| Abstract: |
Gambling is often regarded as a lower form of pleasure with an elitist
perception of gamblers as being either ignorant or exhibiting poor
mathematical skills. Gambling also poses a challenge to the notion of rational
decision-making because individuals take on wagers which are losing bets by
expectation. From the paternalistic perspective, gambling may be attributed to
poor decision-taking resulting from cognitive failures and biases. From the
liberal perspective, however, it is possible to account for gambling within
the framework of rational choice by appealing to risk preferences or by a
utility of gambling itself. This paper examines how a person’s cognitive
ability (IQ) predicts his betting behaviour. We combine three individual-level
data sets from Finland, including online horse bets from the betting monopoly,
cognitive ability test scores from the Finnish Defence Forces and
administrative registry data on Finnish citizens. Our results show that
intelligence is a positive predictor of participation, gambling consumption
and success in gambling. Moreover, we find that gamblers are unlikely to
exhibit poor mathematical skills because mathematical intelligence drives this
result. Our results suggest that a one standard deviation increase in
mathematical IQ from the mean increases the probability of participation in
betting by more than a third, the bettor’s annual amount wagered by a half and
his annual losses by 40%. Overall, our results are consistent with gambling
being consumption of entertainment, which intelligent individuals enjoy. This
is consistent with the liberal perspective on gambling. |