Some bloggers bet on the ideas they express in their writing. A few have been quite successful. I have chosen not to do this (until now). In some cases, those who refrain from gambling are criticized for not having the courage for their convictions. I don’t believe that criticism is fair, and I’ll explain why in this post. Before I do this, I would like to emphasize that I am not against gambling nor do I criticize others for it. I will just express my very subjective personal preferences. My aversion to gambling has two aspects: personal and philosophical. (It’s not ethical.)
Personal objections:
Think back to when you were young. Maybe some eight-year-old boys dared Freddy to pull Mary’s ponytail. When Freddy refused, they taunted him. “No, no, no, you’re afraid to do it.” Maybe he was scared. Or maybe he had other reasons. Maybe he was polite. Or maybe he was friendly. Fear is not the only human motivation.
Unfortunately, many people seem to have so little imagination that they can’t imagine why anyone would refuse to bet on their faith unless they are afraid of losing money. Refusal is seen as implying that their stated beliefs were somehow not sincere. To say I’m not a fan of this kind of childish taunting is an understatement. But it happens so often that I feel like I have to respond.
Please note: Some (not all) of the following apply to my current situation and would not apply to when I was 30 years old. If you are young, you may have difficulty accepting these claims.
The last time I checked, Bryan Caplan had made a few dozen bets and won almost all of them. When I looked at his bets, many of them were quite lopsided. The people he bet against often took foolish positions. So I understand the argument for Caplan-style betting. Often it was like stealing candy from a baby. Good for him! But it’s not for me.
[To be clear, although I almost always would have agreed with Bryan, I still think he did a bit better than I would have–I recall a Brexit bet where I would have taken the other side. He really did do quite well.]
Consider six types of possible bets: small and large bets with friends, small and large bets with strangers, and small and large bets on betting markets. I’ll start with the three types of small bets.
At my age and financial position, I don’t care much about money, and hardly at all about small amounts of money. I appreciate two things: time to enjoy the last few years of my life, and a lack of annoyance. Money? I won’t say it doesn’t matter at all, but it’s way down the list.
Why would I want the annoyance of making a bunch of small bets where even if I win the money it won’t change my life at all? Even worse, I have a very non-competitive personality. If I lose my bet, I feel bad. If I win $50 from a friend, I feel sorry for that friend. And who cares about a measly 50 bucks? If I bet with someone I don’t know, how do I know if he or she will pay out? But I do know I would pay, and that fact tilts the bet in their favor.
I remember one a while back tweet from Elon Muskin which he predicted that Sam Bankman-Fried would escape arrest for donating to Democrats. (SBF donated to both parties.) I knew immediately the tweet was stupid. How did I know that? Because I’m not 100% ignorant of how the American criminal justice system works. Of course he would be prosecuted. Ambitious prosecutors have never failed to prosecute someone like SBF. They live for those kinds of targets. (Read The bonfire of vanities.) To be clear, Musk is perhaps the greatest entrepreneur in the world, much smarter than me, and there is no shame in not being an expert in all areas. As long as you know that the intricacies of government are not your thing. . .
Suppose I had challenged Musk to a bet. He probably would have ignored me. But let’s say he took the bet and I won. That sounds great, doesn’t it? No, that would be a nightmare.
I had thousands of readers at TheMoneyIllusion, many of whom were Russian trolls who hated me. I would have been bombarded with demands to bet on this or that. Some of the suggested bets would be too vague to resolve. If I refused, they would taunt me endlessly. If I were to accept, I would wonder if these trolls would actually pay. I just want to spend my last years reading novels I like and watching old Japanese black and white movies. I don’t need this kind of annoyance.
To give you an idea of how much I hate aggravation, there has been more than one occasion when I regretted talking to people at a large financial firm for a short period of time, even though they were giving me a large sum of money. The exacerbation came from having to pay, which often involved a lot of back and forth emails and failed attempts at direct deposit. Most people would consider the money I received as more than enough compensation – I’m different.
So if I don’t like betting on individual flesh and blood people, why not on betting markets? Before the recent election, I blogged that Trump had a 75% chance of winning, and a 50% chance of winning the popular vote. That was higher than the betting markets, where I remember Trump had a 60% to 65% chance of winning the election, and only a 25% to 30% chance of winning the popular vote. So why didn’t I bet on Trump? The thought of winning a small bet simply wasn’t worth the time spent figuring out how betting markets work and doing the paperwork to set up an account. And don’t tell me it’s “easy.” I would say that about 90% of the time I find it difficult when someone tells me something is easy to do on the computer. (Mercatus technical support: “This will only take five minutes.” Two hours later…)
So far I’ve been talking about small bets. What about a big bet? Why didn’t I bet $10,000 on Trump’s victory, or $100,000?
This is where another set of problems comes into play. I’m married and it’s not really “my money”, it’s “our money”. This doesn’t matter for small bets, but for large bets I would consult my wife. In this area I am far from risk neutral and much more risk averse than when I was younger and single. Even winning a big bet is no longer life-changing. One definition of “old age” is the moment when you realize that even if you won a million-dollar lottery, it wouldn’t really change your life. That realization happened to me a few years ago. On the other hand, I know my wife wouldn’t enjoy seeing me lose thousands of dollars on a foolish political bet. So even if the bet was somewhat in my favor in terms of “expected dollar value,” in terms of “expected utility” it would be a bad bet.
Again, I’m not against betting on ethical grounds. I can imagine a betting offer so favorable that my wife would insist I accept it. One of those bets where you take candy from a baby. But it would have to be an extremely favorable bet to get me interested at all. You can’t find these kinds of extremely favorable bets on the betting markets, and do I trust a stranger to pay out on a $100,000 bet? And do I really want to bet €100,000 with a friend? Maybe Elon Musk. He is so famous that he would be pressured to pay up. Seriously, while I’m not completely ruling out bets, non-Elon bets just don’t seem like an attractive option to me.
Philosophical objections:
When I was young, I remember a guide showing parents around the UW-Madison campus. The guide pointed to a building with an observatory on top, and called it the ‘Astrology Department’. I smiled, but no one else seemed to notice.
Don’t be too smug. I sometimes wonder if we should relabel economics as “financial astrology.” Those who follow my blog know that I am quite disdainful of the cult of prediction. As a result of the EMH, asset prices are effectively unpredictable. Bubbles are a myth. The business cycle cannot be predicted. Large swings in inflation are largely unpredictable.
Unfortunately, most people, even most economists, disagree. There is some sort of faux-macho competition to see who is the best forecaster. This just makes me sad. It would be like a bunch of guys at a statistics conference bragging that they are good at predicting roulette. Of course, not all bets are about unpredictable problems, but many of them are. I fear that the gambling cult only reinforces the view that economics is mainly about prediction, when it is actually about prediction policy regimes. For example, I don’t think I’m very good at predicting large swings in the NGDP. But I do believe I know how to avoid large swings in the NGDP. (Use level targeting and be guided by market forecasts.)
All my old blog posts are still online. People are free to judge for themselves whether my recordings have been useful overall.
Summary:
Just because you don’t see any reason why someone would turn down a bet other than fear of losing, you shouldn’t assume that others feel the same way. Libertarians should be especially receptive to this argument. Consider some related examples of intellectual arrogance:
- “I don’t see why anyone would enjoy smoking, using alcohol or weed, and ban that.”
- “I don’t understand why anyone likes modern art or architecture; they pretend.
- “Rap music seems stupid to me, so it must appeal to stupid people.”
- My neighbor voted for the other candidate, he must be stupid or selfish, fake or brainwashed.
Don’t assume that non-gamblers are cowards or fakes.
P.S. Here’s another look at the problem of aggravation, if you’re still not convinced. Most people pay more than necessary for all kinds of things. If you aggressively search for deals and coupons, you can get lower prices on a wide range of goods and services. Every time the price drops, you can rebook your hotel reservation with Expedia. But who does that? When I was young, I did that on a big TV I bought from Amazon that promised to refund future price reductions after you bought the set. I applied for and received three discounts, each time the price dropped. Now I’m too lazy to do things like that. I long for a simple life.
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