Gambling Reform: Is It in the Cards?

The national experience with gambling was disagreeable enough in the late 1800s that by 1910, no gambling or lotteries were allowed anywhere in the nation - with the exception of horse-racing in three states. Communities adhered to an unwritten social compact: "For mutual gain, we prohibit casino gambling in our community if you do the same."

Since 1990 the country has seen that when one breaks the compact, many break the compact. Many states and communities are now using gambling for "border raids." The siting of a casino in Gary, Ind., for example, certainly had something to do with the fact that Chicago is next door, just as the siting of casinos in Tunica, Miss., had much to do with nearby Memphis.

Casinos attract people and large sums of money. Nine individuals who were granted a casino license for Joliet, Ill., began with a joint expenditure of $7 million. As a result of their investment, each has collected dividends for the past few years exceeding $900,000 a month.

Casino owners in Joliet and elsewhere are making large amounts of money, which explains the intensity of the debate about gambling. There are justifications given and exaggerations made to allow those making the money to continue to do so. Others are clamoring to get in the act.

But before we proceed any further down this path, we need to examine the evidence that there may be more costs and less revenue from gambling than are being promised. Some estimates of the social value of gambling put it at no more than $56 annually per adult, and more likely in the $15 to $20 range, while social costs range from $110 to $330 per capita. Many researchers believe that widespread expansion of casinos would be devastating to the nation's social fabric. Total costs might actually exceed the total value of casino revenues.

Members are now being chosen for the National Gambling Impact Study Commission Act, signed Aug. 3. The nine members - three picked by the House, three by the Senate, and three by the president - are to determine what we can expect from the spread of casinos and other forms of gambling. A competent, independent commission could influence the welfare and direction of the country for generations to come.

Helping P&P gamblers

The primary opposition to widespread gambling comes from the devastating effect that gambling has on the 1 or 2 of every 100 gamblers who become pathological gamblers, or "gambling addicts." The results of gambling addiction are similar to the results of drug or alcohol addiction: fraud, embezzlement, family decay, suicide, even murder. An additional 2 or 3 out of every 100 become gamblers whose gambling has gone beyond personal enjoyment, but who do not exhibit all the traits of pathological gamblers.

If 3 to 5 people out of 100 seems like a small number, consider that it is a small percentage of the population who are responsible for the violent crime in this country, considered to be a major social problem. The acts of the few are paid for by the many.

Many problem and pathological gamblers, known as "P&P gamblers," go through the court and penal systems. Others turn up in social-service settings. Some wind up in neither, but their families and children often show the effects, including low self-esteem and difficulty in school.

Questions that need answers

A competent and fairly run commission, therefore, has its work cut out for it. Some questions it will be tackling:

1. Where do gambling's dollars come from? Evidence suggests that 35 to 50 percent of casino revenues, and 25 percent of all gambling dollars, come from P&P gamblers.

2. How many new P&P gamblers will there be as a result of casino expansion? How will increased access to gambling affect the number of P&P gamblers? Accurate figures from new controlled before-and-after surveys will give answers.

3. What are the costs resulting from P&P gamblers? What fraction of P&P gamblers turn to crime? What crimes do they commit? What is the cost of apprehension, adjudication, and incarceration associated with these crimes? What other social costs are associated with these gamblers, including reduced job productivity, costs to employers, and increased social-service loads?

4. What is the effect of treatment on the gambling addiction life-cycle? For a representative 1,000 P&P gamblers, how costly is treatment at different levels and what is the recidivism rate?

5. How valuable to the average adult is the opportunity to gamble near home? Americans have been gambling in casinos since the 1930s but they haven't always been able to gamble so close to home.

Truthful answers to these five questions will go a long way toward the proper determination of a new social compact. It will either reestablish the previous compact based on prohibition, allow unrestricted casino licensing, or find a third alternative where social and preventative treatment costs are paid by casino taxes and other taxes willingly paid by the community.

Earl Grinols is professor of economics at the University of Illinois in Champaign-Urbana. He is a former senior economist for the Council of Economic Advisers.