Saturday, February 23, 2013

Monetary Origins of the Poker Bubble

by Peter C. Earle Wednesday, February 20, 2013

I. Introduction

Nearly a decade ago, poker exploded in popularity. Between television programming, media coverage, and pop culture references to it—in particular, the Texas Hold ‘Em variant—the game became virtually unavoidable. The American Gaming Association estimates that nearly 1 in 5 Americans played poker in 2004, up 50 percent from 2003; also, that nearly 20 percent of those new players had begun to play within the previous two years. [1]

The creation myth associated with the poker boom credits the improbable victory of a prophetically-named Tennessee accountant, Chris Moneymaker, in the 2003 World Series of Poker (WSOP). Other accounts source James McManus’s 2003 book Positively Fifth Street and the 1998 poker film Rounders. Still other, more mystical explanations refer to the game’s sudden “cultural resonance.” [2]

But fads and surges of popularity come and go; these explanations hardly account for why, in a short amount of time, tens of millions of people suddenly flooded into a familiar—indeed, 150 year old—American card game, frenetically expending tens of billions of dollars on it. Nor do they explain why between 2007 and 2008 poker television programs were suddenly cancelled, tournaments saw a drop in participation, and many poker-related businesses scaled back or failed.

Austrian business cycle theory (ABCT) can, however, explain the origins and outcome of the poker bubble as well as its simultaneity with the housing boom, which, as will be demonstrated, are by no means coincidental. …To Read More……

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