The establishment of casinos in American cities induces moral and economic debates. Due to the profit gambling establishments create, casinos have been able to grow and prosper. Gambling has become a huge industry in the United States with total income of over 78 billion in 2004 (Ernest P. Goss, 2000). Las Vegas by itself in 2005 took in over eleven billion dollars (Ernest P. Goss, 2000). However, despite casino’s overwhelming profit margin, the social costs of having a casino affect both those who gamble and those who do not (cite). A careful, accurate analysis of the effects of gambling and casinos reveals that gambling casinos cause real harm both to the individual gamblers and the communities they reside in. As states, cities, and counties need for tax dollars increases, government departments seek to gain approval for the placement of gambling facilities in their communities. Gambling facilities are often allowed in order to bring in more revenue by taxing gambling activities. However when one looks at the true cost of gambling this method of increasing tax revenue leads to severe long term harm to the communities and individuals who live close to these casinos.
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Based on the best available numbers and analyses, the costs of gambling far exceed the benefits by a factor of more than 3:1 (Gardner, 2005). That is for every dollar of tax revenue three dollars have to be spent to address the harmful externalities caused by gambling. The social costs are tragic. Areas where casinos are built see an increase in crime, suicide, divorce and bankruptcy rates. These casino communities also observe an increase in employment costs, illness, social service cost and family cost. Casinos also hurt the local economy by taking discretionary dollars away from the local restaurants, bowling alleys and other amenities. Thus communities with casinos see either a net loss of jobs in the local community or just simply no increase in jobs at all (Gardner, 2005).
In many ways gambling casinos can be viewed and the gambling that occurs in casinos can seen as small black holes on the geographical landscape of America. These black holes exert tremendous social and economic effect within fifty miles of its location. Their negative effect on the surrounding community increases with proximity. Within this fifty mile radius of the casinos the highest rates of economic loss, bankruptcy, divorce, suicide and crime are found.
By looking at just one individual case we can see the personal tragedy as well as the huge social cost of gambling. Take the case of Riva Wilkinson, based on information made public, she had a gambling problem. Her gambling problem escalated with her beginning to steal money from her job, in order to place bets at a black jack casino in Prior Lake. Eventually it became known that she stole upwards of 410,000 dollars in as little as twelve months (Kearney, 2005). In addition to the monetary cost of this theft one has to add in the social cost of discovering and prosecuting her. Over 1,000 man hours put in by FBI agents, local police and accountants were spent in this discovery and prosecution (Kearney, 2005). “These services cost the public over 100,000 dollars (Kearney, 2005).” As we can see from the Wilkinson case, social costs from casinos fall hard on even those who do not gamble. Gambling is associated with a plethora of crimes ranging from violent to property crimes. These violent crimes include aggravated assault, robbery, rape and murder. Property crimes include larceny burglary and auto theft (Gardner, 2005).
In addition gambling is connected with so called victimless crimes including check forgery, tax fraud, tax evasion, selling drugs, and prostitution (Edington, 1999). Gambling also has been linked to organized crime (Ernest P. Goss, 2000). Many Casinos have been identified as businesses under direct control by the mob. For example “the Illinois Gambling Board concluded that the top officials of a proposed river boat casino were controlled by the mob and most of the casinos investors had links to mob figures (Kearney, 2005). Federal Court documents and South Carolina corporate records show a link between Aouth Carolina’s video gambling industry and a Pittsburgh organized-crime rating (Eadington, 1999). These mob connections although more difficult to quantify are mentioned often mentioned in courtrooms and newspapers in America (Volberg, 2007). These crimes caused by gambling invariably lead to large quantities of resources being spent. Expenditures include extra costs for policing, capturing, imprisoning and rehabilitating of these criminals (Kearney, 2005). Businesses in the communities where casinos are located incur significant business and employment costs. These expenditures which are paid for by tax paying citizens and employers, these expenditures are lost worker efficiency causing reduced performance, lost time working due to extended lunch breaks, arriving late, and leaving early due to gambling. In addition embezzlement and the taking of unnecessary sick days can be attributed to gambling (Gardner, 2005). Between 21 and 36 percent of compulsive gamblers in rehabilitation state that they have lost a job due to gambling (Volberg, 2007).
The National Gambling Impact Study Commision found that counties with casino gambling had an average of an 8% higher crime rate than that of counties that did not have casinos (NGISC, 1999). These crime rate increases occur gradually after the third year of the casino’s operation. (NGISC, 1999) “We conclude that casinos increase property crime and violent crime, with the exception of murder, and that the effect on crime increases over time.” (NGISC, 1999) The authors describe of the report describe it as “the most exhaustive study of casinos and crime to date, both in terms of number of counties we studied and the timer period analyzed.” (NGISC, 1999) The study compared crime statistics of all 3,000 U.S. counties in the United States from 1977 to 1996, observing the differences in crime rates before and after casinos opened. Some interesting facts derived from the report state that in five years after the casino opened, robberies were up 136%, aggravated assaults were up 91%, auto theft 78%, burglary 50%, larceny 38% and rape 21%. These increases were attributed to the casinos (NGISC, 1999). Alarmingly some crimes increase immediately after a casino’s construction, robbery, DUIs and domestic violence increase 9% on average the year a casino is built. (NGISC, 1999)
In examining the external or hidden costs associated with compulsive gamblers we discover the average cost to society if an additional compulsive gambler were to be added to the population. This information can provides us with a cost figure for our society. Another way to examine these hidden costs is to look directly at the symptoms gambling causes. Symptoms such as crime, suicide, and bankruptcy (Eadington, 1999; Walker, 2008). According to a study done in 1999 the average cost to society of an additional compulsive gambler is almost $3,000 (Eadington, 1999).
(Lorenz, Valerie D, 1997)
Gambling also incurs social costs because it is a Directly Unproductive Profitseeking (DUP 136) activity (Walker, Douglas; 2001). A DUP is an activity that produces nothing of social value while removing resources from productive activity. Although gambling may be personally rewarding they are to the gambler, the gambling activity is a waste and a drain on the community resources. This DUP activity of gambling also incurs opportunity costs in the sense that the time the person spent gambling could have been spent performing productive activities (Walker, Douglas; 2001). For example a professional poker player who does not gamble for enjoyment but rather gambles for a living engages in DUP activity and reduces national income by the amount of his potential productive output during those hours spent gambling. Nobel prize winning economist, Paul Samuelson, described DUP gambling as the following.
“There is, however a substantial economic case to be made against gambling â€¦. It involves simply sterile transfers of money or goods between individuals, creating no new money or goods. Although it creates no output, gambling does nevertheless absorb time and resources. When pursued beyond the limits of recreation, where the main purpose after all is to “kill” time, gambling subtracts from the national income (Walker, Douglas; 2001).”
An unnamed source has said that gambling is nothing more than an agreement by a group of individuals to steal each others money. Gambling of course causes personal bankruptcy and these bankruptcies impose social costs by diverting resources to lawsuits, legal costs and bill collection costs (Gardner, 2005). Research and evidence involving casinos and bankruptcy is ongoing. The evidence for the connection between bankruptcies and casinos is provided by a wide variety of sources ranging from different geographical areas and a number of formal studies. In 1994 casinos opened in Baton Rouge Lousianna (Lorenz, Valerie D, 1997). After the opening of the casinos the Baton Rouge Crisis and Intervention center subsequently that gambling related incoming calls jumped from 39 in 1993 to 1,375 in 1995 (Lorenz, Valerie D, 1998). At the same time personal bankruptcy rose 53 percent in the first half of 1996 compared to a year prior. Bankruptcy lawyers stated gambling was the major factor. Also in 1994 Kansas City opened its first casinos, by 1996 bankruptcies were on the rise in Kansas City (Lorenz, Valerie D, 1998). The officials at Kansas City Bankruptcy court normally reported one person a year due to gambling. The Kansas City Bankruptcy court would later report seeing twenty people a month because of gambling related issues (Lorenz, Valerie D, 1998).
In Wisconsin in 1996 an AP report showed that “People in eastern Wisconsin were seeking bankruptcy at a pace 25 percent greater than a year before gambling had been made legal (McGowan, 2008).” According to the AP report one in ten bankruptcies in this Wisconsin area were linked to gambling debts, more than double the rate of past years (Gardner, 2005). A 1995 study in Minneapolis found that in 105 filers for bankruptcy the average gambling loss was 22 thousand dollars (Walker, 2008). “A 1998 study found that in the 298 U.S. counties which had legalized gambling within their borders reported a 1996 bankruptcy gambling rate that was 18% higher than the filings of counties with no gambling (Walker, 2008).” The SMR Research Corporation located in Hackettstown, New Jersey found that 2.5 to ten percent of all bankruptcy filings in the United States have a gambling component (Grinols, 2004).
Gambling also tragically increases the rate of suicide. Studies of problem and pathological gamblers report that they both contemplate and commit suicide at a rate higher than the general public (Gardner, 2005). Studies report that 15 to 25 percent of gamblers who have admitted to having a gambling problem, have attempted suicide rates that are five to ten times the average of the general population. Of these gamblers, 12-18 percent have made potentially lethal suicide attempts, and almost 50 percent have made plans to kill themselves and more than 65 percent think about suicide (Gardner, 2005). The full extent that gambling has on suicide rates in the United States, is definitely a question that needs further research.
The stress that gambling causes individuals can lead to a number of stress-related illnesses such as chronic headaches, anxiety, moodiness, irritability, intestinal disorder, asthma, cognitive distortions, and cardiovascular disorders. Many of the costs of sickness are borne by the gambler, but these illnesses also lead to real resource costs that the local community must bear in the form of treatment costs (Grinols,2005). “The extreme financial stress and employment difficulties associated with problem and pathological gambling can lead to unemployment and require periods in which government assistance is needed (Grinols,2005).”
Social service costs include therapy and treatment costs, as well as unemployment insurance costs, Medicaid, energy assistance costs in some states, and the cost of other social services such as welfare and food stamps (McGowan, 2008;Grinols, 2004). “Other social costs include the family cost caused by gambling such as the cost of divorce, separation spousal abuse and child neglect (Grinols, 2004).” Many of the spouses and children of pathological gamblers are physically and verbally abused (Grinols, 2004).
There are many examples that show the personal tragedies that gambling can cause and the difficulties that the local communities have in dealing with them. The following is just a few of these events. In 1999 Mississippi Gulf Coast banking officials were looking for the best combination of security measures to deal with an increase in bank robberies (Walker, 2008). “Harrison, Hancock, Jackson and Stone counties (on the Mississippi Gulf Coast) reported only two bank robberies in 1990 and in 1991 (Walker, 2008).”While since that time such burglaries have soared to over thirty such thefts in 1997. The Montreal Quebec reported in 1999 that the rate of gambling related suicide had more than doubled in one year. According to their report 15 people all men had killed themselves because of gambling problems this figure is up from six in 1998 and two in 1994(Walker, 2008). Interestingly 1994 was when Quebec introduced legalized casinos. The above are just a few stories of the harm gambling causes.
Another way to judge the effect casino gambling has on the near-by communities, is the use of statistical analysis. In 2003 the amount that compulsive gamblers cost society was above $10,000 (adjusted for inflation) whereas in 1990 each compulsive gambler cost society almost $2,400 (Grinols, 2004). Compulsive gambling is a recognized disorder and is part of the DSM-IV of the American Psychiatric Association (Volberg, 2007).
“Pathological gamblers are identified by a number of characteristics, including repeated failures to resist the urge to gamble; loss of control over their gambling, personal lives, and employment; reliance on others to relieve a desperate financial situation caused by gambling; and the committing of illegal acts to finance gambling. Problem gamblers have similar problems, but to a lesser degree (McGowan, 2008).”
Frequently these different types of gamblers are mentioned together as “problem and pathological gamblers (Kearney, 2005).” Scientific research in the medical field has revealed that gambling influences the brain in much the same way addictive drugs influence the brain. Additionally in the same way that a portion of the population is more susceptible to the influence of drugs, a portion of the population is susceptible to addictive gambling (Albanese J, 1996).
As discussed above a comprehensive cost benefit analysis reveals that true cost of introducing a casino to a region is greater than 3:1 (Gardner, 2005). Which means it costs three dollars for every dollar gained in tax revenue. In light of this casinos are a horribly ineffective way to raise taxes. Building casinos today will bankrupt communities in the future. Casinos are much more costly than simply instituting a tax. If we assume that these cost benefit numbers were somehow skewed are exaggerated by a factor of 3 casinos would still prove to a useless mechanism to generate money (Volberg, 2007).
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In a National Gambling impact Study commission discovered that the close you live to a casino the more likely you are to become a compulsive gambler. A person living within fifty miles of a casino has a 1.2% chance of becoming a compulsive gambler, comparatively a person living between 51 and 250 miles away has a .5% chance of becoming a compulsive gambler (NGISC, 1999) . A 200 mile increase in distance from a casino more than halves one’s chances of becoming a compulsive gambler. (NGISC, 1999)
The national gambling impact study commission also reported that families who live close to a casino spend roughly $500 every year per adult on gambling (Near being defined as within three miles of the casino) (NGISC, 1999). Additionally those families that live between three and one hundred miles away spend $340 per year per adult, a decrease of 32% (NGISC, 1999).
Prior to 1990 most of the country in America had no legalized casinos (Albanese J, 1996). The question put to local communities and society at large is whether they would be better off without legalized casino gambling. The evidence clearly indicates that these communities would in fact be better off without casinos by a wide margin. In simple terms for every dollar spent on casinos, three are required to clean up the casinos externalities (Gardner, 2005).
Problem gambling among Southern Nevadans has a social cost conservatively pegged at between $300 million to $450 million a year, a new report being released this week says.
The cost also is about equal to the total estimated gaming taxes paid by casino operators in Southern Nevada, he said.
The actual cost could be fairly estimated as high as $900 million a year “had very conservative assumptions not been made in preparing the report,” said Las Vegas professor and casino gambling expert Bill Thompson, a co-author of the study.
Estimates of the number of pathological gamblers in Southern Nevada ranged from 20,000 to almost 40,000.
The research showed the annual social cost of each pathological gambler in treatment programs is $19,085.
The highest annual single cost per individual in treatment programs involves bankruptcy debt losses and civil court costs of $10,000.
The employment costs in terms of missed work, productivity losses, forced terminations and unemployment compensation is more than $6,000 per compulsive gambler.
The criminal justice cost (theft, arrests, trials, incarceration and probation) is almost $2,500. The cost of treatment and social services is $500.
“That’s the government’s and the casinos’ dirty little secret. They have claimed they create benefits without costs,” he said.
“For those who have a problem with gambling, it’s a different story. Even at 2 percent or 5 percent of the population, it’s a problem we have to take seriously,” Stewart said.
“The National Gambling Impact Study Commission concluded the annual cost of problem gambling is $5 billion to $6 billion nationwide,” he said.
The report also excludes the costs of family dysfunction, divorce, children being without families, suicide and attempted suicide. That also could be a serious omission because the suicide rates among compulsive gamblers are the highest of any addicted group and six times the rates among alcoholics.
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