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

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 doing either 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

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 as the 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

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”.

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