In a recent post on my personal blog , I shared my response to an inquiry from Paul Wakfer as to my views on gambling. Paul has since responded in kind. Due to my usual email difficulties (stuff disappears), it took me awhile to receive that response, but it’s also worth sharing, and I’ll do so with my own reply inline (killing two birds with one stone instead of first responding by email and then attempting to format it all for publication purposes).

Convention: My original and Paul’s reply will appear in block quote format. My blogged reply will appear as regular text.

Knapp — Gambling can only be considered rational if one finds it entertaining, or otherwise rewarding on some basis other than the likelihood of winning.

Wakfer — So far so good.

Knapp — Many people (myself included) do. If I play my cards right (pun intended), I can go to a casino for an hour or three, have a meal, drink as many beverages as I care to drink, sit around a table and converse with people I’ve never met before and often find interesting.

Wakfer — Here you appear to take the view that what is enjoyable to a person is completely a matter of individual taste or whim and has no relationship to reality. Instead I maintain that the purpose of life is to maximize total lifetime happiness and to do so requires carefully examining precisely *why* and *how* all things that you enjoy contribute to this goal. The result of such examination with respect to this overall purpose will be to retrain yourself to increase enjoyment of and participation in those activities that contribute more to total lifetime happiness and reduce enjoyment of and participation in those activities that contribute less.

What is enjoyable to a person is completely a matter of individual taste. That doesn’t mean that it bears no relationship to reality, however. Everything that one feels, thinks or does ultimately stems from his or her assessment of, and reaction to, reality as he or she perceives it. In some cases, of course, those feelings, thoughts and actions may reflect a flawed perception of reality (mistakes), a lack of due attention to reality (whims), or a twisted relationship with reality (rejectionism).

There is, however, another fact which must be taken into account, and that is that the size and scope of reality are such that no one person’s relationship to it is likely to match, in the weight of all variables, exactly with another person’s. The atmospheric composition and gravitational pull of Pluto are variables of existence which are, quite simply, going to play a larger role in the feelings, thoughts and actions of an astronaut orbiting same than they are going to play in the feelings, thoughts and actions of a cab driver looking for a fare in Manhattan. Conversely, the crime rate in New York is going be a more heavily weighted variable in the life of that cabbie than in the life of that astronaut.

To put a finer point on it, “happiness” is a subjective emergent factor against the objective background of existence. Furthermore, “purpose of life” is also a subjective emergent factor versus the variable objective factors of a particular life. “Maximization of total lifetime happiness” represents a calculation problem that is no less difficult than the one discussed by Mises with respect to planned economies.

Example: I have $50. If I spend that $50 on X, it will increase my momentary happiness by some small amount. If I invest it in Y, then over the course of 30 years it might (or might not — investments usually include risk) increase my total lifetime happiness by a larger amount. My decision on what to do with the $50 must (if I am examining the options closely) include an assessment of the risk involved in the investment and in the likelihood that I will or will not live for the additional 30 years which would pass before I would realize the increase in total lifetime happiness. And, of course, the act of evaluation itself may represent a cost or a benefit. There’s probably a point where evaluation consumes enough of my time and resources that it itself constitutes a drain on total lifetime happiness in excess of the augmentation that the results it yields might make possible.

That the factors which contribute to my “total lifetime happiness” may be different from those which contribute to Paul Wakfer’s, or anyone else’s, “total lifetime happiness” is not a matter of whim, or at least shouldn’t be. It is, however, a result of the fact that while humans have much in common, they also live within different circumstantial matrices in which various facts of reality carry different weight.

Wakfer — In your example above, you need to ask yourself just how the activities described contribute to maximizing your total lifetime happiness and whether some other activities during that time would be more effective for that purpose. For example, I have examined in detail all the pros and cons of alcohol consumption and have concluded that doing so is going to decrease my lifetime happiness rather than increase it. In addition, although it is certainly possible to find people anywhere who are valuable to converse with, I think that such are much more likely to be found at many other places than casinos which are, in fact, populated by many people who desire to “win big” and essentially live in a dream world. Thus, sitting around a table at a casino is at best a highly inefficient way to find people who are valuable conversationalists.

I haven’t seen the results of Paul’s examination of the pros and cons of alcohol consumption. I have, however, studied those pros and cons a bit myself. My conclusions are very different from his.

First of all, I have concluded that regular, moderate consumption of alcohol is likely to increase my lifespan by reducing my risk of heart disease.

Secondly, I’ve concluded that occasional slightly elevated use of alcohol can be instrumental in breaking down inhibitions which it is beneficial to me to have at least temporarily broken down. I suspect this may be an issue where Paul and I very much disagree, so I’m going to go ahead and lay out my particular example: Stage fright. I occasionally make public speeches and such. Doing so sometimes makes me nervous and anxious, leading to halting speech and a less successful overall presentation. A couple of drinks generally relax me just enough to speak straightforwardly and without difficulty — without, so far as I can tell, impairing my ability to think on my feet, entertain questions or arguments, etc. There’s a cost/benefit issue here. My lifetime expenditures on “two drinks before a speech” compare attractively to the benefits of being able to make that speeech (and to make speeches in general), and attractively to alternative expenditures which I might make to resolve the problem in some other way.

Thirdly, of course, is the question of majorly elevated use of alcohol. Frankly, I don’t engage in it any more. I did when I was younger, but found it to be counter-productive … and, in the last few years, also just impossible in terms of results. For whatever reason, I’m not a “lightweight.” Getting drunk is difficult for me now, even if I had some reason to want to do it. I suspect that this may have to do with my philosophical growth and my refusal, attendant to that growth, to surrender control of my mind. My drinking is now limited to the “two drinks before a speech” type — and, if I ever find a wine or beer that I enjoy enough to consume on a daily basis, I’ll incorporate it into my heart health program.

As to the quality of conversation in casinos, I seek different kinds of conversation for different purposes. It’s actually been some time since I darkened the door of a casino. I can’t think of any particular reason why I would do so for the purpose of seeking conversation now … so I don’t. However, if I did have a particular reason for seeking that particular kind of conversation, then my decision to do so would be based on that reason.

Knapp — … and at WORST I’ll spend about what I’d have spent having dinner and drinks and watching the latest 90-minute Hollywood abortion down at the local cinema.

Wakfer — This is not much of a comparison, since what is the point of watching “the latest … Hollywood abortion”. Far better to wait for reviews and other information that will enable you to pick the movies from the later available low cost rentals, which you are much more likely to find to be valuable entertainment.

The point here was not that I frequent movie theatres watching whatever the latest fare is. I don’t (on average, I see a big-screen movie once a year or so — usually a film that I want to review and that I believe will be well worth the price for some particular reason). The point was merely that, among various alternatives, I find casino gambling superior to certain others.

Knapp — At best, I may win some sizeable amount of money.

Wakfer — And just what productive effort did you make to earn this value? Why do you have any interest in gaining value for which nothing of value to others has been created or exchanged?

The productive effort I made to earn that value was a function of the productive effort I made to earn the value I wagered combined with the results of a willing exchange between myself, the casino and the other bettors. The factors in that willing exchange are multiple. The casino provides the environment, various perqs, and the chance of winning. The bettors provide their time, attendance and, ultimately, all of the capital directly at stake (whether directly on the table from themselves, or through the casino as losses to the table on the casino’s part).

As I originally stated — but should have qualified with “from the customer’s perspective” — “[g]ambling can only be considered rational if one finds it entertaining, or otherwise rewarding on some basis other than the likelihood of winning.” Losing is the price one pays for the opportunity to avail one’s self of the other services, amenities and opportunities the casino provides. The possibility of winning is one of those services/amenities/opportunities, but not the only one.

Knapp — In the usual course of things, I break about even. Maybe I’ll leave the casino with $10 more or $10 less than I entered it with, but I’ll also leave it having eaten prime rib for dinner, consumed a couple of drinks that I like but wouldn’t pay bar prices for (I’m not a big drinker, so when I do drink, I like to have good liquor), and probably with a couple of interesting conversations under my belt.

Wakfer — Most of this I have answered above. Here I will only again address the notion of gaining something at the expense of others. That low cost prime rib and drinks are subsidized by the casino from the money they make off of the irrational players who lose big in an attempt to win big. Do you really wish to accept such subsidies, once again for no exchanged production of your own and with the negative effect of effectively supporting the irrational activity of others? Can you not see that this is not so different from accepting government grants (many people are so irrational that they willing pay taxes), from selling heroin to users or sponging off the irrationality of others in any other manner? Again I would maintain that none of these effects of your actions are going to promote the maximization of your lifetime happiness.

If we’re going to consider this in terms of rationality in evaluating economic alternatives, I regard it as more rational to eat prime rib at no financial cost to myelf than to pay $25 for it. The only factor which might militate against that is if I knew that the person giving me the prime rib had stolen it. Casinos do not steal their prime rib. They buy it, with money which has been willingly paid to them by people who regard that payment as a worthwhile expenditure. If I avoided the best deal for myself based on the possibility that it was made possible by the irrationality of others, I’d never buy good food that was on clearance sale because demand for it was low. After all, that would be taking advantage of the irrationality of other customers who hadn’t known a good deal when they saw it, or of the store owner who hadn’t rationally forecast demand, right?

I reject the notion that willing exchange is “not so different” from involuntary, coercive exchange. I also reject the notion that every exchange I involve myself in must be thoroughly vetted to preclude irrationality at any point in the chain of events on the side opposite me in the exchange which led to that exchange. I don’t ask my grocer if he opened his store with keno winnings. I don’t ask my car dealer if the reason I’m getting a good deal is that the last owner of the car I’m buying blew off the very last payment due and got it repossessed.

Knapp — Of course, I haven’t been to a casino in several years … so maybe I don’t like it as much as I used to.

Wakfer — I would hope that you now would find the people there to be much more vapid than you did before.

That might be the case. Frankly, I don’t know when or if I’ll visit a casino again. When and if I do, I’ll report my findings.

Knapp — I occasionally gamble online … when I have a small sum of e-gold in my account that isn’t worth the cost of converting to federal reserve notes and that will just sit and have agio fees taken out of it if I don’t do something with it. I really consider that more a matter of housecleaning than gambling (and I come out about even — sometimes I work whatever small amount I start with up to $100 and have an exchange service send me a check, sometimes I lose it).

Wakfer — Unless the conversion fees are somewhat flat-rate and not a percentage of the amount, logically this only makes sense if you intend to lose at the gambling (but then why bother at all?), since if you win then you will have to convert it anyway. Therefore, it seems more sense logically to bite the bullet and convert it right off. This problem of how to use e-gold without incurring a lot more fees than other methods is the major reason why I have not begun to use it. It appears that it only pays to use e-gold if you are a wealthy person and need places to hide funds from government.

This seems to be a simple matter of failure to communicate clearly on my part. I’ll try again.

Occasionally I have a small balance in my e-gold account — small enough that the cost of having it converted to cash and mailed to me would consume most of it. On the other hand, if I just leave it there, it’s eventually going to decline in amount as agio fees are deducted (it might conceivably grow in value if the price of gold rises, but at these small amounts it’s just not really anything to wait with bated breath for). If I have $10 worth of e-gold sitting there, by the time I have it converted and sent to me as a check, the check is probably going to be $5 or less — and I’ll have expended time and effort to make that happen which is worth more than that $5.

So, I log on to an online casino which accepts e-gold. Sometimes I win, sometimes I lose (overall, I believe I’m “ahead of the house”). If I lose, then I haven’t lost much. If I win, once I have an amount which is worth converting to cash and having sent to me (usually I arbitrarily set that amount at $100), I do so. The gambling does not represent any great expenditure of effort, as I actually find the process interesting and as I usually bet in a manner which is decisive one way or the other fairly quickly (usually I bet one-fifth of my original stake until I’ve lost or doubled it, and then follow my own “rules for leisure gamblers” which are outlined elsewhere). I consider it a reasonable ratio of risk/cost to benefit.

As a side note, I have elided the name of the online casino which was in the original email. The US government has recently begun kidnapping casino executives on the basis that they are criminals because individuals in the US have placed bets on their sites located outside the US. I do not wish to intentionally contribute to any such kidnappings by publicly attesting to the identity of those with whom I have engaged in voluntary transactions. I’m sure the thugs could find out if they really wanted, but I won’t intentionally make it easy for them. While Paul’s email policy is that emails may be published sans explicit pre-agreement otherwise, I hope that he will likewise leave the particular establishment’s identity out of any public communication.

Knapp — [Details about my not-currently-”in print” e-booklet Roulette for the Leisure Gambler elided, since I am currently mulling the question of whether or not promulgating it is ethical or not due largely to this conversation with Paul]

Wakfer — So your booklet is akin to helping obese people to not be as unhealthy and/or bothered with their obesity rather than convincing them that they will increase their total lifetime happiness most if they learn to stop eating so much food and terminate their obesity entirely.

Your current writing efforts are so much more in the latter direction that I expected you would have understood the fundamental difference, and that such palliative approaches as the former are not only a waste of time, but are even negative by continuing to prop up (with a band-aid approach) activities that need to be terminated.

As outlined above, I am not convinced that Paul’s assessment of the value/rationality of gambling and its relationship to human happiness is correct. There are some deeper philosophical issues here which deserve probative examination. At the time I wrote the book, My goal was to make a little money (I did) by aiding individual interested in a particular activity (gambling in general and playing roulette in particular) maximize their success and enjoyment within the context of that activity. I had not, at that time, given much if any thought to the larger context of the value/rationality of the activity itself. I am now doing so.