A new perspective on the ongoing discussions about sports betting, prediction markets, and the ethics of controversial economic activity is coming from a new book by Nobel Prize-winning economist Alvin Roth.
Economist Flags Gambling as “Morally Contested Market”
Roth’s new book looks at what he terms “morally contested markets,” where people engage in transactions voluntarily but are opposed by others because of moral or cultural reasons. His research deals with topics such as organ sales and drug policy, but the framework is clearly a reflection of modern gambling, as reported by Covers.
Roth argues that betting falls squarely in this category. Some see it as entertainment, others think it should be more strictly regulated or even banned outright. Such divisions are not new, he says. Resistance to gambling can be traced back to ancient civilizations, and attitudes have changed over time.
Since the change in regulation in 2018, online sports betting has grown rapidly in the United States and the debate has sharpened. At the same time, prediction markets – trading platforms where people bet on the outcomes of future events – have become hot topics. These systems allow for betting-like activity even in jurisdictions where traditional wagering is constrained.
While the interest in prediction markets grows, Roth is skeptical of what is being said about them. Roth notes that these platforms can aggregate information quickly, but he is also of the opinion that they are not necessarily better than traditional tools like opinion polls, especially for election predictions. He also raises the specter of manipulation, warning that players with deep pockets can influence outcomes by making outsized trades.
Roth Sees Corporate Use for Prediction Markets
However, Roth sees more potential in private settings for these markets. They could be useful within firms in surfacing internal knowledge more effectively, particularly where lower-level employees have insights that are not fully captured in official reports.
The economist also highlights the risks of modern betting formats. Now, with in-play wagers and very specific propositions, the number of outcomes has exploded. This increases the scope for improper influence as individual players or officials may have more influence over narrowly defined events.
Roth also points out that the banning of these activities does not mean they will go away. History provides examples, such as the prohibition of alcohol in the United States, where restrictions frequently drive demand into unregulated spaces. He says illegal betting markets can thrive when legal options are not available.
Roth thinks it might be necessary for policymakers to settle for compromise and coalition-building rather than a universal consensus. Spending caps or tighter regulation of betting methods could help reduce harm without banning participation altogether.