Isn't It Funny How Governments Loosen Their Morals When Cash Is Short?

From Dan Okrent‘s recent Q&A about Prohibition: “No factor played a larger role in the repeal of Prohibition than the government’s desperate need for revenue as the country fell into the grip of the Depression.”

In short: governments who hate vice suddenly hate it much less when cash flow is slow. And we are seeing that again today.

On the other hand, the federal government seems to be moving in the opposite direction where the big money is concerned — proprietary trading. And, while prostitution taxes are being considered, I still haven’t heard any serious discussion of this sex-tax proposal.

It should also be noted that one of the I.R.S.’s most miraculous enforcement ideas was originally rejected on the grounds that it was “too much like 1984,” but when Congress was desperate for more tax revenue, it thought differently.

Ian Kemmish

On the other hand, once you've taken that first big step, you have recurring opportunities to both be virtuous and make money thereafter. Admittedly, I'm only working from memory, but here in the UK, "sin taxes" (gambling tax, and tobacco, alcohol and petrol duties) tend to go up faster than inflation during recessions, when the rest of the tax take falls. The Chancellor always claims he's trying to discourage people; the Opposition always claim that he's just trying to raise revenue. Then, four years later, the roles are reversed....


The only thing that makes it "funny" is anthropomorphization.

Governments aren't people. They don't hate. They *cannot* be hypocritical. They are organizations of people which have to balance many (often contradicting) demands.

Thus, it's not really surprising that their actions are even less consistent than those of individual people, and based more on current circumstances and pressing needs than on long-term policies.


If you really follow the ban on internet gambling you know there is a very small chance of things changing. Congress is either on recess or about to go in the next few days and there is only a small window when they get back before the Nov elections.

It is sad to think that we needed a huge recession to get our personal liberties back. I mean if I can go down to the local casino and gamble all I want why can't I do it in my home.

The ban passed 4 years ago was so crazy. Banks would never be able to keep up and look at so many transactions.

John Q. Public

Tax complexity itself is a kind of tax. ~Max Baucus

After being an honorable taxpayer all my life I became aware that the people above me were not honorable. My tax accountant said, "Ask yourself what Richard Nixon would do?"

So basically the system is broken. 50% of the people have 2.5% of the wealth. 2.5% of the people have 50% of the wealth.

Ah yes, I remember those Halcyon days when saying "the government says X..." would win any bar bet. We need another revolution.

Most countries in the world have a ruling oligarchy with a corrupt police force and goverment cronies keeping the rabble under control. They periodically recruit all the poorest young men to give their lives for honor on some meaningless battlefield in some meaningless invented war.

Gee, I hope we never become like that.


Dubner, don't forget that during the recession Delaware made betting on sports legal!


Sin taxes make our public goods dependent on the recklessness of fools and the misery of addicts. The money's tempting, but it's bad policy.


NPR's "Planet Money" mentioned this relationship earlier in the week (; among taxation of inelastic goods, they also talked about FDR's potential moonshine habits. A good listen if you've got a free 20 minutes.

(and speaking of podcasts, any Freakonomics podcasts coming?)

Chris Suter

Not to mention it also reneges on bilateral treaties and starts treating old friends poorly.

Lawless in Manchester, CT

It is looks like our society is breaking down in slow motion both public and private sector.

Leo Toribio

Mr. Dubner,

May I also call your attention to the role that casinos, proliferating all across the nation, are having in controlling inflation?

Leo Toribio
Pittsburgh, PA


What does marijuana have to do with morals? It isn't mentioned in the Bible. Show me a verse that says, "Thou shalt not smoke of the weed" and I will believe it is a moral issue.


Sounds like it's again time to ramp up the cigarette tax, maybe to $15.00 per pack.

plain spoken

What surprised me the most was when BofA, Wells Fargo, Wachovia, and other major US banks were caught laundering the drug cartels money in Mexico, and there was no prosecution.

It makes is somewhat easier to understand when you get the shakedown at 27% on a consumer credit account, that their usual customers are drug thugs and crooks.

They barely notice the ethical problem posed when they borrow taxpayer funded money from the FED at 0%, loan it out at almost 30% and pay1% on their customers' CD's.

We have effectively institutionalized and legitimized theft for corporations in these economically challenging times.

And no one even objects.

An economy cannot prosper by allowing corporations to take what they do not earn. Even if they are friends of the drug lords.


Since 47% of Americans don't pay any taxes, I suggest they would be a good place to start.


I wonder if the economics of the drug war would make it a revenue bonus just on the savings from reduced enforcement and incarcerations. Not to even talk about taxation.


Governments casting about for new revenue sources are overlooking a major opportunity: An inheritance tax on the meek.

Arlington Beech

There has never been a federal ban on online gambling. Never. While some states (I'm looking at you, WA) have banned it, UIGEA did not, though it did make getting money online harder. As it stands, online gambling is now and has always been completely unregulated, which is the crux of the new legislation today.

Eric M. Jones

@11--EMR, Pot in the bible...There is plenty of evidence that the bible (and other ancient texts) is filled with marijuana use. Since pot was so cheap, it was not smoked like cigarettes or in pipes, but in tents and temples where it was thrown onto hot rocks.


You might think the author is trying to prove his drug-addled point at the expense of the truth, but then you would have to explain how hemp was cultivated for 10,000 years all over the ancient world, its seeds were used for food, its fibers for cloth and rope, its oil for dozens of uses....and nobody got high on it?. You think those visions of heaven and angels were on the natch? Not likely.

Omar McVaine

Uncle Sam has loose it's moral for more than half century by starting with let Fed printing money as toilet paper.


What's so "funny" about thievery increasing when thieves don't have what they want? No internal moral vision controls governments; they are only controlled to the degree that the people they rule allow them to be immoral.