Risk-of-Ruin Goods

In 2018, the US Supreme Court legalized sports betting (or rather, legalized states to legalize sports betting), which led to a flurry of new sports bets and online casinos. Anyone who listens to US podcasts has probably heard the consequences: a flood of companies desperately trying to bribe customers into taking a gamble.

It seems that many people can gamble occasionally and get a thrill and call it a day, while other people end up betting their literal house and losing that too. My social media feeds are now flecked with people saying some version of: "one thing that's made me less libertarian is seeing how some people get entirely sucked in and ruined by online gambling."

Here's a brief list of things that I think plausibly have this property: many drugs, alcohol, gambling, day trading (but I repeat myself), shopping, pay-to-play games, pornography.

I don't think there's a common name for this category, so I'm going to call them Risk of Ruin goods.

There's obviously a strong overlap between "fine for many, but ruins some" and "addictive," but I don't think they're the same thing. For example, with some drugs the risk is that a small % of people will have a terrible reaction the first time they take it, rather than getting addicted longer term.

Similarly – and I know this will sound weird, please read to the end of the paragraph – I would largely describe cigarettes as more addictive and less Risk-of-Ruin-y. This is because, while I'm sure there's variance, my sense is most people who smoke for any consistent length of time will get addicted, and the bad consequences of smoking (while somewhat random) are more accretive and consistent. Outside Thank You For Smoking, there's no cigarette equivalent of the ways you can meaningfully ruin your life in one night through alcohol or gambling.

What should be the policy response to Risk of Ruin goods? I think a lot of people are torn between
1) not wanting to limit the ability of adults to access goods that don't harm them
2) feeling weird about some share of people having those goods ruin their lives.

Is there a legal regime that could keep the goods legal but prevent any one person accessing too much of them?

I think there are defacto examples of attempts to do this, especially with alcohol: for example, in Norway, only the government's Wine Monopoly can sell anything stronger than 4.75%, and the hours you can buy alcohol are generally restricted. The object seems to be make it possible to drink a bottle of wine with friends at dinner, but difficult to drink a handle of vodka alone at 2am.

We also have social customs that try to curb "problem drinking" while enabling moderate drinking: social norms like never drink alone or never drink before 5pm.

Could we do more? I wonder if, in this age of prevalent digital surveillance, we pretty easily could: credit cards could block you spending more than 10% of your income on potentially-ruinous goods in the same way they block seemingly 10% of my very normal transactions.

I'm not sure this would be a good idea; it would presumably open the door to all kinds of paternalism. The whole policy area of what to do about Risk of Ruin goods strikes me as one of those things where all the options – prohibition, legalization, selective restriction – have different bad consequences.

That said, I'm pretty confident what we shouldn't do is selectively ban people. While every gambling ad includes a long read-out about some number you can dial if you want to voluntarily ban yourself from casinos, the same casinos automatically ban anyone who makes semi-intelligent bets.

One of my big fears, looking around me, is that many currently-successful business models are kept afloat only by rinsing a small % of people of their entire life savings.

Finally, I have an observation that I'm not sure what to do with: whether it's correlation, causation or coincidence, when looking at the list of Risk of Ruin goods, I can't help noticing that a disproportionate share are forbidden in Islam.