Austrian economists lash out at nanny state

Mark Thornton of the Mises Institute calls the passage of the UIGEA a "cheap election year ploy that purports to protect Americans and maintain moral values." He denounces the new legislation as the "very pinnacle of puritanical nannyism" and claims that internet gambling actually solves many of the negative externalities associated with gambling. By keeping vice in the closet, it does not undermine community values, he says, nor does it "expose women and children to socially undesirable activities, or introduce prostitution into communities."

The sheer naivety of the libertarian argument comes out when Thornton lists online gambling's economic benefits. "It has turned casino gaming into a normal good," he gushes, and "creates good jobs in places like poor island nations in the Caribbean."

Well, really. Gaming, online or off, will never be a "normal good" because it makes no economic sense. Normal rules of competition do not apply to gaming because more competition does not lead to better allocation of resources – the underlying aim of competition – but to an overheated market. In an area where fundamental concerns such as public order and the general interest of society are at stake, it is unreasonable to expect market forces alone to find the ideal balance. Especially without a level playing field for all the players involved.

Flawed arguments give way to plain wrong facts, however, when he singles out state lotteries for targeting low income groups. Most scientific research shows that player demographics match the general population pretty closely. And he ignores the fact that the low payout rates offered by state lotteries are mandated by regulators to ensure that gaming positively benefits communities, outweighing at least some of the risk of an activity that Thornton himself brands as "socially undesirable".

The Ludwig von Mises Institute is the research and educational center of classical liberalism, libertarian political theory, and the Austrian School of economics. Handle with care!