This is a problem that has been posed by a number of economists and sociologists, and it has been addressed by the British author Charles Goodhart in his classic paper “Society as a Gamble.” Goodhart uses the words roulette and lottery as examples of human activities that are intrinsically irrational. And he concludes that the outcome of both these games is unpredictable and not a suitable form of “theory” for public policy: “the results of the gamblers of roulettes, and of the lottery, depend entirely on random chance. They are not a form of ‘theory.'”
The fact that both roulette and the lottery are irrational is a general and well known fact; and the fact that the outcomes of the gambling activities depend entirely on chance should not prevent us from implementing strategies to minimize the harm they cause, which is the basis of modern gambling regulations, e.g. those issued by the American Gaming Association. However, the question arises as to how to make the gamble game itself sufficiently non-irrational. The question we should be asking is whether in playing roulette, or on a lottery, we should just give up and go back to playing dice, as we have until now, or whether we should use game theory as an alternative to gambling to minimize the risk of gambling harm.
In a paper that I’ve just finished writing, I consider the case of roulette, as compared to the lottery. The question I raise in the paper is, “are gambling strategies that minimize the potential harm of gambling, in other words game theory strategies, better than pure gambling strategies” (Sperling 2005). The paper starts with two key aspects of the issue: first, why game theory doesn’t “understate game outcomes” and, second, why roulette is different from the lottery.
This paper examines the first part of the question by analyzing the lottery and comparing the outcomes of roulette with those of the lottery. According to the author, there is a substantial difference between “betting” with odds of 0.1 or 0.2 and betting for a probability of 15:1 and betting for such a probability of 100:1. According to a recent article by Professor G. B. Shih (see also this blog post), in the roulette situation, “the more one bets, the more one has to lose, making the decision to play more risky. At an equilibrium, which is a nonzero probability, a single bet does nothing to change the outcome” (Shih
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