Acton Institute Powerblog

A Government-Enforced Monopoly

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Let’s engage in a little thought experiment. How would you feel about the following scenario?

1) The government bans all activities associated with Industry X because it judges that this industry damages the common good. Industry X is under government prohibition.

2) After enough time has passed and a new generation of bureaucrats has arisen, one of them has the idea of resurrecting Industry X because it has the potential to create new streams of revenue for the government.

3) The government then legalizes Industry X but imposes strict controls, such that the government itself is deemed the only institution responsible enough to administer these activities. We now have a government-run monopoly on Industry X.

4) After initial success, the income from Industry X suffers for a variety of reasons, including competition from private enterprises in competing industries. The government realizes that it cannot run Industry X effectively, and so decides that it must privatize the industry.

5) The government doesn’t want to lose all control of the industry, however. It just wants it to be run more like an effective private-sector business. The government decides to take bids to sell of its interests in Industry X. The winner gets the exclusive right to run Industry X and is protected by a government-enforced monopoly.

At the end of this chain of events, the government has cashed in on years of running its own monopoly on Industry X, and has also gotten a huge windfall in the sale of its monopoly to a private firm.

That industry hasn’t become a real competitive market, however, because the private firm has a government-enforced monopoly on Industry X. It is still illegal for anyone other than that private firm to create a directly competitive business in that industry.

That sounds pretty bad to me. But the reality is that we are between stages 4 and 5 in the lottery industry in America today. States like Illinois and Indiana are considering selling off their interests in running a statewide lottery.

In Illinois, for instance, state officials have seen lottery revenues fall due to competition from other forms of gambling, including casinos and Internet poker.

This has led John Filan, the chief operating officer of the state of Illinois, to come to the following epiphany: “This is fundamentally a retail business, and governments are not equipped to manage retail businesses. Gaming is getting so competitive around the world that we’re worried our revenues could go down unless there is retail expertise.”

Governments are not equipped to manage retail business. What a revelation!

Rather incredibly, however, the criticism of these moves has not come from those worried about the vitality of the market and its advantages. Instead, economists are concerned that states are being short-sighted in selling off long-term income streams for a single short-term payday.

Melissa Kearney, an assistant professor of economics at the University of Maryland says, “It’s unclear exactly what is gained by selling a lottery, except for a huge pot of money that legislators can start spending right away.”

Charles Clotfelter, who teaches economics at Duke University, agrees. And Edward Ugel, author of the forthcoming Money for Nothing: One Man’s Journey Through the Dark Side of America’s Lottery Millions, writes that “Illinois is selling its future in order to fortify its present.”

Nowhere is any concern expressed over the impropriety of a government-enforced monopoly (even less one that is government-run).

If it is true that lotteries are “retail enterprises” that are inherently risky, and that government is ill-prepared to run them and that they should be turned over to those who are “in the risk-taking business,” then the government should legalize lotteries and open up the industry to real competition. A government enforced monopoly of a privately-run lottery system is no solution.

Jordan J. Ballor Jordan J. Ballor (Dr. theol., University of Zurich; Ph.D., Calvin Theological Seminary) is a senior research fellow and director of publishing at the Acton Institute for the Study of Religion & Liberty, where he also serves as executive editor the Journal of Markets & Morality. He is author of Get Your Hands Dirty: Essays on Christian Social Thought (and Action) (Wipf & Stock, 2013), Covenant, Causality, and Law: A Study in the Theology of Wolfgang Musculus (Vandenhoeck & Ruprecht, 2012) and Ecumenical Babel: Confusing Economic Ideology and the Church's Social Witness (Christian's Library Press, 2010), as well as editor of numerous works, including Abraham Kuyper Collected Works in Public Theology. Jordan is also associate director of the Junius Institute for Digital Reformation Research at Calvin Theological Seminary. He has authored articles in academic publications such as The Journal of Religion, Scottish Journal of Theology, Reformation & Renaissance Review, and Journal of Scholarly Publishing, and has written popular pieces for newspapers including the Detroit News, Orange County Register, and The Atlanta Journal-Constitution. In 2006, Jordan was profiled in the book, The Relevant Nation: 50 Activists, Artists And Innovators Who Are Changing The World Through Faith. Jordan's scholarly interests include Reformation studies, church-state relations, theological anthropology, social ethics, theology and economics, and research methodology. Jordan is a member of the Christian Reformed Church in North America (CRCNA), and he resides in Jenison, Michigan with his wife and three children.

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