A World of Chance: Betting on Religion, Games, Wall Street [Paperback]

Reuven Brenner (Author), Gabrielle A. Brenner (Author), Aaron Brown (Author)

Book Description

Publication Date: August 4, 2008 | ISBN-10: 0521711576 | ISBN-13: 978-0521711579 | Edition: 2

Although financial markets often try to distance themselves from gambling, the two factors have far more in common than usually thought. When, historically there were no financial institutions such as banks, lotteries constituted the ways by which expensive items were disposed of, and governments raised money quickly. Gambling tables fulfilled roles that venture capital and banking do today. "Gamblers" created clearinghouses and sustained liquidity. When those gamblers bet on price distributions in futures markets, they were redefined as "speculators." Today they are called "hedge fund managers" or "bankers." Though the names have changed, the actions undertaken have essentially stayed the same. This book shows how discussion on "chance," "risk," "gambling," "insurance," and "speculation" illuminates where societies stood, where we are today, and where we may be heading.

Editorial Reviews

Review

"Did you know that the modern insurance industry is a direct outgrowth of gambling? Did you know that poker provided one of the most important sources of capital for penniless Western frontiersmen in the United States? Did you know that major opera houses of Europe began as gambling halls with the theaters attached (history, if not always the quality of music, repeats itself in Las Vegas)? Do you know the real reason the NFL resists the legalization of sports betting in America? For the fascinating answers and insights into the politics, the finance, and the economics of that over-maligned pastime, gambling, and, yes, including the surprising role it has frequently played in finance - read A World of Chance. The odds are strong that you will love it." - Henry G. Manne, Dean Emeritus, George Mason Law School

"A World of Chance undermines our usual view of 'economic man' and substitutes the angst-ridden, uncertain denizen of a world that offers no certainties and requires risk-taking as a matter of survival.... For providing a theoretical foundation for the counter-intuitive behavior of American taxpayers, the Brenners deserve the Nobel Prize in economics." - Asia Times

"No one since Joseph Schumpeter has done more than Reuven Brenner to put risk-taking and innovation at the center of economic theory." - Laury Minard, Forbes

"...a fine, freshly produced reference for those presenting the argument about pros and cons of gambling versus Wall Street and how they compare in the 21st Century." - Howard Schwartz, The Gamblers Bookshop

"A World of Chance puts up a stout defense of gambling both as a form of entertainment and source of hope.... The book does an excellent job of disassembling all the bogus arguments for keeping lotteries and other forms of gambling under state control, and in particular highlights the self-interested nature of the assault on internet gaming, which is a threat neither to national security nor public morals." - Peter Foster, National Post

"The relationship between gambling and finance (let alone religion and politics) eludes even the most erudite among us because it is clouded in misunderstanding, prejudice and good, old-fashioned politics. Reuven Brenner, Gabrielle A. Brenner, and Aaron Brown have written several books in praise of gambling. In this book, they draw insights from sociological theories of gambling and propose a risk-taking model of expected utility. They use it to disentangle the relationship between fortune and providence, democracy and autocracy, chance and mobility. It is a tall order, but... they succeed admirably." - Nikolaos Zahariadis, Perspectives on Politics

Praise for Gambling and Speculation:
"Brenner is one of the freshest writers I have read in economics, willing to introduce himself into his prose and express (sometimes outrageous) opinions. I like to read him." - Richard C. Rockwell, Social Science Research Council

Praise for Rivalry:
"This is an important book. Schumpeter would have been impressed." - Graham Bannock, Business Economist

Book Description

A World of Chance shows how some societies created more chances for their members than others and, as a result, prospered. The book looks at events through the prism of risk-taking, games of chance, futures, and financial markets, and how religion, politics, and finance interacted to bring about the situation societies find themselves in today.

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Product Details

• Paperback: 352 pages
• Publisher: Cambridge University Press; 2 edition (August 4, 2008)
• Language: English
• ISBN-10: 0521711576
• ISBN-13: 978-0521711579
• Product Dimensions: 6 x 0.8 x 9 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #1,373,694 in Books (See Top 100 in Books)

Most Helpful Customer Reviews

5 of 5 people found the following review helpful

4.0 out of 5 stars Economists argue to legalize gambling October 20, 2009

By David J. Aldous

Format:Paperback|Amazon Verified Purchase

This (rather unhelpfully titled) book discusses gambling from an Economics viewpoint, and argues three main theses. That traditional moralistic objections to gambling are misguided. That all forms of gambling should be treated as ordinary businesses -- private rather than governmental, regulated and taxed no more stringently than any other private business. That zero-sum (fair) gambling with a small chance of a big gain, which academics usually regard as irrational (for reasons of risk-aversion and concave utility function) is explainable under a "leapfrogging" model in which people care about relative economic status. The style is at the serious end of the "popular science" spectrum, a little too weighty for pleasant bedtime reading, but (aside from a mathematical appendix) perfectly understandable by an educated reader without needing any specific technical background.

Much of the book deals with history, from the 20th and earlier centuries, of gambling practices: how laws on gambling were influenced overtly by cultural and ethical views (and covertly by vested business interests) in different countries and periods, and what were the economic effects of these laws. This historical discussion, used to support their arguments for contemporary policy, is quite differently focussed and much more detailed than most "popular science" style books treating the history of risk or chance, e.g. Against the Gods: The Remarkable Story of Risk and Chances Are: Adventures in Probability. Part of the book discusses empirical evidence to refute the traditional moralistic concerns about gambling: statistically, gamblers behave as responsibly in other affairs as non-gamblers, and big lottery winners typically do not fritter away their winnings.

I found the factual material to be both interesting and informative. As for any book arguing a thesis, the arguments need to be read critically. It's written from what one might call the Economist magazine view of the world, which I tend to share, so I am predisposed to agree with the authors' theses, but let me try to engage it critically anyway.

The authors correctly point out that gambling involving small stakes and small rewards (slot machines, poker, sports betting) is just a form of entertainment, so the existence of a thicket of laws restricting this particular form of entertainment is bizarre. They note the clearly desirable risk-taking that drives economic growth in a free market society, from the hands-on entrepreneur starting a physical business to the familiar financial spectrum of venture capital, IPOs, and secondary markets (i.e. Wall Street) to which speculators, who as individuals are acting as gamblers, have the desirable effect of adding liquidity. But they are implicitly arguing there is some meaningful connection between entertainment gambling and liquidity provision in more tangible markets. Despite their collection of cute historical stories ("poker banks" in the settlement of the southern and western U.S.; late 19th century "bucket shops" allowing ordinary people to bet on
commodity price fluctuations; lottery brokers founding the Chase National Bank and the First National Bank of NYC) and a brief chapter (8) speculating on how sources of capital and attitudes to risk-taking varied between different societies, the connection today is not particularly convincing.

Underlying this book is the first author's theory (reiterated in Appendix 1) of "leapfrogging", developed in the 1980s. This takes the familiar idea that people are concerned with their relative position in society, and tweaks it by adding the "dynamical" notion that people whose position has declined are more motivated to take risks to restore their position. This sounds plausible, and is an interesting academic exercise to examine. Though (to caricature slightly) it is attacking a recent dogma that people are "predictably irrational" in dealing with matters of risk, and returning to the earlier Economics dogma that people always act rationally, so that apparent irrationality must mean that people are acting in accordance with some less apparent objective.