The Future of Vice Economy

How the transgressive escapism of today aspires to become healthier and legal without losing its edge

Richard Yao
Oct 24, 2019 · 12 min read

ice, everybody has one. It could be as simple as a bad habit, or as severe as all-consuming addictions, separated often by self-imposed moderation. Usually legal or at least morally acceptable, vices are nevertheless stigmatized and frowned upon socially. Still, despite the potential censure, people have been enjoying their vices for centuries, drowning their sorrows with wine or seeking the thrill of a jackpot. For many, vices provide the necessary reprieve from harsh reality, allowing them to relax and gather the strength needed to face the struggles of life. For some, it just feels good to be a little bad. The inherent transgressiveness of vices is part of the appeal.

The allure of transgressive escapism that vices provide a great draw, and anything that can be considered a “vice” inevitably creates economic opportunities, regardless of its legal status. Recently, capitalizing on the turning tide of marijuana legalization across the States, a new value chain, plus a cottage industry, has sprung up around weed and weed-adjacent products. While the vice economy surrounding marijuana has been around for decades, it did not enjoy the kind of scale and visibility brought on by legalization. From on-demand delivery to high-end designer weed, VC investments are pouring in to modernize the weed business just as they have done with many other CPGs. Based on the $52 billion in sales the industry posted to the 76% increase in cannabis jobs this year, marijuana legalization is already making solid contributions to the U.S. economy.

Interestingly, the booming weed business may come at the expense of other parts of the vice economy. After all, in an age of wage stagnation and heavy debts, the share of wallet for leisure spending has remained largely the same. With weed products becoming more accessible than ever, how are other leading sectors of the vice economy trending? In this piece, we will examine the two major categories of vices — ingestive vices and behavioral vices — to get a better sense of the major forces at play and how they may shape the future of vice economy.

Ingestive Vices to Become a Healthier Lifestyle Choice

Drinking, smoking, and taking recreational drugs are all considered vices because they involve highly regulated products. Alcohol, cigarettes, weed, and drugs are regulated in the first place because they were considered to be unhealthy and addictive. Obviously, the degree of legality varies greatly between these vice products. Alcohol and cigarettes have legal restrictions placed on their distribution and marketing, but consumption is perfectly legal for adults. Marijuana used to be grouped in with controlled substances, but is now moving towards a similar status as alcohol with a growing body of research debunking its perceived addictiveness and defending its medical benefits. Recreational drugs remain illegal in most parts of the world, yet the cultural attitude towards some of the non-addictive variants such as psychedelics are showing early signs of acceptance.

The alcohol industry is arguably the biggest sector among the legal variants of the vice economy. According to Statista, alcoholic drinks generated over $1,474 billion worldwide in revenue in 2018. For comparison, tobacco products generated around $773 billion in revenue last year. However, growing cultural trends, coupled with the rise of alternatives, forecast a gloomy outlook for the industry. WSR, which looks at global alcohol consumption, found that in 2018 alcohol consumption was down 1.6%, however it is anticipated that consumption will grow over the next five years, particularly in premium wine and beers as well as low-alcohol beverages.

Source: Statista

In developed markets, consumers, particularly the younger generations, are abstaining or drinking more mindfully, as they increasingly shun late-night occasions as the standard venue for socialization shifts from bars to online channels. Driven by elevated awareness of the health risks and the rise of wellness-oriented lifestyle, consumers are gravitating towards “less but better” products that serve as healthier alternatives, as the popularity of White Claw hard seltzers this past summer can attest.

Taking note of the shift in cultural attitude, beverage brands are starting to hedge their bets on alcohol’s future. Some beverage companies are investing in cannabis producers, in order to protect themselves against cannabis as a substitute vice, while others are looking into new options for non-alcoholic beverages with new flavors and ingredients, such as the kind of hangover-free synthetic alcohol substitute that one UK-based startup called Alcarelle is developing.

The downward trend in alcoholic beverages is also mirrored by the long-term trends in tobacco products in developed markets. For example, according to CDC data, current smokers in the U.S. have declined from 20.9% in 2005 to 14% in 2017, and the proportion of smokers who have quit has increased. Of the estimated one billion smokers in the world, 80% live in low- and middle-income countries where awareness of cigarettes’ health risks are only starting to develop. Over the past few years, the growing popularity of vaping products such as JUUL and JUNO among younger generations were seen as a comeback for nicotine products in developed markets, but heightened awareness of their health risks and the resulting regulations are tampering the revival narrative.

In contrast, recreational and medical use of psychedelics is showing early signs of revival, thanks to a new wave of research interest in a class of drugs that became stigmatized by its association with the 1960s counterculture movement. As taking ayahuasca for spirit quests or doing LSD at Burning Man become part of self-experimentation for certain demographics, non-addictive, recreational drugs are taking its first step towards normalization and social acceptance. Already, a psychedelic mushroom industry is emerging in Denver after a decriminalization ballot passed in May, as is the case in Oakland as well, with Chicago poised to become the third U.S. city to decriminalize naturally psychedelic plants and fungi. Building on years of preliminary research about using ketamine, a hallucinogenic substance, for treating depression, Johnson & Johnson developed a drug called esketamine that is now sold under the brand name Spravato.

Interestingly, the future of ingestive vices is best illustrated by the rising popularity of CBD products. Touted as a calming natural ingredient that aid sleep and reduce anxiety, CBD, a non-psychoactive chemical extracted from cannabis, has been exploding onto the scene thanks to the passage of the US Farm Bill in 2018, which legalized industrial hemp, and the legalization of medical and recreational cannabis at the state level. Depending on where you live, CBD-infused products can be found in supermarket aisles, in convenience stores, and even some restaurants and bars, although some states and cities have taken measures to ban CBD-infused food and drinks. Besides, CBD is also being incorporated into a wide range of lifestyle products from athleisure apparel and skincare products to household goods like candles and pillows, becoming a catch-all magical ingredient for brands looking to capitalize on the buzz and add some competitive edge to their offerings. In a similar vein, deep integration with lifestyle products with a bent towards wellness and mindfulness may provide an interesting path for alcohol, marijuanna, and psychedelics as well.

Behavioral Vices to Grow with Shifting Social Norms

Compared to ingestive vices, behavioral vices such as gambling or prostitution are even harder to regulate and prone to develop grey economies. Health risks are less of a concern for this group of vices (with the exception of sex work), as morality becomes the primary source of objection. But, morality is a relative concept — many of the behaviors that are considered as “vice” are perfectly acceptable leisure activities in some circles, but tend to be shunned in a larger social context for their tendency of catering to the worst aspects of human nature. Some of the moral objections also stern from the potentially addictive nature of these vices that can sometimes lead to social withdrawal and financial ruins.

Yet as with the former group of vices, behavior-based vices often provide the kind of transgressive escapism that acts as a necessary pressure relief vault for people, and will continue to have sustaining appeal despite their legal status and potentially addictive risks. Instead of trying to stifle them, lawmakers are starting to realize that perhaps legalization would be a better way to bring transparency to those vice economies and better regulate them to minimize the risks and downsides.

Gambling is a popular vice. The global gross yield of the gambling market was forecasted to reach $495 billion in 2019, and in the U.S. alone, the gambling market revenue reached about $80 billion in 2018 and employs about 1.8 million people. According to ADA, an industry trade group for casinos, the share of American adults that visited a casino in the past 12 months jumped to 44% in 2019, up 9% from 2018. This is hardly surprising, as a 2018 Gallup poll reveals 69% of Americans find gambling as morally acceptable, up from the recent low of 58% in 2009 (a natural result of the 2008 recession).

Source: Gallup

Online gambling is still highly regulated and is currently only legal in five states (Delaware, Iowa, Nevada, New Jersey, and Pennsylvania), but sports betting is more prevalent. Since the federal ban on sports wagering was lifted by the Supreme Court in May 2018, thirteen states have developed legal, regulated sports betting industries, with six more to join soon next year. According to a 2018 Gallup survey, 17% of Americans reported gambling on professional sports in the past 12 months. Outside of the U.S., however, various forms of online gambling are legal and regulated in many countries, including some provinces in Canada, most members of the European Union and several nations in the Caribbean region.

Lotteries are an interesting variant of vice for they are legalized gambling sponsored by the local governments to raise money to support policy funds without raising taxes. They are legal in all states except for Hawaii and Utah, making it one of the most accessible behavioral vices in the states. According to a 2018 survey conducted by Gallup, half of U.S. adults reported buying lottery tickets in the past 12 months. While some find lotteries questionable as a tax on the poor given a perceived popularity among lower-income households, some recent surveys have disputed that common conception as they find no major difference in lottery participation across various income and demographic groups. In some countries such as Portugal and Romania, lottery tickets are printed as part of receipts and invoices to combat tax evasion by businesses.

Paid sex is another highly regulated and stigmatized form of behavioral vice. Sex work, the consensual provision of sexual services for money or goods, is criminalized in most countries, whereas pornography is typically legal (with certain restrictions) in the developed world while being banned in most of the developing world. Lately, there have been movements towards decriminalizing sex work based on various research and debunked myths about the supposed dangers and moral implications of legalized sex work. In June, Democratic lawmakers in New York proposed a bill that would fully decriminalize prostitution. If passed, it would be the first of its kind in the U.S. (Nevada is currently the only U.S. state where prostitution is legally permitted with strictly regulated brothels operating in mainly isolated rural areas.) As is the case with marijuana, perhaps the incentive to collect taxes on this long-standing sector of vice economy will provide a major push for legalization. After all, sex work is estimated to generate $14 billion a year in the U.S. alone.

The internet has had an interesting effect on sex work. It offers sex workers a much safer way to advertise, vet, and choose clients than without an online system. Yet, the FOSTA-SESTA bills, which has the stated goal of curbing sex trafficking yet also indiscriminately bans all sex work-related content from public online channels, threaten to undo all the benefits the Internet has granted sex workers and have been largely ineffective in achieving its original goal and considered by some to be an abject failure. Furthermore, with VR sex and teledildonics on the horizon, we are not nearly ready to confront the full impact of digital technologies will have on human sexuality, let alone facing the messy future of paid digital sex.

Besides various forms of gambling and sex work, other common but less stigmatized behavioral vices also include hoarding, compulsive eating, and littering. Recently, there has also been some chatter about whether excessive gaming should be considered a vice that requires stricter regulation. Since there is generally no moral judgment against video games (although some may object to some of the extreme violence depicted in video games), the debate largely hinges on whether video games could be addictive, especially considering its effects on mental health. So far, there has been no clear consensus. Some of those objections on gaming, however, tend to carry a trace of technophobia and conflate the alleged dangers of video games with other forms of digital “addictions” such as social media usage.

Looking ahead, the rise of environmental awareness could lead to a very different type of behavioral vices, such as excessive air travel (some Scandivanians have developed “flight shame,” which is quickly spreading to other developed countries), usage of single-use plastics (metal and paper straws are already gaining traction), and driving diesel- or gas-powered vehicles. In turn, these future vices will create big economic opportunities for clean energy and renewable materials instead of grey economies that support these behaviors that are perfectly fine by today’s standard.

The Path Towards Social Acceptance & Legalization

Fundamentally, vices are a social construct whose criteria moves along with culture. When enough people of a certain culture deem a particular vice as morally dangerous, the lawmakers tend to follow public sentiment (or in some cases, capitalize on the moral panic) and introduce laws to ban it. And when enough share of a population find an illegal vice to be enjoyable and largely harmless, the shifting public opinion would then lead to de-stigmatization and gradual legalization, but not before a shadow economy has sprung up around the vice in question. In fact, loss in taxation on those underground vice economies often provides an important incentivization for the legalization of vices, as we have seen with weed and sports betting.

If we were to chart the path towards social acceptance and legalization, as well as the various stages of developments for most vice economies, it would look like a winding process as follows:

Moral acceptance → illicit consumption fueled by black market (underground vice economy: sex work, recreational drugs) → decriminalization & partial legalization → higher acceptance & widespread consumption (emerging vice economy: marijuana, gambling, vaping) → full legalization with some restrictions → mainstream adoption (industrialized vice economy: alcohol, tobacco, lottery)

Sometimes, previously acceptable vices can even be deemed morally corrupt due to shifting social mores and thus become re-criminalized, such as sex work in some developing countries and recreational use of cocaine in Victorian Britain, thus reversing the aforementioned flow chart of vice economy development. Such is the fluid nature of vices as a social construct. Once a vice economy reaches the final stage of development and achieves mainstream adoption, it will start to lose some of its transgressive coolness over time with increased public awareness of their potential downsides, therefore leaving them vulnerable to be overtaken by the next rising vice.

Moral objection towards popular vices today tends to hinge on two points: potential health risks and potential escalation into addictions. In moderation, most vices are perfectly enjoyable leisure activities that provide a necessary escape from the mundanity and stress of daily life. With industrialized vice economies eagerly trying to figure out healthier alternatives for ingestive vices, we as a society should re-evaluate our definition of addictions and how to regulate vices based on that.

A better understanding of what makes some people more prone to addictions is needed to help the public guard against the turning point of potentially addictive vices, and do so without depriving the majority with the legal means to enjoy said vices. Too often, addictions stern from social isolation and depression, and when lonely and depressed people turn to vices for escapism, they are more likely to face the worst outcome of a common vice. The best solution to addiction is connection, and a balanced development of future vice economies will depend on how we can amplify the social elements of certain vices to curb their addictive potential. After all, drinking and smoking became popular vices for being social lubricants. Can other vices follow suit?

IPG Media Lab

The media futures agency of IPG Mediabrands