The subject of gambling is much discussed in the contemporary popular press and literature. The level of interest is especially keen because of the apparent worldwide trend toward the legalization of various heretofore illegal forms of wagering (1). Social scientists offer various explanations for this trend, related primarily to the individual's desire for entertainment, excitement, and risk or to the growing acceptance of the libertarian advocacy of personal as well as economic freedom (2). While this trend certainly has implications for the social, psychological, and economic fabric of society, it is the latter consideration that has been the major force behind legalization. State and local governments in the United States and abroad are attracted to legalization by the lure of revenues that the relaxation of existing prohibitions against gambling will allow. The major counterforce against legalization centers on fears of increased crime and the corresponding increased need for law enforcement that would inevitably result.
Although some would argue against legalization on purely moral grounds (not all religious leaders are agreed on this point ), there will be no attempt to deal with this latter position here. Rather, this chapter considers some of the economic aspects of gambling, both from a micro- and macroeconomic perspective. The first section looks at gambling from the point of view of the individual. Who is the typical gambler? Why do individuals undertake high risk wagers? These two questions are useful in addressing the related issue of the regressive effects of gambling.
The second section of the chapter shifts to aggregate aspects. We look at various forms of gambling and consider each as a . . .