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Atlas Folds

Two events occurred yesterday with a curious connection.  The first installment of the movie version of Ayn Rand's Atlas Shrugged opened in theaters. Ilya Somin at VC has this post with links to varying reviews.  Meanwhile, in New York, the US Attorney has obtained indictments and restraining orders against the three largest online poker sites.  Larry Neumeister and Oskar Garcia of AP have this story.

The biggest villain in Rand's novel is not the bureaucrats but rather the crony capitalist (and brother of the heroine) who exploits government regulation to frustrate business rivals.

And who is crowing the loudest over the poker shutdown?  A bible-thumping moralist railing against the evils of gambling?  Guess again.

Frank Fahrenkopf, chief executive of the American Gaming Association, the commercial casino industry's main trade group, said the prosecution shows a "clear need to strengthen laws to address illegal online gambling in the U.S."

He added: "Tough law enforcement is the key to making such a system work, and the AGA supports strong enforcement against illegal online gambling activity in this country. But illegal activity - and the risk of consumer fraud, money laundering and underage gambling - will continue until the U.S. passes laws ensuring that only licensed, taxed and highly regulated companies can operate in the U.S. market."

That's right.  It is casinos who don't want competition who are most anxious to see the online sites outlawed.

This harkens back to my days as a company general counsel in the wine industry.  Alcoholic beverage laws in the various states regularly have high-toned language about the importance of temperance followed by substantive law designed to maintain the oligopoly of those who presently own the market, to the detriment of consumers.

Whether the government should pass moralistic laws to protect people from their own sin and folly, as opposed to violating the rights of others, is a separate debate I won't get into here.  The present fact is that no such argument can be made for outlawing gambling, as legal gambling is all over.  In most states, the government itself runs the biggest numbers racket in the state.  Indian casinos dot the landscape so that nearly everyone is within driving distance of a casino.  You don't need a plane ticket to Vegas to play slots any more.

So why outlaw online poker?  Is it to protect consumers from fraud?  The market is already doing that pretty well.  There was a scandal at one of the sites in question a while back, and they paid for it dearly in loss of reputation and market share.  Active monitoring and statistical analysis find any monkey business, and the market applies the hammer.

If the government wants to maintain a monopoly on "sin" for itself, and the associated revenue, that's one thing.  The state lotteries, the state liquor stores in some states, and the proposed online poker in DC are examples.  State monopolies aren't great, but if they replace part of the tax burden with something that taxes none but the willing, as Jefferson said of lotteries, there is something to be said for them.  But using the power of government to maintain an oligopoly for some businesses and exclude competition from others is just obscene.

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