The recent thread on gambling and financial markets reminded me of a conversation I had last week with Josh Wright, a George Mason lawprof who is also a bit of a poker shark.
I think it would be possible to teach a great seminar on Poker & the Law. Not having anything to do with the laws that regulate gambling. Rather, I'd use poker concepts to explore issues in law and economics. Having trouble laying down pocket kings with an ace on the board? Welcome to the endowment effect. Has the gal on your left check-raised you one too many times? Let's talk about the importance of reputation and repeat play. I could imagine a whole syllabus:
Week 1: Efficient Markets. Is poker gambling? Is it a game of chance, or skill? How does this compare to investing? Does your answer depend on the skill of the investor, the efficiency of markets, or both?
Week 2: Paternalism. Should we let bad poker players keep playing? How do table limits screen out bad players? How do these limits compare to "accredited investor" rules?
Week 3: Staged Financing. Why is position so important in poker? How much is the button worth? How can you extract information from your opponents, and how do you maximize the opportunity of being the last to act? How does this compare to staged financing in VC deals?
Week 4: Signaling. Why is it important to defend your blinds? How does this compare to the early stages of a negotiation?
Week 5: Endowment Effect. What makes people hold on to hand that they should lay down? Do people tend to underreact to new information? Why are pocket pairs so hard to fold? How do markets take advantage of behavioral mistakes?
Week 6: Impact Bias / Salience. Why does everyone have a slew of bad beat stories at their fingertips?
Week 7: Norms. Why, at low-limit tables, is raising before the flop frowned upon?
Week 8: Taxation. How does the table rake compare to taxation? Is the rake noticeable or hidden?
Week 9: Taxation, continued. When you tip the dealer, is it taxable to the dealer? Is it deductible, if you are a professional poker player? How does this question shed light on whether other "gifts," like blog tipjars, are taxable to the recipient?
Week 10: Taxation, continued. When you win a big pot, is that income? What if you don't cash in your chips, but keep playing? What if you leave them in a lockbox overnight? What are poker chips really worth, and what does this tell us about the realization doctrine? Cf. Zarin.
Week 11: Marginal Utility of Wealth. In tournament play, why do big stacks have such an advantage?
... you get the idea. I am semi-serious about this. Many lawyers have good instincts as poker players, and a course like this could leverage that knowledge into a base of law and economics knowledge. But I'm not sure my senior non-poker playing colleagues would embrace it so quickly. (I could probably count on Bainbridge for support.) Of course, significant poker experience would be a pre-requisite. These days I think it's safe to say that more law students have significant poker experience than, say, take a course in corporate tax or regulation of financial intermediaries.
The course also might have limited appeal for women. Although there are some strong high-profile women players, the game remains overwhelmingly male.
The best part of the course: we could do a field trip to Vegas. (Good luck squeezing that one by the Dean.)
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1. Posted by Caroline Bradley on July 6, 2005 @ 15:19 | Permalink
I like this idea. Law Profs use sports metaphors all the time, so why not card games too.
There may not be as many women who play poker as men, but this may be changing. Women have been doing well in poker recently. Today's Miami Herald has a front page story about Natasha Hass who is going to Las Vegas for the World Series of Poker after only playing poker for a year. She'll be one of a number of women there: http://www.lasvegassun.com/sunbin/stories/business/2005/jul/05/519003618.html
2. Posted by Gordon Smith on July 6, 2005 @ 15:48 | Permalink
Vic, This is a cool idea. I think you should designate this post as the kernal for open source materials and see what comes of it.
3. Posted by Scott Moss on July 6, 2005 @ 18:36 | Permalink
How about a week on bounded rationality? In the 1990s, an economist named Andrew Metrick did a fun and insightful piece in (I think) American Economic Review studying the rationality of "Final Jeopardy" bids -- he watched a gzaillion episodes, tracked contestants' bids, and compared them to the strategically optimal bids given the other contestants' scores. I don't know if anyone has done a similar piece about the rationality of poker bids.
4. Posted by Abelard on July 7, 2005 @ 7:56 | Permalink
Talk to Charlie Nesson about it.
5. Posted by Chris Van Zele on July 11, 2005 @ 14:26 | Permalink
My $.02 checking the river heads-up and out-of-position is a "real option" for the player in position; betting out with a marginal value hand denies the player in position this option unless (s)he is strong enough to raise with a decent but not a monster value hand.
In fact, gambling as a while is rife with "optionality" - see Grosjean's _Beyond Counting_ (if you can find a copy).
6. Posted by Ted on August 1, 2005 @ 21:12 | Permalink
Scott, it would be impossible to do a similar piece about the rationality of poker bids. The same hand in the same position facing the same flop and the same betting situation with the same stacks might rationally make different decisions depending on factors ranging from who the opposing player is, what tells the opposing player is giving, whether the opposing player is eating while playing (which is a tell), and what has happened in the previous forty hands. And I've had people swear to me that there are tells to be had in computer poker. Plus finally, optimal game theory requires some random decisions. Levitt of Freakonomics fame is supposedly doing a study of some sort or the other, but I suspect they're going to be disappointed.
The real question I have is what stakes Josh plays and what makes him a "shark."
7. Posted by Debra Riley on October 18, 2005 @ 6:09 | Permalink
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