Resources - Social Costs

Social Costs of Gambling

Rises in addiction, crime and negative economic impacts are all consequences of predatory gambling enterprises. Following are brief overviews of each.

Gambling and Addiction

Gambling expansion has swept the nation, and with it has come high social costs, chief among them addiction. Following is how Dr. Tim Kelly, who served as executive director of the National Gambling Impact Study Commission, summarized commission findings on addiction before the Texas Legislature in 2005. He had some to oppose any expansion of gambling in Texas. His top reason dealt with addiction.
Read the whole article here.

Gambling and Crime

The major study on the link between gambling and crime was done by Earl Grinols, of the University of Illinois, and David Mustard of the University of Georgia. The two economics professors surveyed data from all U.S. counties from 1977-1996 and published their findings in 2004. Their findings have since been duplicated in several other states.

• Casinos increase crime rates in counties in which they are located. Overall, counties with casinos had 8.6 percent more property crime and 12.6 per cent more violent crime. The rise was linked directly to the presence of a casino in the county.
• This rise occurs over time.
• Crime in neighboring counties did not go down after the casino was built, indicating crime was created in casino counties rather than being shifted from one area to another.
• Crime went up in all areas except murder. The rise in crime translated to a social crime costs of $75 per adult in 1996. This figure does not include other social costs related to casinos, such as crime in neighboring counties, direct regulatory costs, costs related to employment and lost productivity, social service and welfare costs.

Read the report in Resources.

Other studies have shown:

• Three years after the introduction of casinos in Atlantic City, there was a tripling of total crimes. Per capita crime there jumped from 50th in the nation to first. ("Beyond the Limits of Recreation: Social Costs of Gambling in Southern Nevada," 2004)
• Comparing crime rates for murder, rape, robbery, aggravated assault, burglary and motor vehicle theft reveals Nevada is the most dangerous place to live in the United States. ("Beyond the Limits of Recreation: Social Costs of Gambling in Southern Nevada," 2004)
• Bankruptcies increase 100% in counties with casinos ("The Impact of Casino Gambling on Bankruptcy Rates: A County Level Analysis," by Ernie Gross and Edward Morse.

Gambling and Economic Impact

The National Gambling Impact Study Commission, the most exhaustive and authoritative study of gambling to date, found that gambling has negative economic impacts. Among them:

• Legalized gambling leads to increased costs to the state from bankruptcies, addiction treatment centers, and the penal system. The National Opinion Research Center (NORC) estimates that direct gambling costs born by the government are currently over $6 billion per year ($500 Million/month - money that could have gone to education or health care). That does not count indirect costs such as loss of productivity in the workplace, divorce consequences for the family, etc. It is reasonable to suggest that the more gambling a state offers, the more of these costs it must bear.
• Gambling revenue comes from money that would otherwise have been spent at local businesses and services, and thus acts as a drain on the local economy. Instead of citizens spending money on food, clothing or entertainment, it's spent on gambling - often by those who can least afford it. Local businesses will find that their customer base shrinks as gambling expands, and consequently many will fail. Atlantic City is a textbook study of this phenomenon.
• State-sponsored gambling, such as the lottery, preys on the poor, resulting in a need for more community services and higher taxes.
• Gambling is associated with corruption of government, always costly to legitimate businesses. The gambling commission concluded that government tends to become a "dependent partner" to the gambling industry, since it becomes reliant on their vast funds and can be influenced by campaign contributions and program support. There are many examples of this occurring on both the state and federal levels:
  • On the federal level, legislation introduced by Sen. McCain in 2001 to close the loophole allowing betting on college sports in Nevada was put on hold indefinitely despite strong support. Such betting, according to the NCAA, puts student-athletes at risk for point shaving and other schemes - as has been reported in several college scandals. Although it was predicted that 75% of the senators would have supported the bill, the leadership on both sides of the aisle worked together to keep it from coming to the Senate floor for vote. Why? The gambling industry has fought the bill vigorously, and is among the highest contributors to campaign funds for both parties.
  • On the state level, West Virginia's Governor Wise was embarrassed a few years ago by the disclosure of a high-paying government job provided to a State Senator's daughter. This occurred shortly after the Senator surprised colleagues by voting in support of the Governor's video slots proposal - a vote that swung the outcome.
  • Dr. Tim Kelly, commission executive director, told Texas lawmakers in 2005, "In my view, this is perhaps the greatest danger inherent in legalized gambling - it's pernicious ability to corrupt the political process. With so much money available for campaign and other contributions, it is just too easy for the gambling industry to influence policymakers."
  • He added, "The gambling industry is apparently not run by the mob as it was in the days of "bugsy." But there is a tendency for gambling proposals to come in with "muscle" in terms of aggressive, secretive, well-funded tactics that stretch the limits of what is legal and appropriate. Watch for this phenomenon whenever a new gambling initiative is put forward."

Read Dr. Kelly's testimony under Resources

Other Studies Have Shown:

• Each compulsive gambler costs the economy between $14,006 and $22,077 per year. If 2% become addicted, that's $280 -$440 per U.S. citizen. (Earl Grinols: "Cutting the Cards and Craps, right thinking about gambling economics.")
• Most casinos attract 80% or more of their market from a 35-50 mile radius. Casinos absorb existing entertainment, restaurant and hotel business, and deplete dollars available to other retail businesses. That destroys other jobs in the trade area and eliminates their sales, employment and property taxes. (Earl Grinols: "Gambling in America, Costs and Benefits.")