Last Monday Woj over at Bubbles and Busts and I got into a bit of a debate after class. Then Tuesday we started again, after clarifying "What were you actually saying Monday?" After a few minutes we started talking past each other again, so obviously it is time to take this to the internets!
The trigger to this long and confusing discussion was the Federal ban on Intrade just after the last election. (Nov. 26 the CFTC sued Intrade for letting US citizens bet on things, see here.) My offhand comment was that, paranoid as it sounded, it was quite a coincidence that this happened right on the heels of Intrade's markets calling the US presidential election correctly, so maybe it was a result of politicians not liking anyone accurately gauging their chances of winning. Woj replied that everyone makes predictions from polls and the like, and those didn't get shut down. My theory (entirely unsubstantiated, mind you) is that most polls are wrong, either due to normal error or strong bias, and really offer very little value to someone making a decision on whether to back a candidate. If you are trying to make a point about a candidate's chances there is always one poll or another you can quote to make it. However, Intrade has the prestige of betting markets, which are known for being more accurate than straight polls over all. It is possible it is too strong a signal to be ignored, and doesn't allow enough wiggle room around it. (The literature on betting markets illustrates many cases where folks don't want accurate forecasts so they can do what they want with less constraint.) The other point in the theory was that at the least, if pols wanted to get rid of ALL predictions of success, they would have to censor news agencies which would whip a large number of people into a frenzy, but shutting up Intrade just required shutting citizens out of an online betting market, which people apparently believe the government has the right to do.
That's when things got hairy.
Woj and I argued back and forth on this, most of which is lost to me now because I didn't understand his disagreement, and I don't think he understood mine. At this point I will digress into spelling out clearly what I meant.
Social norms are strange things. Rules generated by humans in general don't need to be internally consistent, and often just don't make sense as a result. In this case, my position is that the social norm may be that gambling is not inherently wrong, but also that the government has the right to make it illegal (or regulate it, whatever.) At first glance this doesn't make sense, as if the general social rule is that something is ok, why would society also agree that the government can make it not ok? It is not because people are crazy. It is because whether or not you should do something is not attached to whether or not you can, or should be allowed, to do something.
Our classmate Derek provided a good example upon which I will elaborate: If your neighbor puts some really ugly pink flamingo lawn ornaments in his front lawn, you might grumble and hate that he did it, but you can recognize that he has the right to do it. You don't go over and kick them down or call the HOA/police on him, or whatever else you might do if he didn't have the right to put them out, such as you might if he put them up in your yard.
Likewise, as a society you don't have to agree with a given bit of legislation to accept that the government had the right to pass it. You can accept that the government has the right to set speed limits on its roads without agreeing with the level.
Now, in speaking with Woj, I stated that the government's banning of Intrade and the resulting deafening silence could be taken as evidence that the social norm is in fact that the government has the right to regulate and ban organized gambling. This might have been a bridge too far. Woj made a good point that just because you don't see people voting officials out of office or marching on the capital wielding pitch forks doesn't mean that the social feeling was that the government has the right to ban gambling. After all, most people are ok with the idea of poker night for the guys, online poker (which is banned now), and even public figures like Brian Caplan openly betting other economists about certain predictions. Oh, and what is the stock market other than a bunch of people gambling? That's all true, but... things are about to get long. Longer.
1: There is absolutely nothing inconsistent with people breaking the law in small, individual instances and yet thinking the legislature had a right to pass the law. Again speeding/traffic violations. Based on my driving experience, most people exceed the posted speed limits on highways, as well as most other places, and at least in NoVA turn signals are treated as totally optional. However, I feel very confident that most people would think me crazy for asserting that therefore there should be NO speed limits enforced. Historically, most people have when I suggest that.
2: It is possible people consider organized gambling businesses something that need to be regulated, but not small scale individual gamblers. In fact, this seems to be the norm. We also like to regulate super market produce, but don't worry too much about our neighbor who sells stuff out of her garden. This gets back to the previous post about how most people don't think the rules apply to them, or even exist. Humans are strange like that, possessing a certain schizophrenia when it comes to things between people they know and strangers. Your neighbor who is not a professional farmer and just grows tomatoes for a few extra bucks, she's fine, but that guy who makes his living based on whether or not his thousands of tomatoes are good and safe to eat, we had better hire someone to keep an eye on him!
3: Then there is how the great mass of indifferent people affect things. Indifference is actually fairly important here, so I will take a moment to discuss it.
There are five possible states a person can have regarding another's right to do something: strong agreement, weak agreement, total indifference, weak disagreement and strong disagreement. The strong/weak modifier simply denotes whether you are willing to take action to affect that right one way or the other. So for instance, I am strongly against the notion that my neighbor has the right to take my tv over to his house without asking; should he try, he will find locks installed, and probably some lead coming his way should those not do the trick. On the other hand, I am weakly in agreement with his right to play loud music in his car; I wouldn't call the cops on him, yet if someone else did I wouldn't go out and defend his right to deafen himself, I would probably just shake my head and think about what a silly situation it is.
The interesting thing is that weak preferences behave differently from strong. In establishing social norms related to "Does someone have the right to do something" weak and indifferent positions are functionally the same as strong agreement. Functionally is the key word there. If I put up a pink flamingo in my front yard, and the whole neighborhood does nothing but grumble a bit, it is functionally identical to everyone agreeing that I have the right to do so but not liking that I did. Society behaves exactly as if they agree that I have the right to do it. This is important, because if I am not certain if it is ok to do, all I can go on is society's reaction when I do, and if they all act as if it is fine, even if it isn't, the consensus for the next guy considering gaudy lawn ornaments is "Huh, apparently that's fine."
In establishing social norms, inaction in individually enforcing the rule is the same as agreeing that it need not be the rule. Enforcing need not be driving someone out of town on a rail; something as simple as shunning or just commenting on how ugly that plastic bird is are the usual tools. The key is that a large percentage of people need to individually do it for it to matter. A few pushy people attempting to enforce a norm alone are just annoying if they are a small percentage of the group.
Government, however, is power wielded by the few pushy people. The social norm that government has the right to pass legislation on a matter only requires weak/indifferent preferences. However, when deciding policy politicians treat the indifferent as if they don't exist. The only ones that matter are those who will act upon and express their preferences in a way that will affect the politicians. This is why relatively small interest groups have such seemingly disproportionate power in government. The NRA wields tremendous power not because they have a lot of members, but because they can get a large number of people to stop simply grumbling and actually go out and vote for or against a candidate. Politics is largely controlled by the people who really care about given issues, and the rest who only provide opinions don't matter. The only thing that matters is whether or not enough people care about an issue one way or another for politicians to get away with it.
Woj at the time pointed out that voting hardly matters, only a tiny fractional amount, in deciding most elections. This is true, but meaningful action in this case is not limited to voting. Often writing letters to congressmen actually helps a bit, or writing a blog that people actually read (not mine), starting organizations to focus people into action, and all sorts of other behaviors that affect how politicians act. Of course, sometimes democracy fails and you have to start rioting and killing politicians like has been popular in the Mid East lately (where democracy will probably fail again.) That's the problem with government: it takes pretty big behaviors on the part of the citizens to limit what politicians can get away with once things get rolling in that direction. Indifference in this dimension gives the government the effective right to do things, and then only those who really care matter, and in any given field those are the tiny minority.
So, it stands to reason that the government would ban Intrade participation because they can without expecting any real push back, even while ignoring news program pols, because if they did ban news program pols those organizations would beat said politicians about the head and neck with the 1st Amendment. (Of course McCain-Feingold limited what people could say about politicians while those politicians were running for office, and that was ok, so who the hell knows.)
Does government acting in a certain way without obvious backlash then act as evidence of a populace with the social norm that government has the right to act that way? I would say yes, if only functionally. If not functionally, one has to then wonder what the effect of social norms is on government if any given norm may or may not actually apply.