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01/09/2006

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Bruce M

I've never quite understood why gambling is presumtively illegal throughout America. While I don't agree with drug prohibition, the illegality of prostitution, and similar legislative prohibitions based on the majority's (typically irrational) notion of morality, at least there are arguments to support why those things are considered immoral. The same is not true for gambling. Sure, some people are compulsive and gamble more than they can afford to, but people spend more money in Neiman Marcus than they can afford to, also. We don't ban designer clothes.

Why is it illegal to bet on the outcome of a spinning wheel but perfectly legal to bet on the rise or fall of a stock (even a casino stock!). How is playing the stock market morally different from playing blackjack? And how is buying a state-sanctioned lottery ticket any different than me starting my own lottery (and paying my taxes accordingly). I can understand why the states' lotteries don't want the competition, but why is it so easy to convince people that gambling is somehow immoral?

Another point I'd like to make about Indian casinos is how control of the casino creates factions amongst casino-rich tribes and much conflict, infighting, and even resurrection between tribal members to gain control of the tribal councils, and thus control of the casino (and its profits). Nothing seems to cause tension, hatred, and insurection within a theretofore tight and well-knit tribal group like the introduction of an indian casino.

Not to imply this latter point provides an answer to my previous question of immorality. Fight to control the casino is the fight to own the casino. That's just capitalism, and the way the Bureau of Indian Affairs and the NIGC operate seems to provoke insurrection and tribal coups.

I see no reason why every individual in a free country should not be permitted to hang a shingle and start their own casino. Of course casino operators who steal from their customers via rigged slots and trick decks, etc, should be investigated and found guilty of theft if the evidence exists to convict. But I see no reason why running a casino is more prone to theft than running a used car lot.

Bruce M

I've never quite understood why gambling is presumtively illegal throughout America. While I don't agree with drug prohibition, the illegality of prostitution, and similar legislative prohibitions based on the majority's (typically irrational) notion of morality, at least there are arguments to support why those things are considered immoral. The same is not true for gambling. Sure, some people are compulsive and gamble more than they can afford to, but people spend more money in Neiman Marcus than they can afford to, also. We don't ban designer clothes.

Why is it illegal to bet on the outcome of a spinning wheel but perfectly legal to bet on the rise or fall of a stock (even a casino stock!). How is playing the stock market morally different from playing blackjack? And how is buying a state-sanctioned lottery ticket any different than me starting my own lottery (and paying my taxes accordingly). I can understand why the states' lotteries don't want the competition, but why is it so easy to convince people that gambling is somehow immoral?

Another point I'd like to make about Indian casinos is how control of the casino creates factions amongst casino-rich tribes and much conflict, infighting, and even resurrection between tribal members to gain control of the tribal councils, and thus control of the casino (and its profits). Nothing seems to cause tension, hatred, and insurection within a theretofore tight and well-knit tribal group like the introduction of an indian casino.

Not to imply this latter point provides an answer to my previous question of immorality. Fight to control the casino is the fight to own the casino. That's just capitalism, and the way the Bureau of Indian Affairs and the NIGC operate seems to provoke insurrection and tribal coups.

I see no reason why every individual in a free country should not be permitted to hang a shingle and start their own casino. Of course casino operators who steal from their customers via rigged slots and trick decks, etc, should be investigated and found guilty of theft if the evidence exists to convict. But I see no reason why running a casino is more prone to theft than running a used car lot.

Joe Merchant

...there is no reason why they should have any privileges denied to people in the same state, whether Indian or not, who do not live on reservations.

Indians come from a fundamentally different culture than the European conquerers of this land. The reservations were offered as a kind of "peace bribe" to those Indians who would choose to tolerate the invasion peacefully. Reservations were recognized as "quasi-soverign states" where the Indians could live without the white man's rule of law.

If non-Indian Americans are "denied a privlidge" by United States laws, those laws should not also automatically extend into the reservations, lest you deny the Indians their quasi-soverign rights to live as they choose.

Having said all of this, the Indians have finally managed to turn the tables, however slightly, and make a little mockery of the system that was imposed on them, turn the peace settlements to the tribes' advantage, and get some Power in the United States Government (money). If you consider the cost of the Indian wars, $20 billion a year in 2006 seems a small price to pay to the decendants of those Indians who chose not to wage a war of terror to the last man in 1806. But, all good things do need to come to an end before they get out of hand.

I like the Dutch approach of legalization and control, and I think it could work with gambling at least as well as it has with drugs and prostitution, but only if the population takes a rational, pragmatic view of things. I haven't seen this tendancy in the "Moral Majority", and they are a large enough and vocal enough minority to be be a major concern in any social engineering projects in the United States. We are not a mature society in many respects, and I believe the conservatives are afraid that they cannot raise their children as they would wish in a melting pot that contains people not like themselves. So, unilateral legalization of gambling is out.

What, then, to do with the Indians and their casinos? I think that they could/should be allowed to continue to run, up to a point. I am not familiar enough with Indian taxation issues to know what is practical, but at the point that the tribe is taking in $250,000 per member in annual profits, the brakes should be applied somehow. Excess profits could be channeled to Indian directed infrastructure improvements on the reservations, such as roads, schools, utilities, etc. but otherwise, tax the excess into oblivion.

Oh, and while we're at it, put up a toll booth on the beltway in D.C. and charge lobbyists, Indian or otherwise, $100,000 a day to cross inside it. It's ridiculous how cheap it is to buy political influence in this country.

Kosta Calfas

"The Indian tribes do own the reservations, and if their members want to continue living there, that is their right. But there is no reason why they should have any privileges denied to people in the same state, whether Indian or not, who do not live on reservations."

Fair enough, but owning land is one thing, having te resources to sustain it without some form of industry is another. Short of stripping reservations for natural resources, there seems few other credible way for indians to make money to build and sustain infrastructure. Moreover, should these lands no longer be sustainable, or should the indians be placed in a position to surrender them, the overall effect would be deliterious to the state and a violation of the social contract.

Where the identity of a cultural group is predicated on certain conditions, it is the obligation of an impartial multi-cultural state to facilitate those conditions to the maximum extent (i.e. without placing undue burden on other groups). In this case, the cultural groups identity is tied to its environmental surroundings as much as social practices. The sine qua non of this cultural groups alliegance to a legal order that ensures "life, liberty and the pursuit of happines" therefore is the possession of their lands which they equate with who they are, and therefore derivatively, with their life.

This goes into some rather serious questions of the extent to which a federal legal regime can impose universal legal standards on cultural communities without compromising the contractarian grounds of its legitimacy by not threatening the life of that group. The Indians are no different than evangelical christians who seek state funding for parochial schools in their state, the latter seeing itself defined and predicated upon certain ideas it feels the state has an obligation to help it disseminate, hence preserving the identity.

From a recent reading of "Frontiers of Legal Theory," Justice Posner seems to intimate a rather cavalier use of the 14th ammendment for the purpose of enforcing universal standards, be it in censorship or, it seems plausible in this case, in equality. Without retreading the relative merits of the Frankfurter-Black debate, I think it's simply worth stating that such blind equalization has a deliterious effect on social cohesion.

Now, if Justice Posner wishes to instead argue that the Indian culture is inferior to its Anglo-Saxon American counterpart, that's a question of value, and it's best left to the legislative, religious and those other communities which have license to make naked value judgements without consideration of social cohesion. This issue is complicated by the fact that usually questions of property and entitlement are not sine qua non of cultural identity and value. The playwright David Mamet recently wrote: "A court may determine whether Jones or Smith owns the overcoat, but it may not rule that chocolate is better than vanilla." In this case, however, by judging "whose property belongs to whom" or through imposition of equalization ruling, the courts are making a judgement of value i.e. That the continuation of this culture via support of lands through casions presents too much of an imposition on the state. This is patently false, and the indiscretions of one attourney do not make it otherwise.

So it's not just a case of shutting down a few casinos, or fairness. This is a case of shutting down one of the few possible industries available to cultural community to make a wage so that they may stay on land which defines them as a group, ensuring their continued existence, and consequently alliegance to the state and its laws.

Chetly Zarko

As a small-time political consultant in Michigan (I believe third most tribal casinos) who has never had the luck to have a tribal client but know someone who has worked as an attorney for several tribes, I find this a fascinating discussion. I always wondered what would happen if Michigan legalized gambling - but know its not politically possible and still haven't decided either way whether it would be desirable. But Posner's suggestion goes a bit further - he dares suggest something else I've wondered about. Effectively ending tribal sovereignty - his "benefit" is that this would foster "assimilation". Of course, avoiding that is the reason sovereignty exists, and if that were the only reason to suggest such a policy I'd disagree with it (government should neither attempt to encourage or discourage such decisions). I believe that "assimilation" though already exists - at least to the point where there no longer is a genuinely separate nation or set of nations of native origin. As such, the problems and distortions created by sovereignty should be reconsidered in light of that fact. Again, I'm not sure that we're ready for such a radical reorganization of tribal relations - there are compelling historical arguments relating to the treaties that might suggest otherwise. But if we are to consider that proposal - lets also consider questioning why we give States and sub-governmental entities sovereign immunity from lawsuits, a practice that no doubt creates a number of distortions in the market, especially in modern times where the "quasi-state-corporate" entities exist, often in competition with non-sovereign entities. We had it right in Chisholm v. Georgia, the Supreme Court decision of 1791 that was rendered null by the 11th Amendment (of course, at the time, the survival of the Union was predicated on the political process yielding an 11th Amendment, but it shouldn't be today). This is not to say that I'm against "State's rights," I'm actually quite vigorously in favor of States having far more control over most matters than the federal government, and that the States would have rights in relation to the federal government, but I believe that State sovereignty should not reign supreme over individual rights - that is, individuals are the level at which rights begin, and all larger units that have "rights" should be less supreme than those possessed by individuals.

As to Kosta Calfras suggestion that "blind equalization" has deleterious effects, if we were talking about outcome equalization rather than process, I'd agree. Communist systems provide a perfect example. But it is clear Calfras is speaking about "universal standards," a process-based equalization, and I see no evidence here to support that assertion, or evidence that the multi-culturalism Calfras lauds is "better" or "worse" than any other system. Indeed, I think Posner is merely arguing to eliminate the rent-seeking, not the "industry" itself. The assumption that tribes or tribal casinos would immediately go out of business as a result of free-market principles applied to gaming I think is a rather dubious idea, along the idea of the rather dubious claim by proponents of race preferences in admissions (so-called "affirmative action") that claim an end to preferences will eliminate opportunity for blacks. The opportunity will still be there, and indeed, for the assumption to be true (that opportunity would be gone without preferences) one would have to believe in the inferiority of blacks or black culture.

Robert

In a truly free society, no one would be crawling over Capitol Hill throwing money at legislators. This is so because those very same legislators would lack that which presently makes them the object of the lobbyist's attentions and their clients' largesse: the ability to use the coercive power of the government in granting a monopoly.
The problem begins when legislators arrogate more and more power over various areas of our lives. With that comes those who, unable or unwilling to seek a competitive advantage in a free market, seek that advanatge from the government by way of a monopoly, a franchise, an exemption, etc.
Accepting the above, the answer in dealing with Indian casinos (or any monopoly) lay in limiting government power to those areas in which a warrant of authority has been expressly granted by the Constitution. Even better would be to erect a commercial version of the First Amendment that creates a wall of separation between business and the government.

Josh Doherty

Posner begins the comment by stating the causes of corruption receive little attention. For some insight see this post:

http://www.becker-posner-blog.com/archives/2005/08/economics_of_co.html

The causes as laid out are simple economics:

1. Generations of rents (above normal profits)by an industry.
2. Rent induced entry. In this case, the explicit industry is casino gambling while the implicit "industry" is lobby work and graft generations.
3. Heavy regulation which induces corruption to navigate regulations.

So, as a summary we have rents generated by casinos (higher than necessary due to market regulation which limits supply)and regulations that are onerous. As a result, we have a high rate of entry by lobbyists. As more lobbyists enter, the competition between them begins to migrate to the offering of bribes.

Okay, so this might be a restatement of what Posner already stated. I guess I am being that person in class that raises his hand then repeats what the prof said as if he is adding some insight. I hate those guys!

Wes

Last night there was an awards show on television that was hosted by Dennis Miller. As I flipped past the channel it was on, Dennis Miller was saying something about how much money Indian Casinos make. At the time, I was like "Where did that come from?" I mean, of all the problems facing the United States, Indian casinos are way down the list of problems that actually matter.Now I understand, Republicans are trying to blame other people (in this case, people who would like to see the Indian communities propser) for their own lack of integrity. While such behaviour is disgusting, it is hardly surprising given the complete disregard that Republicans have for observed facts when forming their opinions.What has received little attention is the underlying cause of public corruption, which often and in this case simply is bad laws.Well, I am sure that I will cry myself to sleep tonight thinking about all those poor Republicans who were forced (despite their valiant efforts to the contrary) to take bribes by laws that, when it comes to a few things like gambling, give Indian reservations the same powers as other states.I mean, after all, it's not like the solution to the problem of corrupt Republican politicians is to vote them out of office or anything.

nate

A business needs a judge to provide extended exclusivity during bankruptcy, kind of like a permit to run a casino. UAL strikes me as a game of chance and an exercise in gambling, but I could easily be wrong.

http://finance.yahoo.com/q/bc?s=UALAQ.OB&t=2y&l=on&z=m&q=l&c=

N.E.Hatfield

All this appears to be is a variation on the old "Black Hills Incident". Where the Black Hills in S.D. was granted to the Indians in perpetuity. That is, until, "GOLD!" was discovered and as they say the rest is history. Even the U.S. Army couldn't stop the invasion and exploitation

Gambling begets lots of money and money begets corruption. Maybe that's why it was banned for so many years. Perhaps this geneeration is rediscovering the reasons for its regulation in the first place.

John Bows

I would like to follow up on the point made by Justice Posner about the increase in social ills that would likely follow from the non-restricted gambling.


I believe that one of the major hesitations associated with unrestricted gambling its lack of fit with the hypothesis of diminishing returns. While eating individual slices of pizza or drinking single containers of beer at the same sitting, the payoff received from each individual slice eaten or container drunk beyond some satisfaction threshold becomes less. But while the decreasing marginal returns from such activities tend to diminish a participant's interest in them, gambling is not that way. Here, the tendency may be just the opposite.


While not fully explanatory, I believe that the basic mechanism involved in gambling is explained by an article entitled "Prospecting" (Econometrica, 1979). The article's authors suggest that human beings tend to act differently to the expected value of some win/loss scenario when the wins are additional to one's initial holdings or the wins are compensating for losses from one's initial holdings. One tends to act in risk-averse or risk-neutral fashions in relation to potential wins when they are calculated as additive to one's intial holdings, but that same person will likely be driven to act in risk-inclined fashions when potential wins are seen as recapturing one's initial holdings. Given that the expected outcomes of many gambling scenario favor the house, the trap is set for the average consumer. Where it is more likely that one will lose rather than win for some wager, that person will continue to wager to recover their original holdings until much (or more likely all) of their total holdings are exhausted.


The real trap is set for those at lower income levels. Because the per dollar utility of their income is much higher than that of middlle- and upper income earners. By replacing the traditional geographic remoteness of legalized gambling institutions with locally accessible ones, society brings down any barriers that might naturally constrain individual gambling, such as high transport and transaction costs that keep people from falling victim to the prospecting vulnerability. I believe the burden of the problem and the heaviest losses associated with it will fall disproportionately on lower-income earners (however, I'm no economist or statistician, so I will apologize readily for any errors I have made and welcome any and all criticism for the position I've taken).

Arun Khanna

We need satellite campuses of state schools in major native tribe reservations. Well-educated native tribes will be able to assimilate in mainstream society.
Last but not the least, I was born in India ergo I am an Indian. You should consider changing the title to: The Economics of Native Tribe Casinos.

Joe Merchant


Yes Arun, and Colombians, Peruvians, Brazillians, etc. are also "Americans" - perhaps "South Americans" to be more precise, but "Americans" nonetheless.

I think the point that the reservations exist for the purpose of allowing the Native Tribes to choose not to assimilate is well worth repeating. If the Chineese roll into India the way the Europeans rolled across North America, you'd want some "preserves" of ancient Indian culture to exist, and not be educated and assimilated by the larger state.

There is value in preserving the Native cultures - far more than we now or ever have acknowleged.

Doug

One reason (touched upon by the author and some commenters) for the states' restriction of gambling is the protection of their monopoly rights to the lottery - the "game" with by far the worst edge against the (low-income) player. A slot machine will pay out 90-95 cents of every dollar wagered by the customer. In contrast, a typical state lottery pays out 50 cents on the dollar. Talk about monopoly power! A casino operator who dared to program his slot machine with those odds would have his license revoked.

Arun Khanna

Reply to Mr. Merchant: My suggestion for educational institutions on reservations will provide each individual native tribe member the option to join mainstream society. It is the height of arrogance to decide on your own that there is value in keeping native tribal members on reservations beset with crime and alocholism without letting those individuals have a feasible option to choose their own life (on or off the reservation). In this regard, it is telling that you or no one else is keen to live on or near such reservations.
Finally, your comment about Chinese invading India shows that knowledge or wisdom is not correlated with old age. I suggest you take advantage of Florida state universities policy of providing free classes to senior citizens.

kevin

That's very true. I do think so.

N.E.Hatfield

As for the comments regarding "native" see the following:

From a conversation overheard in a tavern in Durango Co.: That's just downright UN-AMERICAN. Why don't you go back to where you came from!

What!? My family has lived here for ten thousand years. Where do you want me to go?

Bill

1. I question the assimilation argument. It is just as likely that an Indian family will use additional revenue to support a child in higher education. What evidence does Posner have that there is the same or less assimilation as a result of gambling activity on the reservation. Absent some sources of revenue on the reservations, poor people are less likely to move or increase their educational attainment. Sources for testing the Posner hypothesis are in the US Census. You could do a comparison of a non-gaming reservation and a gaming reservation, or a time series showing the change in a reservation before and after gambling. But just a lip shot without support is just amazing to me. Arguments can be supported by facts.

2. Allocation of gambling rights is the creation and transfer of property. Presumably it is to be used to reduce poverty and also replace government programs on the reservation. My question is this: would those who support taking away the property right that was created also support using the taxing revenue to support Indian rural development and assimilation? To increase BIA funding if this revenue source disappears?

3. As to corruption, monopolies and regulation, please note that we have electical utilities, telephone companies, licensed professions (including law), zoning boards, ---and the list goes on. There is not a part of society that does not have some form of regulation, or some benefit conferred upon it by regulation. The real issue is corruption--tackle that directly, and punish it.

2.

Mike

While I agree that deregulating gaming markets would generally lower the price of gambling, I wonder if that price would fall "to the cost of operating a gambling business." Is it possible that the established rules of certain casino table games such as blackjack, three card poker or carribean stud, which give the casino a fixed edge over the player (excepting minor rule variations between markets), might amount to implicit price collusion between all the casinos? For example, PGT recently introduced and holds a patent on a table game called "Texas Hold 'Em Bonus," which gives the casino an approximately 8.5%-9.0% edge over the player. Would any casino have the ability (or the desire) to request that PGT alter the rules of the game such that a smaller edge was received? I certainly don't know, but I think it's an interesting question. Given the ability to easily reprogram machines to specfic win rates, I don't think this would be an issue with slot machines.

N.E.Hatfield

As with all aspects of gambling the old song puts it in a nutshell: " You gotta know when too hold em, know when too fold them, know when too walk away-know when to run!". Say, is that an ace up your sleeve?" ;)

vimax

I think the issue isn't corruption or "good and bad laws". I think the issue is one of freedom.

This is the price we pay for ever regulating gambling to begin with. Why not allow anyone who wants to open a casino to simply do so? Is it not up to people themselves as to how they wish to spend their money?

Why so much regulation just so a little old lady can throw some quarters in a slot machine?

N.E.Hatfield

I hate to say it, but some of those quarters probably came from selling her Medicare prescriptiion drug benefit on the black market.

N.E.Hatfield

Carl, I don't know what your study shows on NYS and NYC, but I know that legalized gambling is clearly out of control when gambling machines start showing up on the doors in the stalls in washrooms; like in Reno & Sparks.

Richard Mason

American Indians are not the only ones who can be privileged by accidents of political geography.

It is due to similar accidents of history that the State of Nevada and the Principality of Monaco have a degree of sovereign independence from their more populous neighbors, and have exploited that sovereignty to build profitable gambling industries that now form the principal basis for their economies.

Yet one does not often hear that this is unfair to neighboring states, that the Mongasques are trapped in an insidious cycle of dependency, or that Nevadans would be better integrated into the larger American community if they were subject to California law.

Admittedly, a weakness in the analogy to Nevada is that any American can move to Nevada to pursue a career in gambling or prostitution, whereas membership in Indian tribes (like membership in the House of Grimaldi?) is based on biological inheritance.

Perhaps non-Indians who live, work, or own land on Indian reservations should be entitled to equal treatment under federal and tribal law.

Larry

To all those who favor assimilation:
Forced assimilation has been tried by the federal government during at least two periods in American history. It did not work. Yes, members of Native tribes should have the option to leave the rez, but the government also owes the tribal members the ability to make a living as Indians. After taking over this nation, and leaving the Indians with the least productive land in America, we're complaining about a little gambling?

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