Freakonomics: The legality of online poker

File picture showing a man playing poker on his computer connected to an Internet gaming site from his home in Manassas, Va., October 2, 2006.

Tess Vigeland: Time now for a little Freakonomics Radio. It is that time every two weeks where we talk to Stephen Dubner, the co-author of the books and the blog of the same name -- it's about the hidden side of everything.

But today we have a treat: the other Steven, Steven Levitt, Dubner's dismal scientist co-author. Hello.

Steven Levitt: Hi Tess, how are you?

Vigeland: I'm very well, thank you. So a few weeks ago, the U.S. government cracked down on Internet poker. And from what I understand, you were steamed about this. Let me venture a guess that this left you, perhaps, with some extra free time?

Levitt: No, not me, but my wife; my wife is a kind of a semi-professional poker player. So now she wants me to entertain her all night instead of playing poker.

Vigeland: Now so what do you think about this? I know that you don't necessarily think it should be shut down.

Levitt: I think it makes no sense at all. Most things that are made illegal, everyone agrees on: homicide, theft. There's a general agreement. And then there are these other sort of activities which fall into a gray area, things like prostitution and gambling. Not everyone agrees, but I think poker is so obviously on one side of the gray area relative to legality that it just doesn't make any sense to make it illegal.

Vigeland: Well I hear that you have your own system of figuring out where your moral compass lies. Tell us about the "daughter test."

Levitt: Yeah, as an economist, I have a relatively underdeveloped moral compass. But the little one that I have is as follows: so if the prohibited activity is something that I actually think would be good for my daughter to be able to do, then I'm in favor of it being legal. But if the activity is something which I would feel terrible if my daughter did, then I would want it to be illegal. So for instance, when I think about prostitution, kind of my mind says, well why shouldn't prostitution be legal? It's a transaction between two individuals. But I think, well do I want my daughter to grow up to be a prostitute? And the answer is clearly no.

But when it comes to something like poker, I say, well, how would I feel if my daughter did grow up to be a professional poker player? And I think, that wouldn't be so bad. I mean, I'd rather have her be a great economist or a professional golfer, but if she had to be something, a professional poker player wouldn't be a bad thing for her to turn out to be. In that realm I think, why in the world should we make an activity illegal when a father says, if my daughter grew up to be that kind of person, I'd actually be happy.

Vigeland: Well, by that logic, don't we have to outlaw high school boyfriends?

Levitt: Well look, high school boyfriends -- if you could control everything about your kids, you would. But would I be in favor of outlawing premarital sex? I probably would. Now that would be a hard law to enforce.

Vigeland: Indeed, right. Well, you know, what you say about the daughter test certainly makes sense. But I want to know what an economist thinks about the aspect of this where the cost of online poker in society, it really isn't imposed on others. I suppose you can make the argument that if there are addicts, the rest of us are going to pay for that some way or another. But does that make a difference?

Levitt: Oh it absolutely does. When we think about prohibiting activities, we do them either because they directly harm someone else typically -- and that's like homicide or theft. Or because indirectly, there are spillovers that hurt other people. So we think that drug addiction, for instance, imposes costs on other people, or people have argued that secondhand smoke imposes a cost on others. But if you think about poker, what economists would call the "externality," that's the spillover on other people who aren't part of that injection, it's just hard to see how that could be very large. Especially when there are sanctioned kinds of gambling which people are allowed to do, like lotteries, which pay out at much worse rates than do poker sites. And I think that the easiest kind of message to draw from this is that the kinds of gambling which the government outlaws are those kinds of gambling which the government does not directly financially benefit from. And that the reason for the outlawing for certain kinds of gambling are financial rather than moral, and that's not usually the way we set up our criminal sanctions.

Vigeland: Steven Levitt is our guest, FreakonomicsRadio.com is the website. Thanks so much, it's been fun.

Levitt: Thank you, glad to be here.

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