Hi, I’m from the games industry. Governments, please stop us

But sometimes it does hurt, like gambling and drug abuse. The reason those things hurt is not just because they're addictive, but also that people are making money depending on how addictive you are. The money-making incentivizes people to manipulate consumer's behavior. Drug does this by the ways of bio-chemistry, gambling does this by the ways of psychology. In this way, addictive social games like Game of War is very similar to gambling.

The problem with this kind of manipulation is that, like gambling, those addictive social games are selling people things that don't exist, don't have any actual value, and don't contribute to support a country's economy(it actually does the opposite). People won't want those things have they not been manipulated. Just psychological manipulation itself is not wrong. Even hard-working and honest companies need some kind of ways of spreading the word, and getting consumers to be in their favor in order to sell their products. It's not wrong if the product itself has some kind of actual value to the costumer.

But in the case of addictive social games, if we look at it in a perfectly neutral way, the only value of the virtual items and perks they sell to the consumer is in the context of the in-game psychological manipulation context. Does a row of numbers in a MySQL database that doesn't mean anything elsewhere really worth $20 dollars? Obviously not. Does watching a picture of a sword or armor or animation of the building of a building really worth that $20 dollars? Highly doubtful. But that's what those addictive social games actually sells. They conditioned customers to pay for something they don't need even when the actual gameplay has become repetitive and boring long times ago.

Let's think back and check: it sells people things of no actual value; it manipulates people to buy things of no actual value; its money-making solely depends on the manipulation. It sounds a whole lot like a fraud to me. If it's not illegal, I can't think of why frauds should be. I'm I missing something?

But sometimes it does hurt, like gambling and drug abuse. The reason those things hurt is not just because they're addictive, but also that people are making money depending on how addictive you are. The money-making incentivizes people to manipulate consumer's behavior. Drug does this by the ways of bio-chemistry, gambling does this by the ways of psychology. In this way, addictive social games like Game of War is very similar to gambling.

The problem with this kind of manipulation is that, like gambling, those addictive social games are selling people things that don't exist, don't have any actual value, and don't contribute to support a country's economy(it actually does the opposite). People won't want those things have they not been manipulated. Just psychological manipulation itself is not wrong. Even hard-working and honest companies need some kind of ways of spreading the word, and getting consumers to be in their favor in order to sell their products. It's not wrong if the product itself has some kind of actual value to the costumer.

But in the case of addictive social games, if we look at it in a perfectly neutral way, the only value of the virtual items and perks they sell to the consumer is in the context of the in-game psychological manipulation context. Does a row of numbers in a MySQL database that doesn't mean anything elsewhere really worth $20 dollars? Obviously not. Does watching a picture of a sword or armor or animation of the building of a building really worth that $20 dollars? Highly doubtful. But that's what those addictive social games actually sells. They conditioned customers to pay for something they don't need even when the actual gameplay has become repetitive and boring long times ago.

Let's think back and check: it sells people things of no actual value; it manipulates people to buy things of no actual value; its money-making solely depends on the manipulation. It sounds a whole lot like a fraud to me. If it's not illegal, I can't think of why frauds should be. I'm I missing something?

(To answer your statement, if there is a stalemate such that both government failure and market failure are inevitable, I would prefer the latter, for the simple reason that it entails less layers of indirection and that it doesn't impose any upper bound on heterogeneous consumer preferences.)

That said, I do have some reading recommendations.

James M. Buchanan was an eminent economist and political theoretician. I'd recommend his classic The Calculus of Consent co-written with Gordon Tullock, supplemented with his own The Limits of Liberty and Costs and Choice.

William A. Niskanen wrote Bureaucracy and Representative Government presenting a budget-maximizing theory of government akin to a utility-maximizing theory of an economic actor. Both have limitations, but it's worth reading.

Don Lavoie wrote great primers such as Rivalry and Central Planning and National Economic Planning: What Is Left? which equally apply to a mixed economy.

R.H. Coase formulated the Coase theorem in his paper "The Problem of Social Cost," demonstrating how private property rights plus low transaction costs lead to endogenous self-regulatory actions.

Oliver E. Williamson wrote a technical work on transaction cost economics entitled The Mechanisms of Governance. Another technical writer was Lester G. Telser, particularly his work on the "core theory" related to cooperation, coordination and collusion.

Essays and papers by Armen A. Alchian, Harold Demsetz and Yale Brozen are also worth examining.

For a bare introduction, see Government Failure: A Primer in Public Choice, or a recent paper using behavioral theory to analyze public policy [1].

[1] http://www.brookings.edu/~/media/research/files/papers/2015/...