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What you need to know for 07/24/2017

Economics of gambling: cost and benefits

Economics of gambling: cost and benefits

Very well, gambling is a losing proposition for those who indulge in it, and it is addictive to some

Very well, gambling is a losing proposition for those who indulge in it, and it is addictive to some small percentage of the population who lose their shirts and ruin their lives with it, but it does create jobs, you might say, and it does stimulate the ever-loving economy.

This is the position of the gambling industry (which calls itself the gaming industry), and it is one generally accepted by local and state governments, which seem to believe that all economic activity is good economic activity.

I am not much of an economist myself, but there has always seemed to me something spurious about the position. I just couldn’t believe that a job sweeping up after people who are losing their Social Security checks was an unalloyed social benefit, just as I couldn’t believe that the loss of those checks was a great win for society either.

Now I have had my skepticism fortified. I have been studying a book titled “Gambling in America: Costs and Benefits,” by a professor of economics at the University of Illinois, Earl L. Grinols, and I feel like I have acquired the beginning of understanding.

Professor Grinols has little use for the traditional economic-impact study that we get hit over the head with whenever anybody wants to build a factory or schedule football practice for an out-of-town professional team. He offers instead a cost-benefit analysis, weighing the value of new jobs and taxes against the costs of a project.

Sure, if you build a casino that casino will employ people, which you can count, and it will share its winnings with the state, which you can also count. But what are the costs, and how do you calculate them?

The costs are things that the gambling industry prefers not to talk about — increased crime, lost productivity at work, bankruptcy, suicide, social services, divorce, domestic violence, and what he calls “abused dollars,” those being “gambling money acquired from family, employers, or friends under false pretenses.”

I will spare you the calculations, but he concludes that the social costs of casino gambling outweigh the benefits by a ratio of 3 to 1. In a hypothetical county with a population of 100,000, the benefits would be $4.6 million, the costs would be $14.3 million.

The gambling industry, of course, sponsors its own studies, which show gambling to be a great boon, just as the tobacco industry long sponsored its own studies showing cigarette smoking to be perfectly fine, but I pay those little mind.

It’s pretty obvious that if you encourage people to lose money they can ill afford to lose, you’re going to get problems. A great deal of data presented by Professor Grinols shows that all those ills — crime, bankruptcy, suicide — increase with the spread of casinos, which is merely what you would expect if you thought about it. What I hadn’t thought about was the dollar-and-cents cost of the problems.

Anyway, you don’t need to be an economist to see there’s a difficulty with counting a dollar dropped into a slot machine as any kind of booster if only because the dollar is no longer available for something else. The customer can no longer use it toward buying a car or going to a movie. And if a state encourages its residents to play slot machines and buy lottery tickets it’s implicitly discouraging them from doing those other things. It’s implicitly discouraging them from buying cars and going to the movies.

The gambling industry also downplays the significance of gambling addiction, pointing out that only about 1 percent of the population are addicts, and those people tend to be addicted to other things, too, like drink and drugs. That seems to be true, from what I’ve been able to learn, but more relevant than the percentage of the general population would be the percentage of casino customers, or lottery customers or OTB customers, who are addicts.

That’s something I’ve not been able to determine. But when you peek into an OTB parlor or into the Saratoga casino on a sunny afternoon, and you see a bunch of people engrossed in horse charts or in video slot machines, how many of them do you suppose are ordinary work-a-day people who just dropped in for an hour’s innocent entertainment and how many of them do you suppose are compulsive bettors?

The addict proportion of the general population may be small, but the proportion of revenue that they contribute to casinos is not small. It’s more in the range of 30 to 50 percent, according to numerous studies, which again only stands to reason. Just as it stands to reason with lotteries and OTB betting.

Jim Finnegan, the former owner of Finnegan’s Convenience in Albany, the biggest seller of lottery tickets in eastern New York, guesses that “at least half” of his lottery customers were compulsive bettors.

But maybe we have to have a lottery and casinos and OTB parlors, because if we didn’t, New Yorkers would just go to neighboring states and drop their money there.

This generates what Professor Grinols calls a “race to the bottom,” in which eventually all states will have to bear the social costs and all will lose.

“As the number of people who gamble to acquire money increases, society becomes poorer,” he says. And, “if everyone gambled to acquire his money, we would all starve,” just to carry the analysis to its logical conclusion.

Red-face dept.

The other day, commenting on gay marriage, I remarked that a person of sober disposition does not apply leaches for relief of fever, and any number of alert readers jumped on me for the blunder.

It’s leeches, with “ee,” that suck blood and were once regarded as medicinal. Leach with “ea” is what water does when it filters down through sand.

Thus did I land in my own Homonym Hopper and cover myself with shame.

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