Gambling and the Good Society - Some Economic Aspects of Gambling

By Calvert, Guy; McCORMICK, Robert E. | The World and I, July 2000 | Go to article overview

Gambling and the Good Society - Some Economic Aspects of Gambling


Calvert, Guy, McCORMICK, Robert E., The World and I


Many Americans gamble. This is not a recent phenomenon. Gambling is older than our Constitution. Indeed there have been periods when it was a fundamental source of government revenue, and so it flows today. Currently, gross state revenues from gambling sources exceed $34 billion annually (of which a large portion is paid out in prizes).

Some people think gambling is fun, but to others it is dull, wasteful, harmful, economically devastating, and immoral. As scientists, economists tend to analyze morals rather than judge them. Here, accordingly, is an amoral view of gambling with a slant toward understanding its good and bad features.

The bad

Gambling saps us of our will and energy. It distracts us, it consumes us, and it prevents some of us from keeping our commitments and obligations. Gambling produces nothing except entertainment. It is a zero-sum game providing no capital for future consumption.

Interpreted in this light, it is easy to see why moral rules developed against gambling. It consumes without producing. Oddly, most people tend to view production as good and consumption as bad. For example, ponder current fascination with the balance of trade deficit, which is a case of consumption exceeding production.

Today, gambling-related activities consume enormous amounts of resources. Consider all the buildings, streets, and labor involved in Las Vegas, one of the fastest growing cities in America, which would probably not exist were it not for gambling.

For instance, gambling hires away 169,102 people from productive employment in other economic sectors. These include hotel maids, croupiers, and a variety of managers. There are more than 2,000 business establishments using space, electricity, and other valuable resources as well. The gambling industry consumes more than $15 billion of resources every year in the United States.

Many gambling communities have grown so large that new sewers, schools, streets, and other infrastructure facilities have had to be put in place to cope with the influx of people. Many towns have hired additional police because of the presence of gambling and all that it brings.

Because of the enormous resources that gambling consumes and its massive potential for ruin, societies, through their governments, restrict economic freedom for the better good. We pass laws to protect citizens when they cannot be trusted to care for themselves. By law, we keep gambling away from children.

The good

Yet any trip to Las Vegas leaves little doubt that starvation is not a prospect for most gamblers there. Food is simply too cheap. There is screaming, jumping, crying, joy, and sadness but little poverty. Few gamblers at American casinos today are on the dole. They are middle America, and they are having fun. Biloxi, Las Vegas, and Atlantic City are entertainment meccas. So there is the dichotomy.

For some, those on life's edge, gambling is wasteful, hurtful, and bad. Like the nearly bankrupt firm or the team behind with no time left, the only hope is throwing long. For others, gambling is exciting entertainment. Like spending hours watching TV or an evening listening to Porgy and Bess, it is just plain fun. No one is hurt, and there is lots of what economists like to call consumer surplus. In the abstract, there is little difference between an hour spent in front of a big- screen TV watching a movie, a computer monitor playing SimCity, or a video poker display. Each costs time and money.

My own research on video poker gambling (financially supported in part by a firm in the gambling industry) in South Carolina finds just that. …

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