he only assumption... that the goods are commodities is another assumption. In fact, any economy that protects intellectual property rights and has patents is, by definition, not a free market.

Certainly there are economies that are closer to, or further away from, that theoretical idea of a free market - but that's all a free market is, a theoretical construct that exists nowhere in the world today (though I do contend that it usually in our best interests to get as close to that theoretical idea as possible).

In order to keep integrity in your argument, you'd have to believe there is no such thing as ANYTHING but a zero-sum game.

Not true. Again, the game of roulette is absolutely zero sum. No wealth is created - it simply changes hands. When I build a chair, real material wealth is created, as the chair is more useful to society than the wood I made it from. A dollar in a gambler's pocket is no more or less useful to society than a dollar in the croupier's tray.

Now, the casinos are providing an entertainment service, for which patrons are willing to pay money, so in creating entertainment they are creating economic utility - creating wealth. So, again, while roulette is a zero-sum game, the casino business is not.

Does that help clear things up?

Regards,

Eldrehad

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Again, the game of roulette is absolutely zero sum. No wealth is created - it simply changes hands. When I build a chair, real material wealth is created, as the chair is more useful to society than the wood I made it from.

I have to disagree. Maybe the wood is more valuable to me raw, than as a chair. Maybe I was going to build something else. Maybe 'society' already has more than enough chairs. So the wood is more useful than the chair.

So by building a chair, you have dicreased economic utility. It is not automatically a positive.


hewler
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Hi Eldrehad,

In your seeking of an definition of Free Market, you're getting confused with a "Perfectly EFFICIENT Market."

A free market doesn't require a lack of artificial constraint, just as water will always seek it's own levels. Constraints live WITHIN the free market, they don't eliminate it.

I'll set this aside though, as I suspect we're really on the same page.


In order to keep integrity in your argument, you'd have to believe there is no such thing as ANYTHING but a zero-sum game.

Not true. Again, the game of roulette is absolutely zero sum. No wealth is created - it simply changes hands.

The GAME of Roulette is NOT zero-sum at any for-profit casino, but is a negative-sum due to the vig built into the payoff rules.

Maybe at your neighborhood "casino night" at the Kiwanis Club, where gaming profits aren't the point... maybe THERE it's zero-sum (where winners pick stuffed toys and losers lose no money, and everyone pays $100 for dinner.)


When I build a chair, real material wealth is created, as the chair is more useful to society than the wood I made it from. A dollar in a gambler's pocket is no more or less useful to society than a dollar in the croupier's tray.

But an hour of a gambler's entertainment time at the gaming table is real life wealth. CERTAINLY arguable as of equal and often GREATER utility value to certain discount furniture.

Wealth has nothing to do with physical property, but with the market's valuation of utility.


Now, the casinos are providing an entertainment service, for which patrons are willing to pay money, so in creating entertainment they are creating economic utility - creating wealth. So, again, while roulette is a zero-sum game, the casino business is not.

I really REALLY thought you "got it"... until the capper end sentence...

Whether the GAME is zero-sum or otherwise has nothing to do with wealth creation.

Let's DRAMATICALLY simplify this;
Wealth is created by the circulation of value... period.

Could be currency,
could be trade-in-kind, (chickens for camaros,)
could be baseball cards & marbles,
could be chair sticks, glue & screws,
could be experience of time in a focused endeaver,
could be a service creating something, or
could be creating nothing but emotions...

The RESULTS of the trade have no effect on wealth either way... it's the VOLUME OF TRADE that determines a society's wealth.

Casinos currently VERY OBSERVABLY increase the volume of trade in a community, and by that very simple acid-test can be known, without a doubt, as increasing the overall net wealth of that greater community (which includes ALL participants, however distantly related, to the trade.)

To flip it upside down (for contrative understanding);
Imagine every human on earth possessed $1 Million dollars...
(*OR* 1 Million CHAIRS, for those committed to furniture,)
HOWEVER, everyone was restricted to SPENDING (circulating) no more than $10,000 per year...

You would have a society of incredible poverty, amidst the "physical wealth."

NOW, imagine everyone having exactly $10,000....
HOWEVER, every person SPENDS that $10,000 as rapidly as they can.
By the nature of a "zero sum" economy, that money cannot "pool" but instead forces itself back into one pocket as fast as it's shoved away from the other.
Individuals may "spend" that $10,000 circularly over and over and over....

THIS is the experience of "WEALTH!"

Depressions don't occur because somebody had a massive bonfire and burned all the currency...
Depressions occur from lack of circulation.

Conversely,
VIBRANT economies don't occur from ADDIITONAL currency nor property...
Vibrant economies occur when value is in rapid circulation.

Cheers,
Dave
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I'll set this aside though, as I suspect we're really on the same page.

We are, and thanks for pointing that out... my economics courses were a while back.

I really REALLY thought you "got it"... until the capper end sentence...

Actually, I don't think I ever lost it. :-) My failure was, I think, one of communication, not ideas.

The RESULTS of the trade have no effect on wealth either way... it's the VOLUME OF TRADE that determines a society's wealth.

In a free market, you are absolutely and uneqivocally correct.

How's that?

Regards,

Eldrehad





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I've always disliked the government granting special consideration to Indian tribes. I say they are American citizens and they should be subject to the same laws and restrictions as any other American.

A good idea.

Equally libertarian (in my mind) is the idea that the federal government should live up to the contracts (treaties) it made with the Native Americans granting them sovereignty on their reserved lands.

-NGR

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A dollar in a gambler's pocket is no more or less useful to society than a dollar in the croupier's tray.

You're missing the point.

A dollar SPENT is better for the economy than a dollar SAVED.
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A dollar SPENT is better for the economy than a dollar SAVED.



A dollar spent is better for the economy than a dollar buried in a can in the backyard.


Your savings provides capital for someone else to start a business, purchase an asset, or have current consumption. Savings & spending are two sides of the same coin.
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The main reason being that casinos degrade the prosperity of the region in which they are located.

Tell that to Las Vegas and Atlantic City.
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You'll get no argument from me. I was just trying to point out that casino games are zero-sum... and I don't see how it can be argued otherwise.

In that case, all other entertainment businesses are also "zero-sum" businesses. Restaurants, theaters, music halls, would all be considered zero-sum under your definition.
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This could be said of every form of entertainment and even stretched to most services. Does watching a movie redistribute wealth from the viewer to the theater owner and so forth? Does a massage redistribute wealth from the client to the masseuse? Does an consultation with a lawyer redistribute wealth from client to attorney? Does a tarot reading redistribute wealth from the client to the reader? Does a tutoring session redistribute wealth from the student to the tutor? Does a ticket to a football game redistribute wealth from the buyer to the owner? Does a piano lesson redistribute wealth from the teacher to the student?

Great minds think alike.
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Allow me to explain myself. When I wrote that the game was zero-sum, that's exactly what I meant... the game. The entire 'casino experience', if you will, isn't.

Okay, but then a concert is definitely a "zero-sum" experience because there is no way you will walk out with your money unles you have been given the tickets.
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I remember once long ago a friend was telling me how he had lost his entire paycheck in an after work card game (I was present but did not participate). Money that he needed to provide for his family.

My ex-father-in-law used to live in Las Vegas. He told me how the locals would describe someone as having 'the fever' when the gambling temptation hit them. How they generally managed to lose significant assets before the fever broke.

My sister and brother-in-law live in the midwest, near the Mississippi river. Several years ago they legalized riverboat gambling in the hope that it would rejeuvanate the local economy. My brother-in-law (who is in wholesale produce) told me that business suffered as a result of the new trade in town. Tourists and locals tend to spend their money gambling (losing) rather that spend the money on other pursuits.

I haven't really followed the case, but yes, the local tribe that wants to build the casino in northern California did come to an agreement with the city council. However the payoff was minimal. If I recall correctly, several of the city council members were recalled (ala Grey Davis) because of the outrage of the community.


I had a bunch of alcoholics in my family. Does this mean we should go back to prohibition because some folks can't handle themselves?
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Your savings provides capital for someone else to start a business, purchase an asset, or have current consumption.

At which point it is a dollar spent. My point remains valid.
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A dollar SPENT is better for the economy than a dollar SAVED.

Forgive me, but that is one of the single biggest economic fallacies I know of.

When one saves a dollar, that does not mean the dollar isn't spent. One saves the dollar, perhaps at a bank, who in turn lends that dollar to someone else who turns around and spends it.

Now, if by saving money you mean putting it in an empty muffin tin and burying it in the back yard then yes, you have a point. If the dollar is saved any other way, though, your contention is not true.

Regards,

Eldrehad


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In that case, all other entertainment businesses are also "zero-sum" businesses. Restaurants, theaters, music halls, would all be considered zero-sum under your definition.

We're having a communication problem I think. None of these business are zero-sum, and again, as I said before, the casino business isn't zero sum either.

Regards,

Eldrehad

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Now, if by saving money you mean putting it in an empty muffin tin and burying it in the back yard then yes, you have a point.

Well, what I said was: "A dollar SPENT is better for the economy than a dollar SAVED."

I meant that spending a dollar is better for the economy than keeping it in your pocket.

Keeping your dollars in the bank for lending to others is not saving, it's investing.

save: to put aside (money) as a store or reserve
invest: to commit (money) in order to earn a financial return

If I had said "A dollar SPENT is better for the economy than a dollar INVESTED" then you might have a valid point about economic fallacy. But that's not what I said. Congratulations on knocking down your own straw man.

-NGR



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I meant that spending a dollar is better for the economy than keeping it in your pocket.

The best place for that dollar is that in which that dollar is employed in the use with the greatest utility - even if the greatest utility happens to be in my pocket.

Either way, your contention is still untrue.

Regards,

Eldrehad

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The best place for that dollar is that in which that dollar is employed in the use with the greatest utility - even if the greatest utility happens to be in my pocket.

The best place for that dollar, since it is yours, is where it provides the greatest utility to you. That may well be in your pocket. But I wasn't talking about what's best for you, I was talking about the economy. The economy is driven by the CIRCULATION of money. And a dollar in your pocket is not circulating. If by saving that dollar now you're able to spend that dollar somewhere else later, it changes my argument not one whit... for it's now a dollar spent again, helping the economy go 'round.

your contention is still untrue

You seem to be arguing against your perceptions of my arguments rather than the actual content of my argument. For a minute there you even said "in this case you'd have a point", at which point I confirmed that was indeed my argument, but now you've decided I'm still wrong anyway?

-NGR
~confused


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The best place for that dollar, since it is yours, is where it provides the greatest utility to you. That may well be in your pocket. But I wasn't talking about what's best for you, I was talking about the economy. The economy is driven by the CIRCULATION of money. And a dollar in your pocket is not circulating. If by saving that dollar now you're able to spend that dollar somewhere else later, it changes my argument not one whit... for it's now a dollar spent again, helping the economy go 'round.

How do we define macroeconomic well-being? I like to define it as the highest possible aggregate utility. Well, if we use that definition, as one member of the economy that makes up the aggregate, what provides the highest utility to me is also that which provides the highest aggregate utility for the economy.

You seem to be arguing against your perceptions of my arguments rather than the actual content of my argument. For a minute there you even said "in this case you'd have a point", at which point I confirmed that was indeed my argument, but now you've decided I'm still wrong anyway?

Well, yes... on the one hand I see your point regarding the difference between putting a dollar in the bank vs. keeping it in one's pocket... but then as the discussion continued and I got to thinking it through a little further, I decided that if the greatest utility for that dollar is in my pocket (because I really like dollars in my pocket), then that's also what's going to contribute to the aggregate utility and overall economic well being.

Regards,

Eldrehad



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I decided that if the greatest utility for that dollar is in my pocket (because I really like dollars in my pocket), then that's also what's going to contribute to the aggregate utility and overall economic well being.

If the only reason that dollar is in your pocket is because you really like dollars in your pocket then it may well be contributing to your personal well-being, but if your plan is to leave that dollar in your pocket for the forseeable future then that dollar is NOT contributing to the aggregate economy, because you've effectively removed it from circulation.

-NGR
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If the only reason that dollar is in your pocket is because you really like dollars in your pocket then it may well be contributing to your personal well-being, but if your plan is to leave that dollar in your pocket for the forseeable future then that dollar is NOT contributing to the aggregate economy, because you've effectively removed it from circulation.

I disagree with you. As long as the dollar is providing me with utility, it is still economically useful. Utility isn't dependent upon circulation.

Take a painting that you buy because you like, put on your wall, and have no plans to sell. Is that painting economically useful, does it give you utility? Sure it does... it gives you utility every time you look at it. Sure, you only paid for it once, but the price you paid was paid with the knowledge that it would continue to provide you utility for years to come. It wasn't a 'look at it once and then it turns into a puff of smoke' deal, was it? And again, I'd argue that since the painting is continually providing economic utility, it is continuing to contribute to the aggregate economic utility, and is therefore still contributing to society's overall economic well being.

The same is true for the dollar in my pocket. I have decided that the dollar in my pocket gives me greater pleasure than a McDonald's double cheeseburger (or anything else) I could buy with it. I therefore, by definition, have put the dollar to its most productive use because I have employed it where it will grant the greatest utility.

Regards,

Eldrehad


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If the only reason that dollar is in your pocket is because you really like dollars in your pocket then it may well be contributing to your personal well-being, but if your plan is to leave that dollar in your pocket for the forseeable future then that dollar is NOT contributing to the aggregate economy, because you've effectively removed it from circulation.

Forgive the double-reply, but I just thought of a simpler way of putting this.

What is overall economic well-being in the macroeconomic sense? Well, I think it's the aggregate economic utility.

If that's the case, that that which provides me, personally, with utility is, by definition, contributing to the the aggregate economic well-being.

Otherwise you are saying, "Well, it isn't valueable to other people, so therefore it isn't contributing to society". Well, if that's your argument, then there are a lot of people who don't find spinach valuable (blech!), so spinach doesn't contribute to overall economic well being?

You can't have it both ways... you can't say, on the one hand, one person gets a benefit but society doesn't - because the benefit to society is the sum of the benefits to the individuals in society.

Either what benefits the individual is considered a benefit to society, or it isn't... and either that dollar in my pocket benefits me, or it doesn't.

Regards,

Eldrehad

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You can't have it both ways... you can't say, on the one hand, one person gets a benefit but society doesn't - because the benefit to society is the sum of the benefits to the individuals in society.

Either what benefits the individual is considered a benefit to society, or it isn't... and either that dollar in my pocket benefits me, or it doesn't.


A dollar's value is tied directly to the amount of stuff you can pay for with that dollar. You could even say that a dollar is DEFINED by the amount of stuff you can trade it for. But a dollar has no practical or aesthetic use in and of itself... other than as a means to an end. By contrast, a painting has instrinsic value... it's pretty to look at.

Utility is increased whenever an exchange is made wherein both parties receive something of more value to them than what they traded away. But a dollar is useful precisely because it can be used for buying things... if it sits in your pocket for all eternity then it might as well be tissue paper for purposes of the sustaining the economy. Buying a painting can increase utility... if the seller wants $1000 more than he wants the painting, and the buyer wants the painting more than he wants his $1000, then they've both improved their lot AND the money is still available for further circulation.

Utility is increased through exchanges advantageous to both parties. A dollar in your pocket cannot represent an increase in utility, as no exchange has taken place.

Utility is not increased by removing a dollar from circulation. And saving a dollar indefinitely is effectively removing it from circulation for that duration.

-NGR
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...a dollar has no practical or aesthetic use in and of itself....

I disagree with you. Since we don't agree on the definition/value of a dollar, then I can see why we're stumbling over other issues. I think you have a dollar defined incorrectly, or at least, aren't measuring the utility of a dollar correctly.

A dollar's value is tied directly to the amount of stuff you can pay for with that dollar. You could even say that a dollar is DEFINED by the amount of stuff you can trade it for.

If this is the case, a dollar would have equal value to all people. While on the surface this might appear true, if we dig down to true economic value, utility, this certainly isn't the case. Take the concept of diminishing marginal utility... is a $20 bill worth the same to a homeless person who hasn't eaten in a week as it is to a billionaire? The dollar still buys the same stuff in both person's hands, so by your definition, it is of the same value to the homeless hungry person as it is to the billionaire.

But that's not true, is it? One would increase the homeless person's utility a whole lot more by giving the dollar to him than one would increase the billionaire's utility by giving it to the billionaire.

A dollar in your pocket cannot represent an increase in utility, as no exchange has taken place.

With all due respect, I think you are wrong. I like having money in my wallet... if nothing else it gives me a small sense of security. Does not that sense of security have utility, even if that dollar is never spent, and never transacted?

You bet it does.

Regards,

Eldrehad





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I think we've talked past each other.

I believe (correct me if I misstate) that you're arguing that maximized economic utility is most efficient for the economy, and since a dollar in your pocket is maximized utility to you it adds to the efficiency of the system.

Here's where we started:

"A dollar in a gambler's pocket is no more or less useful to society than a dollar in the croupier's tray."

Now, is a $20 bill worth the same to a homeless person who hasn't eaten in a week as it is to a billionaire?

I suppose I made an assumption that $1 was of greater utility to the croupier than to the gambler. My impression while writing my first post (a dollar spent is better than a dollar saved) was that the dollar was more likely be pocketed forever (effectively removed from circulation; buried in the backyard) in the hands of the gambler than the croupier. Without that assumption in place my arguments do fall down... and looking back I see that this assumption was far from a given.

An excellent argument, El.

Food for thought: Imagine a multimillionaire at a mental crossroads. He has become distrustful of banks and Wall Street, and has enough money already for all his forseeable needs. He decides to hoard his money in cash at home, as he sees this as his best use of funds since it makes him feel safe, comfortable and secure. His money could be available capital, but he's effectively removed most of it from circulation.

Theory: personal economic utility can be at odds with the greater economic utility.

-NGR
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I believe (correct me if I misstate) that you're arguing that maximized economic utility is most efficient for the economy, and since a dollar in your pocket is maximized utility to you it adds to the efficiency of the system.

That's pretty much what I've been trying to say, yes.

Theory: personal economic utility can be at odds with the greater economic utility.

Here I'm going to have to disagree with you - at least with regard to the example you cited, which I'll copy here:

Food for thought: Imagine a multimillionaire at a mental crossroads. He has become distrustful of banks and Wall Street, and has enough money already for all his forseeable needs. He decides to hoard his money in cash at home, as he sees this as his best use of funds since it makes him feel safe, comfortable and secure. His money could be available capital, but he's effectively removed most of it from circulation.

This is still the best use for those dollars and the use that maximizes overall utility in the economy.

We can measure the utility to those who might seek to borrow these funds by looking at what they are willing to pay, in interest, to get them. If our multimillionaire is looking at the investing landscape and saying to himself, "5% interest? No, I feel more comfortable with the money stuffed under my mattress." then we know that the greater utility for him, and for the economy, is under the mattress. He is getting more satisfaction from the money's current use (as mattress filling) than others would get out of it if they borrowed it - and we know this because they have not offered him a 'price' for his money that he is willing to accept.

In short, we know he's getting more satisfaction, or utility, than the rest of the economy (the would-be borrowers) by virtue of the fact that no transaction is taking place.

Transactions happen when economic resources (including dollars) are being moved from a less productive use to a more productive use (with utility maximization being the definition of productiveness in this example). Again, if no transaction is taking place, that is de facto evidence that the resources are already employed where they grant the overall economy the greatest utility.

Does that make sense?

Regards,

Eldrehad







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I've always disliked the government granting special consideration to Indian tribes. I say they are American citizens and they should be subject to the same laws and restrictions as any other American.

This is sarcasm, right? You can't possibly believe in unilateral abrogation of all those treaties the U.S. Government signed with Indian tribes, can you?
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Thanks for clarifying the status of American indians and their relationship with the US government.

In my opinion, the 'problem' is that recognized indian tribes are allowed to operate casinos. They suck money out of nearby communities and flaunt their exempt status in the face of non-indian Americans.


Nevadans and New Jerseyans are "allowed" to operate casinos too.

I say either make them Americans or not. No more of this states rights BS!

R:
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We can measure the utility to those who might seek to borrow these funds by looking at what they are willing to pay, in interest, to get them. If our multimillionaire is looking at the investing landscape and saying to himself, "5% interest? No, I feel more comfortable with the money stuffed under my mattress."

But that's got nothing to do with my example. The millionaire is stuffing his mattress becuase he's decided that's where he wants his money, not because he can't earn a high return.

...then we know that the greater utility for him, and for the economy, is under the mattress. He is getting more satisfaction from the money's current use (as mattress filling) than others would get out of it if they borrowed it - and we know this because they have not offered him a 'price' for his money that he is willing to accept.

The problem is that an individual's choice to hoard money may have nothing to do with utility and everything to do with his personality and mindset.

In short, we know he's getting more satisfaction, or utility, than the rest of the economy (the would-be borrowers) by virtue of the fact that no transaction is taking place.

He has decided that NO transaction is worthwhile to him considering his financial circumstance. That says nothing about the utility of his decision. You're assuming that hoarding his money is the best use of money. That might be the case for him PERSONALLY, but if that choice is based on mere whim there's no guarantee that his whim is not decreasing utility overall.

Transactions happen when economic resources (including dollars) are being moved from a less productive use to a more productive use (with utility maximization being the definition of productiveness in this example). Again, if no transaction is taking place, that is de facto evidence that the resources are already employed where they grant the overall economy the greatest utility.

That's seems horribly circular. Transactions are defined as utility maximization, so if there's not a transaction that proves that utility is already maximized?

Let's consider the hypothetical once more... (A multimillionaire) decides to hoard his money in cash at home, as he sees this as his best use of funds since it makes him feel safe, comfortable and secure. His money could be available capital, but he's effectively removed most of it from circulation.

I've been arguing this poorly. Ultimately, the multimillionaire is NOT maximizing his utility by sitting on his money (though I think I argued the opposite for a while there). The utility of the multimillionaire's money is NOT maximized by storing it permanently under his mattress. (How could it be, if the road to maximal utility is transactions, and he's suddenly stopped making those). Instead, the multimillionaire is choosing to NOT maximize his utility because of personal preference.

-NGR


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But that's got nothing to do with my example. The millionaire is stuffing his mattress becuase he's decided that's where he wants his money, not because he can't earn a high return.

I beg to differ. This dovetails nicely with your example. He's decided that he'd rather put the money in the mattress than in the bank - the reason doesn't really matter. If he'd rather have it in the mattress than in the bank, it's because that's where he gets the greatest utility from the money. Others are not willing to give, in return, anything of even greater utility in order to entice him behave differently. The greatest utility for the economy as a whole is still under that mattress.

The problem is that an individual's choice to hoard money may have nothing to do with utility and everything to do with his personality and mindset.

Okay, this is the fundamental problem we're having. I contend that his personality and mindset are the conditions that lead this man to the position that under the mattress is where his money will have its greatest utility. Perhaps he gets a sense of comfort, or security, or just really really likes the idea of mattres filling made from $100 bills. That's utility. Others in the economy might not think that's his chioice is a particularly useful one, but that doesn't matter. If he likes it, that's utility - the reason doesn't really matter.

He has decided that NO transaction is worthwhile to him considering his financial circumstance. That says nothing about the utility of his decision.

Again, I disagree with you. Assume I own a painting that I really, really like - it was painted by some relative I am close to, and I wouldn't exchange it for anything in the world. Does the painting grant me utility? You bet - I really, really like the painting. Does the painting grant me more utility than it would anyone else? Absolutely!

Here's how we know... we know this because I'm not willing to exchange it for anything.

That painting, in my hands, is more useful than $1 million, $10 million, or $100 million. We know this because I'm not willing to sell it for any of those prices - in fact, any price at all. That painting provides me with more utility than any amount of money can.

Here's what I think is the most important part - keeping the painting in my hands therefore maximixes overall economic utility. It maximizes the utility for the entire economy by leaving the money in the hands of those who think the money is more valuable, and leaving the painting in the hands of me, who finds it to be more valuable. We maximize utility all around... everyone keeps what gives them the greatest utility.

That's seems horribly circular. Transactions are defined as utility maximization, so if there's not a transaction that proves that utility is already maximized?

Yes, but it's not circular - just logically consistent.

Think of any exchange. Think of kids trading baseball cards. Why do they trade them? "I'll give you my Randy Johnson for your Alex Rodriguez, deal?" Well, the only way this transaction will ever happen is if the holder of the Rodriguez card thinks the Johnson card will grant him more utility, and vice versa. If the holder of either card doesn't think the other card will grant him more utility, there won't be a deal.

And if there's no deal, we know that utility is already maximized.

It's really simple, if there's no deal, the Johnson card stays in the hands of the person who will get the most utility from it, and the same is true for the Rodriguez card.

Now, assume the holder of the Rodriguez card likes the Rodriguez card only a little better than the offered Johnson card, but the holder of the Johnson card likes the Rodriguez card a lot better. What happens then? Well, any schoolboy should be able to tell you that the holder of the Johnson card will say, "Okay, I'll give you my Johnson card and my Pedro Martinez card for your Rodriguez card, deal?"

If through the haggling these boys arrive at a deal it's because they are increasing utility - each getting something they perceive as more valuable than what they are giving up. If they never do arrive at a deal, that means that utility is already maximized.

It isn't circular, it goes to the very definition of utility, and opportunity cost.

Ultimately, the multimillionaire is NOT maximizing his utility by sitting on his money (though I think I argued the opposite for a while there).

Yes, he is. You are confusing what you think his utility should be with what it actually is. If he gets the greatest satisfaction from using his money as mattress filling, then he has indeed maximizes his utility.

Instead, the multimillionaire is choosing to NOT maximize his utility because of personal preference.

I disagree. Personal preference is a big part of what makes up utility.

I have two cars for sale, identical except for color. One is blue, the other one red. Assume Sally really likes red, and doesn't like blue so much. Will the red car give Sally a greater utility than the blue one? You bet. Personal preference has everything to do with utility.

Regards,

Eldrehad














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Assume I own a painting that I really, really like - it was painted by some relative I am close to, and I wouldn't exchange it for anything in the world... Does the painting grant me more utility than it would anyone else? Absolutely!

Here's how we know... we know this because I'm not willing to exchange it for anything.

That painting, in my hands, is more useful than $1 million, $10 million, or $100 million. We know this because I'm not willing to sell it for any of those prices - in fact, any price at all. That painting provides me with more utility than any amount of money can.


But how can that possibly apply to a man hoarding MONEY? How can his 10 million dollars be worth more than 100 million dollars? It can't... unless he's acting irrationally.

If he'd rather have it in the mattress than in the bank, it's because that's where he gets the greatest utility from the money.

Others are not willing to give, in return, anything of even greater utility in order to entice him behave differently. The greatest utility for the economy as a whole is still under that mattress.

But he's not INTERESTED in receiving anything in return. He's not even willing to entertain the possibility. Utility theory depends on a rational actor. I contend that the multimillionaire is acting irrationally, even if keeping his money under the mattress does maximize his satisfaction. If he WERE acting rationally, there would be some investment or other transaction he'd be willing to participate in. Since there's NO transaction he's willing to be a part of, he CAN'T be acting rationally. And since he's acting irrationally, he's not maximizing his utility, even if he's maximizing his satisfaction.

-NGR
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But how can that possibly apply to a man hoarding MONEY? How can his 10 million dollars be worth more than 100 million dollars? It can't... unless he's acting irrationally.

Who's offering him $100 million for $10 million? Sure, in that example he's behaving irrationally, and in that case, all bets are off. We weren't, at least until now, using that example. We were saying that there is no interest rate that others are willing to offer that this person is willing to accept.

Heck, if someone else is offering $100 million for $10 million, we'd have irrational players on both sides of this one.

I contend that the multimillionaire is acting irrationally, even if keeping his money under the mattress does maximize his satisfaction.

Not in the examples that we've used up until this point. Tell me... at what point does this person's behavior constitute irrationality? Turning down 5% interest? 10%? 100%? Even 100% interest isn't the $100 million for $10 million 'trade' you alluded to.

Sure, everything I'm saying depends on rationality - but a person who hoardes cash isn't necessarily irrational - and if he isn't, said cash hoarding is maximizing overall utility in the economy.

Regards,

Eldrehad



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Eldrehad,


As I have followed this conversation, I have become slightly confused by one of the points you have repeatedly attempted to make.

You seem to be making the assumption that whatever a person decides to do with their money automatically equates to maximization of utility. Speaking only for myself, I can look back over my life and find far too many instances where I made unwise or ignorant decisions with my resources. Decisions, many of which, I would change in a heartbeat if I could go back in time. It's difficult to believe that in those instances that was the maximum utility for those resources just because I stupidly decided that's what I wanted at the time.

Just because a person derives pleasure or satisfaction from the utilization of their resources, does this mean that utilization was maximized? Personally, I don't believe I will ever achieve maximum utility of my resources until I stop making mistakes, which isn't likely to happen any time soon.


The Barbarian
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Just because a person derives pleasure or satisfaction from the utilization of their resources, does this mean that utilization was maximized?

Yes.

Personally, I don't believe I will ever achieve maximum utility of my resources until I stop making mistakes, which isn't likely to happen any time soon.

But you didn't think it was a mistake at the time, did you? Therefore, at the time, you were maximizing your utility.

Regards,

Eldrehad



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We were saying that there is no interest rate that others are willing to offer that this person is willing to accept.

Close, but no. I said... Imagine a multimillionaire at a mental crossroads. He has become distrustful of banks and Wall Street, and has enough money already for all his forseeable needs. He decides to hoard his money in cash at home, as he sees this as his best use of funds since it makes him feel safe, comfortable and secure.

That's not "no one's made a good enough offer", but closer to "I'm not interested in entertaining any offer".

Sure, in that example he's behaving irrationally, and in that case, all bets are off.

I never said that he was making a rational choice. I said that he chose to hoard his money due to distrust of banks. You made an assumption that his choice was rational... but that assumption wasn't a part of the original proposition.

Sure, everything I'm saying depends on rationality - but a person who hoardes cash isn't necessarily irrational - and if he isn't, said cash hoarding is maximizing overall utility in the economy.

Many people are willing, able, and is some instances prone to acting in an irrational manner. And since someone acting irrationally is all it takes to invalidate the Utility Theory, it doesn't automatically and in all instances apply to the real world.

I DO concede that, assuming rational actors, we cannot assume that a dollar spent is superior to a dollar saved.

-NGR
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Personally, I don't believe I will ever achieve maximum utility of my resources until I stop making mistakes, which isn't likely to happen any time soon
---
But you didn't think it was a mistake at the time, did you? Therefore, at the time, you were maximizing your utility.


This kind of thinking is why no one takes economists seriously. I mean, really! Because he THINKS he's making the right choice, that's automatically maximal utility? A mistake is still maximal utility by virtue of the fact that he didn't realize it was a mistake at the time? Join us all in the real world, will you?


-NGR
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A suggestion, if you don't mind my butting in for a moment:

Why don't you clearly define "utility" before continuing? Differing assumptions about what comprises utility seem to be at the heart of your disagreement.

cheers,
-progmtl.
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Close, but no. I said... Imagine a multimillionaire at a mental crossroads. He has become distrustful of banks and Wall Street, and has enough money already for all his forseeable needs. He decides to hoard his money in cash at home, as he sees this as his best use of funds since it makes him feel safe, comfortable and secure.

That's not "no one's made a good enough offer"


Okay, here's our fundamental difference then... I think this is quite clearly a case of "no one has made a good enough offer". What's inherently irrational about a feeling of security in knowing one has a source of cash at the ready? I know I get that security from cash, so I don't find it inherently irrational.

I DO concede that, assuming rational actors, we cannot assume that a dollar spent is superior to a dollar saved.

We can absolutely agree on this point. The question is only whether this hypothetical person is rational or irrational. Since he doesn't exist, I think further debates on whether or not he's rational might not be terribly productive. :-)

On the major points here, though, it would appear we fully agree, and that's the important part.

I've very much enjoyed this discussion, by the way.

Regards,

Eldrehad



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Okay, here's our fundamental difference then... I think this is quite clearly a case of "no one has made a good enough offer".

It was pretty clearly "not entertaining any offer..." in MY mind. ;-)

What's inherently irrational about a feeling of security in knowing one has a source of cash at the ready?

Nothing. It was kind of implied in the "would rather have all his money in a tincan rather than some of it making him more money"... especially since this is virtually the definition of irrational you seem to be working from.

The question is only whether this hypothetical person is rational or irrational. Since he doesn't exist, I think further debates on whether or not he's rational might not be terribly productive. :-)

Fair enough!

I've very much enjoyed this discussion, by the way.

Me too!

-NGR
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