Even when fairest, gambling must, in its average results, be uneconomic. In any economic trade each trader gains by getting goods that are, on the marginal principle, to him more valuable than the other kinds of goods he gives But in gambling the winner gets all, the loser gets nothing. If two men of like incomes gamble, the additional desires that the winner is able to gratify are (by the principle of decreas ing gratification) less in amount than the desires that the loser must forgo. As a result the loser is often seriously in jured by the loss of his income, and driven to despair, while the winner makes reckless and extravagant use of his win nings. Easy come, easy go, is the rule of gamblers. More over, gambling reduces the amount of wealth by relaxing the motives of economic activity, diverting energy from pro ductive enterprise, tempting men into dishonesty to offset their losses, and leading them into speculation and embezzle ment.
§ 3. Borderland of gambling. Ranging between the ex tremes of unavoidable risk-taking and of gambling are a num ber of cases of a mixed nature. In nearly all wagers, judg 1 See Vol. I, ch. 5, § 7.
ment in some degree influences the choice of sides. One man bets on a horse whose pedigree and performances he knows thoroughly ; another judges by the horse's appearance as it comes upon the track. The professional bookmakers have the latest possible and most exact information on which to base their bids.
In the bets made on one's own prowess, as on speed in run ning, the chance-taking is still on the uneconomic, side of the borderland, certainly if the running is for the sake of the wager, not for pleasure or for a useful purpose. A premium won by a runner for speed in delivering a message of econ omic importance presents an essential contrast to the winnings in a wager.
Finally, the very borderland of difficulty is reached in the purchase and sale of goods in the market with a view of profit ing by chance changes in price. The purchasing and holding of land, lumber, grain, cattle, and other tangible and useful things, that need to be stored, held for buyers, or taken to market, must be judged liberally. The quality of gambling depends somewhat on the motive as well as on the ability of the trader. The enterpriser dealing with real wealth, and fitted to take the risks both because of his resources and of his exceptional knowledge, needs the motive of gain in such cases, and in a sense can be said to earn socially what he gets. The motive of the uninformed must be a blind trust in luck, and a hope to gain from a rise in prices which they are quite unable to foresee or to explain.
§ 4. Insurance: definition and kinds. The large element of luck in industry due to unavoidable chances has something of the same evil character as gambling. It brings unearned prizes to some and to others unmerited losses. It must there fore be a benefit to the community, if this element of unavoid able chance cannot be reduced as a whole, at least to regu larize it and make it exactly calculable for any individual. In this way each may be encouraged by the more certain pros pect of receiving a reward proportionate to his efforts and abilities. This desirable condition has in many respects been accomplished by means of insurance.
Insurance is a guaranty of partial or complete indemnity against a financial loss that will result if an event of a speci fied kind occurs. The person seeking some surety against the possible loss is the insured; the person contracting to in demnify against the loss is the insurer; the written contract of insurance is the policy; the price paid by the insured in fulfilment of his part of the contract is the premium; the amount paid when a loss has been incurred is the in demnity; and the person to whom the indemnity is paid is the beneficiary (who may or may not be the insured).
The insurance with which we are here concerned is that which gives financial indemnity. This is given for loss of expected net income, when by chance either receipts are less or costs are more than average. The two main classes as regards kinds of loss are property insurance and personal insurance. Property insurance is that which indemnifies for loss of one's possession in specified ways, such as by fire, by the elements at sea (marine), by hail, lightning, or cyclone, by death (of valuable animals), by robbery, and by break age (as of window-glass). Personal insurance is that which indemnifies the beneficiary for loss of income as the result of various happenings to persons, the chief being death, acci dent, sickness, invalidity, old age, and unemployment. The principle of insurance is being constantly extended to new subjects. The Jeffries-Johnson and the Dempsey-Carpentier prize-fights were insured against rain. Frequently race horses, the fingers of pianists, the lives of ball-players, and the throats of singers are now insured. Summer hotels in England regularly insure for large sums against more than so many days of rain per season. Insurance is capable of further development in a variety of directions.