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In a recent article of the Toronto Sun that discusses a proposed waterfront casino for the city of Toronto, the author Christopher Hume makes the following statement:

Experience around the world shows that casinos are the kiss of death for the neighbourhoods and cities in which they are located. Given the terrible social costs of gambling and the damage casinos can do to the urban fabric, Toronto is lucky to be able to say, “Thanks, but no thanks.”

Is is typically true that casinos contribute significantly to the destruction of urban and social fabric?

EDIT I believe there are a few sensible proxies for the above question, which when answered would be illuminating, including:

  1. What are the long-term economic effects of permitting a casino in a city? Namely, after a decade or so of permitting a casino does a city typically realize a significant economic benefit or contraction?

  2. Alternatively, does the GINI coefficient (income disparity) change significantly when one permits casinos in a city?

Although one of many related metrics, the "social fabric" can (and often is in this comparison) extended beyond economics to include addressing the following:

  1. Is a significant increase in crime caused by permitting casinos in cities? Does crime increase significantly particularly where the casino is located? If so, can the crime increase be offset by increased revenue for policing and social services?

  2. Are there significant knock-on effects, e.g. health/sick care costs, mental illness, single or adoptive parents?

It is reasonable I believe to expect that the above are the factors the author making the claim had been taken into account. Although I have focused on an economic proxy, there may be valid arguments that another proxy is preferable.

For further clarity, I would exclude from the analysis those cities whose predominant export is gambling-related tourism (e.g. Las Vegas). The crux of the question is the effect of a casino on cities whose economic foundations are not casino-related e.g. Toronto.

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    Example: An economist might answer with a resounding "No! Casinos only help society, by creating jobs, and increasing tourism!" Whereas some religious zealot might answer with a resounding "Yes! A casino is an inherent abomination, and its mere existence destroys social fabric." – Flimzy Dec 31 '12 at 21:26
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    @flimzy the question is a little fuzzy but not entirely subjective so I think rescuable. The key, I think, is to exclude gambling itself from any consideration so people's opinions of it don't count. That leaves some hard-ish stats about other economic activity, crime, retail activity and so on, changes in which would partially answer the question. – matt_black Jan 1 '13 at 12:33
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    @matt_black: I agree that the morality of gambling must be temporarily put aside in order to answer this question. However, the financial activity involved should be included. I would speculate casinos are analogous to a regressive tax in that they take money disproportionate from the poor, and the profits go to a richer set of investors [citation-required!]. I think it is reasonable to include this, assuming it is true, when evaluating the economic effects. – Oddthinking Jan 1 '13 at 23:12
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    Critical component missing from your question: Timeline. It may not be bad initially, it likely will be in the future. Here's how it works: Legislation, sometimes written by manufacturers, is proposed. It usually has good controls with limits on max bet and payouts to limit problem gambling and restricted number of games per venue. Money is earmarked for "good causes" (e.g. education) The trick: casinos become rich/powerful quickly and invariably introduce future legislation to increase bet limits, payouts and number of machines per location. Montana video gaming history is classic example. – Dan Haynes Jan 3 '13 at 21:43
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    @DanHaynes: What you have described is definitely a core consideration of economic effects. Over a period of several years, most business interests of sufficient organizational capacity tend to rent seek in one form or another, casinos being no exception. One would hope that studies of economic effects would account for this. – Brian M. Hunt Jan 3 '13 at 22:07
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Summary

Native American tribes

There is little doubt that casinos can be very good at generating wealth for their owners. This can be a powerful tool for societal change. For example, the Shakopee Mdewakanton tribe have benefited hugely from owning a casino. This could be seen as a big benefit to society through providing status/power to an oppressed minority.

On the flip-side, this has led to greater inequality within and between tribes and increased tribal conflict. So from this perspective, not so good.

Taxation and inequality

A regressive tax is one that applies to poorer members of society at least as much as richer members, thereby increasing income inequality. Income tax is not regressive as people with higher incomes pay more tax. The most obvious example of a state-levied regressive tax is sales tax, because everyone, regardless of their income, pays the same amount of tax for the same product. In fact, this can disadvantage the poor even more because tax on many good that are consumed in greater quantities by the poor have higher sales tax - e.g. cigarettes and alcohol. implicit taxes can be similarly regressive.

It is absolutely conceivable that gambling could be an implicit regressive tax. This would mean that all forms of gambling would increase inequality, and therefore exacerbate all the negative effects of high income inequality.

In 2007, Freund & Morris looked at Gambling and Income Inequality in the States, and found that:

nonlottery gambling has little impact on state-level income inequality. Lotteries, however, clearly foster income inequality--even when accounting for the effects of other forms of gambling.

although:

While one might reasonably argue that state lotteries have broad geographical effects, casinos (of all types) are likely to have far more restricted areas of impact. To the extent that is the case, casino gambling may well influence local income distributions without producing a discernible state-level effect.

The nonlottery (casino) gambling is less regressive than lottery gambling because:

casinos generate more or their revenue from relatively wealthy gamblers than they do from lower-income gamblers. However, it still may be true that lower-income gamblers bear a greater financial burden from casino gambling than do higher-income gamblers (p. 6).

However it is important to also note that casino gambling may well become similarly regressive on a state level to lottery gambling if it grows in coverage and popularity. And that this is only one study.

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An article in the Toronto Star speaks against a casino, saying:

the MPI’s research, which is peer-reviewed in contrast to the unverified numbers the casino advocates throw around, show that depending on the size of the gambling facility (and the proposed GTA one would be huge), costs to cities in policing and other taxpayer-funded services run between two to seven times the casino advocates’ claimed civic benefits.

The MPI paper which they talk about is available here: The Economic “Impact” of a Downtown Casino in Toronto.

  • It's a great paper cited by the Star but it has no original research; it would be a great improvement to this answer if it quoted the articles referenced. – Brian M. Hunt Mar 29 '13 at 17:55
  • @BrianM.Hunt There's a list of references on pages 9 and 10 of the PDF. I do agree that reading and quoting from them would make this a better answer, and I invite anyone to do so. – ChrisW Mar 29 '13 at 18:07

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