Some bloggers bet on ideas expressed in writing. Some were very successful. I have decided not to do so (for now). In some cases, people who refrain from betting are criticized for not having the courage to follow their beliefs. I don’t believe that criticism is reasonable, and I’ll explain why in this post. Before that, I would like to emphasize that I am not against gambling, nor am I criticizing others for gambling. I’m simply expressing my very subjective personal preference. My distance from gambling has two aspects: personal and philosophical. (That’s not ethical.)
Personal objection:
Remember when you were young? Maybe an 8-year-old boy tried to get Freddy to pull Mary’s ponytail. When Freddie refused, they made fun of him. “No, no, no, I’m scared to do that.” Maybe he was scared. Or maybe he had another reason. Maybe he was a polite person. Or maybe he was kind. Fear is not the only human motivator.
Unfortunately, many people seem to have so little imagination that they can’t imagine why someone would refuse to bet on their beliefs unless they were afraid of losing money. Refusal is taken to imply that the beliefs they stated were not sincere in some way. It’s safe to say that I’m not a fan of this kind of childish mockery. But it happens so often that I feel the need to respond.
Note: Some (but not all) of the following apply to my current situation, but not when I was 30 years old. If you are young, these claims may be difficult to accept.
The last time I looked, Brian Caplan made dozens of bets and won almost all of them. If you look at his bets, many of them were quite lopsided. The people he bet against often took stupid positions. Therefore, I understand the argument for making Caplan-style bets. 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.]
Let’s consider six possible bets. Bet big or small with friends, bet big or small with strangers, bet big or small on the betting market. Start with three small bets.
At my age and financial position, I don’t really care about money, and I don’t really care about small amounts of money. I value two things. Take time to enjoy the last few years of your life and not get frustrated. money? I’m not saying it’s completely fine, but it’s lower down on the list.
Why go through the frustrating process of making multiple small bets that, even if you win, won’t change your life at all? To make matters worse, I’m a very uncompetitive person. I feel bad if I lose a bet. If you win $50 from a friend, you feel sorry for that friend. And who cares for a whopping $50? If I bet on someone I don’t know, how do I know if that person will pay out? But I know that I will, and that fact tilts the bet in their favor.
I remembered something a long time ago Elon Musk’s tweetpredicted that Sam Bankman Freed would avoid arrest because he donated to the Democratic Party. (SBF donated to both parties.) I immediately knew the tweet was stupid. How did you know that? Because I’m not 100% ignorant about how the US criminal justice system works. Of course they will be chased. Ambitious prosecutors never hesitated to prosecute people like SBF. They live for such a goal. (Read “The Bonfire of the Vanities.”) Let me be clear: Mr. Musk is probably the world’s greatest entrepreneur, far smarter than I, and not an expert on every topic. There’s no shame in that. As long as you know that the complexity of government is not your thing. . .
Let’s say I offer a bet to Mr. Musk. Perhaps he ignored me. But let’s say he takes part in a bet and I win. That’s great. No, that would be a nightmare.
TheMoneyIllusion had thousands of readers, many of whom were Russian trolls who hated me. You would be inundated with requests to bet on this or that. Some of the proposed bets are too vague to resolve. If I refused, they would tease me endlessly. If I accepted, I would be stressing over whether these trolls would actually pay. I would like to spend the next few years reading my favorite novels and watching old black and white Japanese movies. We don’t need this kind of irritation.
As much as I hate making things difficult, more than once I have regretted talking to someone from a major financial company for a short period of time, even if they gave me a large amount of money. The frustrating part was getting them to pay, which often involved a lot of back and forth emails and failed attempts to make direct deposits. Most people would think that the money I received was more than enough compensation, but not me.
So if I don’t like betting with real people, why not in the betting markets? Before the recent election, I thought Trump had a 75% chance of winning the popular vote. I wrote on my blog that it is 50%. This was higher than the gambling market. I remember that Trump had a 60-65% chance of winning the election, and only 25-30% of the popular vote. So why didn’t I bet on Trump? The idea of winning with a small bet is worth the hassle of understanding how betting markets work and going through the paperwork to set up an account. It’s not worth it. Don’t tell me it’s “easy”. When someone says something is easy to do with a computer, about 90% of the time I find it difficult. (Mercatus Tech Support: “This will take about 5 minutes.” 2 hours later…)
So far we’ve been talking about small bets. What about big bets? Why didn’t you bet $10,000 or even $100,000 on Trump winning?
Now another set of problems arises. I’m married, but it’s not really “my money” it’s “our money”. It’s fine for small bets, but for big bets I’d talk to my wife. I’m far from risk-neutral in this area, and I’m much more risk-averse than I was when I was young and single. Even if you win a big bet, your life will no longer change. In fact, one of the definitions of “old age” is the moment you realize that even if you won the million dollar lottery, your life wouldn’t change much. That realization occurred to me several years ago. On the other hand, I know that my wife wouldn’t be happy to see me lose thousands of dollars on stupid political bets. So even if the bet was slightly in my favor from an “expected dollar value” perspective, it would be a bad bet from an “expected utility” perspective.
Again, I’m not against betting on ethical grounds. I can imagine that the betting offer is so lucrative that my wife will insist that I accept it. One of those “take candy from babies” bets. But it would have to be a very good bet to interest me. You will not find such a highly profitable bet in the betting market. And can you believe a stranger would pay for a $100,000 bet? And would you really want to bet $100,000 with a friend? Maybe Elon Musk. He’s so famous that he’ll be pressured into paying. Honestly, I wouldn’t rule out betting completely, but betting outside of Elon just doesn’t seem like an attractive option to me.
Philosophical objection:
When I was little, I remember tour guides showing my parents around the UW-Madison campus. The guide pointed to a building with an observatory at the top and called it the “Faculty of Astrology.” I smiled, but the others didn’t seem to notice.
Don’t get too complacent. I sometimes think that economics should be renamed “financial astrology.” Those of you who follow my blog know that I have a lot of disdain for prediction worship. Due to the EMH, asset prices are essentially unpredictable. Bubbles are a myth. Business cycles are unpredictable. Large changes in inflation are rarely predictable.
Unfortunately, most people, and even most economists, disagree. There is a kind of pseudo-macho competition to see who is the best predictor. This alone makes me sad. It would be like a bunch of people at a statistics conference bragging about how good they are at predicting roulette. Of course, not all bets are about unpredictable issues, but many are. I worry that the gambling fetish only reinforces the view that economics is primarily about prediction, and is really about political systems. For example, I don’t think I’m very good at predicting large changes in NGDP. But I believe we know how to prevent large fluctuations in NGDP. (Use level targeting and base on market forecasts.)
All of my old blog posts remain online. People are free to decide for themselves whether my opinions were generally helpful.
summary:
Just because you can’t see any reason for someone to refuse to bet other than fear of losing, don’t assume that others feel the same way. Libertarians should especially embrace this argument. Consider some relevant examples of intellectual arrogance.
“I don’t understand why people who really enjoy smoking, alcohol and cannabis would ban it.” “I don’t understand why some people like modern art and architecture. I’m sure they’re making it up. “Rap music seems stupid to me, so it needs to appeal to stupid people.” My neighbor voted for another candidate, he must be stupid or selfish or fake or brainwashed. there is no.
Don’t label people who don’t bet as cowards or scammers.
PS. If you’re still not convinced, let’s look at the problem of deterioration another way. Most people pay more than they should for all sorts of things. By actively looking for sales and coupons, you can get a variety of products and services at lower prices. Expedia hotel reservations can be rebooked whenever the price drops. But who would do that? When I was younger, I did the same thing with a large TV I bought on Amazon. Amazon promised to refund future price reductions after purchasing the set. I applied for and received 3 rebates each time the price went down. Nowadays, it has become a hassle to do that. I long for a simple life.
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