Americans like to extol the virtue of capitalism and a free market economy. This is a land of freedom and the idea is that letting people express that freedom with dollars will lead to a natural selection in the business community. If a product or service meets a need and does it effectively it will be rewarded with the dollars of the free people. Of course we know that pure capitalism has its pitfalls so in certain cases we expect the government to have some oversight in order to protect the general public. Yet we seem to have a certain aspect of this backward. The realm that tends to have the most regulation is that of vice, things like gambling and pornography, which are true areas of personal choice. Meanwhile, areas of necessity like food and housing are left to the whims of profiteers.
Shouldn’t the opposite be true? Everyone has to eat and therefore at some point will be forced to eat whatever option is available. Thus, shouldn’t we make sure that those options are good ones and not just profitable ones? Some one who grows food, repairs a house or provides a place to keep your money will always find a customer no matter what the positive or negative affect of their business model. Instead, all those sectors that are of vital importance to humanity are less regulated than the ones that we can take-or-leave.
On the flip side, industries that are not necessary and exist merely for pleasure are heavily controlled if not completely outlawed. The rationale is that these things pose a danger to society and the government should keep a watchful eye on them. In actuality, the restrictions help create an element of danger. Vices get forced into corners and those that wish to partake often must follow undesirable paths to get them. They also take away freedom of choice which serves to prop up incompetent and/or unscrupulous entrepreneurs. Why not let the “invisible hand” of economics determine the fate of those who earn a living catering to petty urges? If these vices are in fact dangerous, people will avoid them and minimize the market. The really dangerous ones will eventually kill off their customers. (Not a great business plan.) If they turn out to be naturally profitable markets then they should be open for all capitalists to take advantage.
Instead, by locking down vice industry we create a privileged class of business person; one that is usually overrun with corruption. The massive state intervention creates a maze of approval committees and expensive permits. In order to operate in these industries one needs access to huge amounts of money and to the corridors of power. These are two things that your everyday American Dreamer does not have. Things like casinos and strip clubs tend to have ties to organized crime. We know this. We accept this. Because we understand that in order to get your hands on the closely guarded permits you have to be “connected”. But really shouldn’t anyone be allowed to set-up a black jack table for profit? Even if they are bad at it, have no qualifications or are morally bankrupt where is the harm in letting them have a go at it? As long as the playing field is even, the best businesses should rise to the top.
What happens when we over-regulate certain areas of commerce is we funnel vast wealth to an undeserving few. We now know that by outlawing alcohol in the 1920s the federal government turned a handful of thugs into extremely rich and powerful mob bosses. Though prohibition was repealed there still remains a dizzying array of liquor laws that vary from state to state, county to county, even city to city. Every area requires a license of some kind to sell liquor. In most areas liquor license are limited in quantity and very difficult to obtain. The scarcity drives up the value, a value which is no longer determined by the free market. If your business has one of these precious pieces of paper you enjoy a certain level of financial leverage regardless of economic viability.
A large scale example of vice regulation tampering with true economics is Atlantic City. In the late 1970s, when the State of New Jersey decided to allow casinos to operate in Atlantic City, under strict guidelines of course, they created a massively unbalanced market. A small group of people were given the exclusive right to operate a business that was not legal anywhere else within a thousand miles. And they granted this exclusive opportunity in close proximity to the largest population center in the country. What this meant was that there was no way they could possibly fail. It didn’t matter how poorly conceived their plans or how inept their operation, a casino in Atlantic City would make money. They didn’t need to serve their customers well or the community where they resided either. Their prices didn’t have to be competitive because there was no competition. Their “product” didn’t need to be good because there was no other option. And naturally all of these negative features did take hold. Ask any gambling aficionado and they all agree that Las Vegas is vastly superior to Atlantic City in every way. However, if you live on the east coast, Vegas is a 2000 mile plan ride away, while A.C. can be reached in an hour or two by multiple forms of transport. If you eliminated that geographic distance AC would have been crushed by Vegas, where services were inexpensive, staff was friendly and there were even other things to do besides gamble.
Around the dawn of the 21st century other states started to loosen gambling restrictions and little by little the AC casinos began to struggle. Now several states including neighboring Pennsylvania have casinos and the bottom has dropped out of the economy in Atlantic City. Multiple properties have gone under, even the brand new billion dollar Revel Casino which only lasted a year. Owners and the State of New Jersey keep throwing money at the problem to no avail. They reality is simple. Now that people have other options, why would they go to AC? Everyone involved in the development in Atlantic City was terrible at their job but as long as there were draconian gambling laws in place no one would ever notice the wholesale incompetence. Those days are over and “America’s Playground” is going down the tubes fast.
Gambling is not a staple of life. We can all survive a few days, months or years without drinking alcohol or ogling naked women. These are all merely forms of distraction. So if such businesses are poorly run or fail to operate in the public’s best interest, why should the government even care? Wouldn’t it make more sense to put that energy toward protecting the things that affect every person’s life on a daily basis? Shouldn’t we want more control over the things we can’t live without instead of focusing on matters of pure whimsy? But politicians and the wealthy people they associate with understand that strict regulation of our vices is what helps to keep them hugely profitable and also keeps those profits close at hand.