I ask because our local politicians/crooks are again proposing casino gambling (as a way out of the fiscal mess they’ve gotten us into). My belief (and I’m not an economist) is that casinos are a “zero sum” game-they take in a dollar, but that dollar doesn’t generate any additional revenue (as it wouldif it were used to purchase shoes or a bottleof beer, for example). Hence, I don’t see casinos as being helpful to an economy-on the contrary, I see them as net extractors of wealth.
Economically speaking, I liken the activity of casinos to what I saw in a remote village in Newfoundland: during the winter, the fishing boats are laid up, and nobody has a job. So, the inhabitants hold yard sales and bake sales-but every dollar exchanged winds up back in the same pockets-so no wealth is created. I see casinos the same way-they take fromyou and give nothing in return. Seems to me that is waht happened in Atlantic City-the casinos went in promising new jobs and urban renewal-25 years later, the city is more rundown than ever, and has higher taxes as well!
So, is there anything positive about casinos, or are these political hyenas just wanting to line their own pockets?
How does a casino differ, in your econonmic view, from a movie theater? What you have ascribed to casinos is an attribute of all forms of entertainment.
Buying a shoe is a “wealth producing effort” because, if you are not an expert shoe maker, you’ll spend more time making the shoe than earning enough money at doing what you are an expert in order to buy the shoe.
Wealth is being created here. People are paying their money for something more valuable to them: food. Food, of course, always goes away, but there’s another bake sale going on.
Now, sadly for the community, wealth is slowly flowing out of it in the off-season because they are buying flour or whatnot to make the bread, but they aren’t getting poorer for the bake sales.
Well, now, this is an interesting question.
First of all you’re leaving a rather critical part of the equation out, which is utility, the basis of all economic activity. Casinos provide utility, e.g. something people want - specifically, they provide entertainment. Most people who go to casinos just enjoy going; I know I do. So all that exchange of money isn’t just paper shuffling, it does provide something people want. I would argue that this can be applied to a lot of entertainment industries - pro sports, movies, what have you. You’re not ending the process with anything really tangible, but people get enjoyment out of it, and generating enjoyment is kind of the entire point of life.
However, I think you’re attacking this from a societal perspective, e.g. will my city/state be financially better off with casinos? I think the answer to that is: It depends where you draw the borders.
Your general observation, that financially speaking it’s just moving money around, is largely correct. However, just moving money around can come as a huge benefit to a city or a state if the money flows from external sources. The absolute #1 example of this, of course, is Las Vegas. Since Las Vegas was for a very long time the only place around where you could go gamble away your savings, and since it’s still the premiere gambling destination, a huge amount of money that flows into the coffers is from outside Las Vegas and Nevada. For Las Vegas and Nevada, it’s a license to print money; they take a lot of money from the locals, but they’re taking billions from out-of-state tourists. A big positive for them, and it’s not as bad for the other states as you might think; they don’t get the revenue, but also don’t have to worry about the crime and setting up gaming comissions and all that crap that Nevada has learned to deal with through years of experience. There are other less dramatic examples of this; for instance, Ontario has two casinos right on the U.S. border, one in Windsor and one in Niagara Falls, that draw in American tourists by the busload. That’s a big positive cash flow for Ontario.
But what’s happening now is that EVERYONE is jumping on the bandwagon and getting casinos, and the net effect of all these casinos will be, as you’ve eloquently pointed out, to line the politico’s pockets. If Ontario has casinos and Quebec has casinos and Massachusetts has casinos and New York, Vermont, New Hampshire, New Jersey, Nova Scotia and on and on have casinos, the eventual net cash flow of all the casinos in the Northeast is going to be zero. If one state like Nevada has them, then Nevada benefits. If EVERYONE has them, nobody will benefit (well, Nevada has a big head start so they’ll be fine for a long time - the tourism infrastructure in Las Vegas is decades ahead.)
Is it a net extractor of wealth? Hard to say. Any economic enterprise has frictional costs. Casinos, as I said, give utility through enjoyment of their services. On the other hand, so do cigarettes. What I’m not sure of is how large an economic impact addiction to gambling has on society as a whole; gambling can and does destroy people’s lives, and there is absolutely NO question whatsoever that easier access to casinos makes it likelier that a prospective addict will destroy her or his life. No doubt at all that cases of bankruptcy and financial ruin are on the rise here in Ontario since we got casinos. But I’m not sure how common it is.
I can’t answer your question, RickJay, but the above quote and your earlier remark about “drawing borders” reminded me of something.
I seem to recall that when Ontario was first considering freestanding casinos and the OJC racetracks began lobbying for slot machines, one of the arguments put forth on the “con” side was that there should be a cordon sanitaire around any licensed gaming area–that is, casinos should be set up where people really had to make an effort to get to, rather than where the people tended to already be. This was supposed to make people think twice, to ensure that they really wanted to go and play for money–players from Toronto would be welcome in a Kapuskasing casino, for example, but by putting a casino in an out-of-the-way place like Kapuskasing, it assured that Torontonians couldn’t stop in a Toronto casino on their way home from work to play a few hands every day, for example.
Las Vegas was held up as an example of a place that few would make the effort to go to unless it had some kind of attraction. Its attraction is gambling, of course, and as we all know, there were (and presumably, still are) plenty of vacation packages to Vegas. My ex used to go on one of these every year with her friends; for one low price, they got a flight, a room, and three days of feeding slot machines. Then they came home, their gambling need satisfied for another year. It had to be satisfied; without spending more money and taking more time off work to return to Vegas, they simply couldn’t play the machines until their trip the following year.
Contrast this to nowadays, where they could stop off at Woodbine every day to play the slots. Or hit Windsor, Niagara Falls or Casino Rama every weekend. Its easy to see how they could become addicted without having to make much of an effort.
As I said, I don’t know how common it is either. And I cannot recall where I heard about this cordon sanitaire idea–probably from a newspaper columnist. But without the effort required to get there, gambling addiction would probably become easier; and with more opportunities for gambling everywhere, I can see how fewer out-of-state/province players would make the effort to bring money into the jurisdiction to leave on the tables and in the machines.
Damned hamsters seem to have eaten a longish post I made on this subject a few months ago … but my impression from growing up in Atlantic City during the advent of the Casino era is that the ancillary costs of gaming are underestimated. IOW, the gaming brings in tax money, but they also spend tons on police, infrastructure, social welfare expenses etc.
For the pols, of course, it’s a net gain, as they have larger budgets to play with.
I would say that the economic effects are bad from a purely utlity point of view because choosing to spend your dollars at a casino is not maximum utility.
Ignoring the responsible gamblers for the moment, the majority of gamblers who go in could have got a far larger entertainment value for the equivilant amount of money doing something else. Thus, I liken casino gambling to tobacco and alcohol in that they deliberately foster the non-rational aspects of human behaviour.
As a result, they can be considered as a demerit good and should be taxed and regulated accordingly.
Shalmanese:
Got any data to back your claim that the majority of gamblers are not “responsible gamblers”?
Gambling does not create any WEALTH. The comparison the theater as a form of entertainment is somewhat accurate. There are probably people ADDICTED to going to the theater but I haven’t heard of people ruining themselves financially because of it.
Casinos create cash flow which governments can tax. Or governments can run their own gambling operations called lotteries.
Dal Timgar
There’s been a lot of work done on this issue, unfortunately none that’s published in journals that you can access without belonging to a school or somesuch that I can find. But the basic consensus as I recall is that casinos are pretty much useless in most cases as engines of economic growth, and the same goes for baseball staduims. Now, that doesn’t mean that they are bad, it just means that there really aren’t any good arguments to justify using public money to build them. When this is done, it’s almost always simply a handout to the owners.
The argument that “well, if there are casinos, we can tax them, and that’s a benefit” is pure nonsense. First of all, taxes are not a net benefit in economic terms. But second of all, if you want more tax revenue, there are plenty of things you can tax or raise taxes on. You don’t artificially create a new activity by spending public money just so that you can then tax it. That’s insane.
Gambling does, however, create wealth: purely by the fact that people will pay to engage in it means that there is social benefit to allowing it. Of course, that may be outweighed by other social costs, but that’s a more controversial issue.
Your missing the point. Responsible gamblers add nothing to the equation, all I need to prove is that there are more irresponsible gamblers than… superresponsible gamblers I guess. ie. people who spend less money on gambling than they should based on maximum utility theory.
Again, like alcohol and cigarettes, there might be a vast majority of responsible drinkers out there yet we still tax it heavily to discourage the irresponsible.
Casinos are a form of entertainment. Period. They are not the Great Satan, they do not destroy people right and left. There are problem gamblers to be sure. But the vast majority of casino gamblers play small limits, and can afford what they play. At least as much as someone can afford that cool sports car they just borrowed up to their eyeballs to buy, or that vacation they took by loading up their credit card.
Now, most of them don’t really understand the mathematics of what they are doing, and probably think they aren’t losing as much money as they are. This is a problem, because it probably causes them to over-spend.
But you know what? People destroy themselves over all kinds of things. They drink too much, they eat too much, they watch television 8 freaking hours a day instead of exercising, or spending time with their families, or learning new things. Some people spend all their spare time staring at porn. Others blow all their money and load up their credit cards buying cars they can’t afford, building models, or whatever.
The government has NO BUSINESS trying to protect people from their own foibles. Freedom means being free to screw up your life, if you so choose.
Does gambling cause damage to the community? Possibly. But if our criterion now is that government should fine-tune behaviour in order to improve the community, there are a lot of other things it could do that would have much more impact than stopping casino gambling. For instance, we could make alcohol illegal. Want to lower insurance rates for all? Don’t give out driver’s licenses until people are 21. Put governors on cars that make it impossible for them to go faster than the speed limit. Mandatory physicals could catch a lot of health problems early, and while there you could be weighed, and if you’re too fat you have to lose the weight before your next physical or face fines. There are many other things we could do to ‘manage’ the state of the community.
Of course, all of this is ridiculous. But so is trying to ban casino gambling. The difference? The ‘silly’ stuff above affects YOU. Banning gambling only affects ‘those people’ who do it, and they’re a small, politically insignificant minority. So to hell with what they want. We’re all about ‘the community’.