Gambling for Economic Development is High Risk

by John W Rodat on April 13, 2016

Gambling is intrinsically a zero-sum game. Though there may be locally, in the aggregate, there’s no economic multiplier. So it’s never made sense to me as a viable strategy for economic development. At best, it’s a break-even. And, the odds are that, it simply transfers money from one region to another, mostly from poor to wealthy.

Thanks Lucy Dadayan, for documenting actual results!

State and local government gambling revenues have softened significantly in recent years. States and localities derive the bulk of gambling-related revenues from three major sources — lotteries, accounting for about two-thirds of gambling revenue; commercial casinos; and racinos. Lottery revenue declined by 0.7 percent in real (inflation-adjusted) terms in fiscal year 2015, with twenty- seven states reporting declines. This was the second consecutive decline. Casinos experienced dramatic growth during the 1990s, but that growth slowed over the past decade. In recent years, much of the growth has shifted to racinos — hybrids of casinos and racetracks — as more states have approved such facilities. Revenues from casinos and racinos combined increased by 1.1 percent in real terms in 2015, but that growth is mostly attribut- able to two states, Maryland and Ohio, which legalized casino/ racino operations after the Great Recession and opened more facilities in fiscal year 2015.

The recent geographic expansion of gambling created stiff competition as facilities vie for the same pool of consumers, par- ticularly in the northeastern region of the nation, where weaken- ing growth has been partly attributable to market saturation and industry cannibalization. Between 2008 and 2015, inflation- adjusted tax and fee revenues from commercial casinos grew by more than $1.3 billion in states with newly authorized casinos, but declined by $1.4 billion in states with established casinos, for a net decline of 1.5 percent nationally. 

At least let’s not fool ourselves that this is an easy funding source for government.

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