Abstract
Chapter 2 examined several basic explanations for how the introduction of casinos to a state or a region could have a positive impact on economic growth or the overall output (or income) of the economy. In this chapter I discuss the role of consumer welfare in the economic growth equation. We wish to move beyond a simple tallying of the spending on the building of casinos, of the wages paid to casino employees, or of the taxes paid by casinos to state governments. How does the proliferation of casinos affect people’s well-being?
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- 1.
Consumer and producer surplus are discussed in more detail in the Appendix.
- 2.
For example, consider Thompson and Schwer (2005, 65), who write, “Some economists will argue that there is no economic gain from gambling activity as it represents only a neutral exercise in exchanging money from one set of hands to another. Indeed, as no product is created to add wealth to society, the costs of the exchange (time and energy of players, dealers, and other casino employees) represent a net economic loss for society.” This idea comes up more formally in Chap. 15.
- 3.
One exception is the odds bet behind the pass/don’t pass line in craps, which is a fair bet. But the player must make an unfair bet to be able to make an odds bet.
- 4.
Even if one concedes the point that for some patrons, casino gambling is not “enjoyable,” the vast majority of them are not problem gamblers. Yet, some researcher suggests that a large proportion of casino revenues do come from problem gamblers.
- 5.
In the case of casinos, many researchers have instead focused only on the “cannibalization” effects.
- 6.
- 7.
- 8.
This possibility requires trade. As a result of trade, the region or the country is able to consume on an IC beyond the PPF. This is the reason that trade is beneficial to individuals and countries. As the casino industry expands the region attracts more tourists (Fig. 3.2). The region develops a stronger comparative advantage in casino gambling and the opportunity cost of production in that industry falls relative to the other industry. This explains why the slope of the line tangent to PPF2 is lower than the slope of the tangency to PPF1.
- 9.
To fully understand the implications of the immiserizing growth theory, one must have an understanding of international trade theory. Carbaugh (2004, 73) explains, “The case of immiserizing growth is most likely to occur when (a) the nation’s economic growth is biased toward its export sector; (b) the country is large relative to the world market, so that its export price falls when domestic output expands; (c) the foreign demand for the nation’s export product is highly price-inelastic, which implies a large decrease in price in response to an increase in export supply; and (d) the nation is heavily engaged in international trade, so that the negative effects of the terms-of-trade deterioration more than offset the positive effects of increased production.”
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Walker, D.M. (2013). Gambling, Consumer Behavior, and Welfare. In: Casinonomics. Management for Professionals. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7123-3_3
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