setting up a legalised casino good or bad
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Setting up a legalised casino: Good or bad?
October 23, 2013
An issue that is highlighted in the newspapers now is about the Government planning
to allow a foreign businessman to set up a casino. The Opposition has criticised the
proposal although casinos were allowed to operate during the time of the UNP
governments as well.
Of course the argument against them is now couched in
terms of the moral dimension. Is gambling inherently immoral? Buddhist monks say
so. But we already have lotteries run by the Government.
The British colonial ruler banned cockfighting – a village sport popular in certain parts
of the country and hence gambling is not entirely absent from our ancient culture.
Villagers are known to take bets on future events like which party will win an election.
The gambling spirit seems to be inherent in mankind. Generally we all know that
gambling implies taking some sort of risk. In other words, people bet (usually money)
with the hope of winning something (usually money) without being aware of what the
outcome will be. Is it morally wrong?
Ongoing debate
There is a debate over whether or not gambling can be good for an economy. Paul
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Samuelson Nobel Laureate thought it is harmful to the economy. He said: “(Gambling)
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. Gambling subtracts from the national income.”
Other economists point out that this criticism could be applied to many entertainment
activities as well. These are products that don’t add to the ability of the economy to
produce more. But they still have value because they provide satisfaction, or utility (in
the economist’s jargon), to consumers. These economists are more concerned about
the costs of banning gambling instead. They point out that where there are illegal
casinos there are law enforcement costs and the incentives to lobby and bribe public
officials to allow illegal gambling to occur.
A powerful economic development tool?
Some economists say gambling can be a powerful economic development tool.
Gambling is a thriving industry in America. Gambling generates billions of dollars of tax
revenue every year similar to the Ceylon Tobacco contributions to our own
Government revenue.
Las Vegas is a testament of the powerful ability of gambling to foster economic
development. Because of gambling, Las Vegas has shown impressive job growth,
developed into a major city with a low tax burden that has spawned significant private
and public sector investment. But Las Vegas also tends to have a wide variety of
social ills associated with it, given the high out of state and tourist population. No
studies have examined whether those are really associated with gambling, or with the
transient population.
Economists also refer to Atlantic City. It used to be a slum by the sea, and now, it’s a
slum by the sea with casinos.
The basic criteria for economic development success is for a project to increase a
region’s net exports. Specifically, the amount of goods or services that are exported
needs to be increased or the amount that are imported decreased. This is the only way
that income can increase.
Projects can certainly be an overall economic success in terms of profit without doingeither of these, but those profits come at the expense of other businesses, say some
economists.
Positive or negative economic impact?
Various factors come to play in determining if gaming has a positive or negative
economic impact. The basic economic impacts include the construction of a casino
which leads to many jobs for construction employees and suppliers, employees to staff
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the casino, and the suppliers for an ongoing casino. Multiplier effects then ripple
throughout the overall economy.
But just because a gambling project creates a lot of jobs and
a large facility is built it doesn’t mean the economic impacts
are positive. Non-economic impacts such as social costs are
usually intangible, difficult to measure, and on say those who
oppose casinos.
The benefit for a region however is if the transfers of money
are made from outside of the region. If tourists arrive in larger
numbers because of the casinos then the economic effects
are positive.
Gambling is often legalised to promote economic
development of depressed areas. That was an important
motivation in Las Vegas, Atlantic City, New Jersey,
A casino here will have to be patronised largely by foreigners
and this should draw more funds as well as more tourists.
Any industry that draws money from outside is helpful and
has a case for it. There could be an influx of funds and even some investment from
abroad. The Australian businessman will have to bring in money to set up the casino
here and this will help us in our present foreign exchange crisis.
What is in dispute are the social costs and the extent to which the local residents will
be harmed. How many local residents will be attracted to such a casino and how will
they be affected? In my opinion not many and even they will be those who make easy
money through corruption and unproductive enterprises. Easy come easy go is a
saying with regard to money.
It will contribute to increased government revenue. Politicians and the public are
naturally attracted to an industry that is willing to pay 20 to 30% of its gross revenues
as taxes. Also, gambling is seen as a source of money that is easier to obtain because
it is not a tax on individuals.
Gambling has become a very accepted way for governments to raise funds such asthe running of lotteries. But it should not be viewed as a panacea for the fiscal woes of
the state. Casino gaming is more appropriately viewed as an amenity that can be a
cornerstone in the local tourism/entertainment market.
Social costs
Social costs are the costs borne by society as a whole that result from the behaviour
of the “problem gambler”. Any habit can and will be abused by some people, be they
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problem gamblers or problem drinkers. There will undoubtedly be some Sri Lankans
who will patronise the casino and there may be problem gamblers among them.
Social costs that result from gambling may include increased rates of suicide, car
accidents and incidence of child abuse, divorces and depression. Other social costs
may involve employment costs, loss of work, bad debts, civil court costs, criminal
justice costs, therapy and welfare. But what will be the magnitude of its incidence here
in our country? Maybe an insignificant incidence. We have to assess costs versus
benefits and take a decision rationally rather than emotionally.
Economist Frank J. Fahrenkopf Jr. who
carried out extensive research on casinos,
believes that commercial casinos are key
contributors to the economic wellbeing of the
communities that host them; their tax
revenues help to provide much-needed jobs
and benefits to thousands of Americans. To
further emphasise the legitimacy this industry, Fahrenkopf says he found “no link
between gambling and bankruptcy or gambling and crime”.