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Casinonomics pp 25–35Cite as

Misconceptions About Casinos and Economic Growth

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Abstract

The economic effects of the casino industry have been examined in a number of US states and regions, and in other countries, by a number of authors. Despite the volume of studies on the effects of gambling, there is no consensus among researchers. Indeed, the economic impacts of casinos are to some extent market specific and vary by the type of casino (e.g., destination resort, riverboat). This chapter focuses on different arguments related to the economic growth effects of casino gambling, with a specific focus on some fallacious arguments that continue to arise in the literature and in political debate. The goal of the discussion in this chapter is to set these arguments in the context of a mainstream economic perspective on exchange and economic growth.

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Notes

  1. 1.

    1 I am uncertain of the origin of the term “cannibalization effect.” However, it does not seem appropriate if it describes casinos negatively impacting non-casino businesses. Nevertheless, the term is commonly used, and I have used it and continue to.

  2. 2.

    2 The “zero-sum economy” is unrealistic because it ignores the fact that there are always more and different things that consumers would like. When a particular industry fails, productive resources (land, labor, capital, managerial skills) are freed up to produce in other industries.

  3. 3.

    3 Obviously, this statement depends on several assumptions, and is not always true. In the context of international trade, however, empirical studies suggest that it is generally true (Krugman 1996, 36).

  4. 4.

    4 We are ignoring social costs created by gambling, but these are not relevant for understanding whether the industry expansion alone causes an increase in welfare.

  5. 5.

    5 Also see Grinols (2004, Chapter 4).

  6. 6.

    6 For explanations of the theory’s flaws, see Vaughan (1988), Hoover and Giarratani (1984), and Walker (1998a, 1998b, 1999).

  7. 7.

    7 Range is defined as “the farthest distance a dispersed population is willing to go in order to buy a good offered at a place. This range will take on a lower limit if there is competition from another center” Berry and Horton (1970, 172).

  8. 8.

    8 One must wonder about their understanding of mutually beneficial transactions. Consider their statement that “a local economy discards money” (emphasis added).

  9. 9.

    9 See Ekelund and Hébert (1997).

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Authors and Affiliations

  1. Department of Economics & Finance, College of Charleston, Charleston, SC, USA

    Douglas M. Walker

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  1. Douglas M. Walker
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Walker, D.M. (2013). Misconceptions About Casinos and Economic Growth. In: Casinonomics. Management for Professionals. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7123-3_4

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