What would a Futarchy do about Prostitution, Gambling, and Recreational Drugs?

Robin Hanson writes in a recent blog post:

In a futarchy with a simple value function based on basic outcomes like population, health, and wealth, then voting on values but betting on beliefs would probably mostly legalize things like prostitution, gambling, recreational drugs, immigration, and big business. It would probably even let prisoners pick torture.

I wonder specifically about prostitution, gambling, and recreational drugs. Assume the futarchic system is smart enough to account for the fact that underground commerce is not normally counted in GDP. In the case of prostitution, futarchy would favor it, as it’s trade and doesn’t seriously harm the economic production capacities of either prostitute or client, so long as appropriate std regulations are in place. Gambling would be a different animal. It’s economically useless activity which is based on the irrationality of the consumers, and it would depend on whether this irrational preference to play is taken into account. You could argue that it ought to be done, else almost any type of consumption could be dismissed as an “irrational preference.” Even then, it would have to consider the ruinous effects on the productivity of gambling addicts, which would not be cancelled out by any increase in the productivity of gambling winners. The best policy IMO would be a paternalistic monopoly system, allow gamblers to buy “lotto tickets” where 10% of the money is taken to compensate winners and account for transaction costs, the gambler who loses can either get the 90% plus two years of interest back in two years or have it back immediately along with a two-year long ban on further participation in the scheme. This way, no gambler could suffer ruinous losses, the maximum any would lose would be 10% of what they could invest. You can think of ways around this by loaning the gambler money, but since gamblers tend to be very bad credit risks, you shouldn’t expect many to try it.

I think it would keep harsh laws against most drugs and adopt harsh penalties and perhaps even prohibition on alcohol, which contrary to common misconception did reduce consumption and alcoholism-induced deaths significantly. Yes, it resulted in a few deaths from tainted moonshine, but these were a drop in the bucket compared to the many deaths which would have occurred had alcoholics been able to buy their poison cheaply and legally. Since even relatively benign drugs like marijuana provide an alternative to participation in the workforce, this provides another reason you expect futarchy to ban them.

 

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