Monday, October 27, 2008

A Two Handed Economist's Take on Slots in Maryland and a Casino in Ohio

A previous commenter asked for my take on Ohio’s Issue 6, which would allow a casino to open in Ohio. My home state of Maryland also has an issue on the November ballot to allow slots. This ballot is closer to my pocket book, not because I’m looking for a place to put my quarters, but because the slot issue is tied to the Maryland education budget. I’m still not sure which way I’m going to vote, but I want to lay out the argument on both sides for Ohio casinos and Maryland slots.

I think the issue is actually very similar to the payday loan issue I was discussing last week. On the one hand we have an economic transaction, in this case gaming. The transaction is completed by two consenting adults. Jobs are provided to create this transaction, so there is some economic benefit.

So the next question as an economist is there an externality? That is does gaming create negative consequences for those who are not gamblers. In the case of slots or a casino in rural Ohio, I’m skeptical of crime arising from this type of casino. Gaming addictions could increase, if the public has to support gaming addicts then this could create an externality.

However, I think the question comes down to like the payday loan decision, do we think that casinos or payday loans make people worse off even if those people chose to gamble or borrow?
Second, should the government implement laws to prevent these choices?

I’m not sure how to answer this second question. But I do know this is the question we should be asking.
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Gregorus said...

My answer to the second question would be:

We shouldn't step in to prevent these transactions; laws preventing them have to be enforced and that enforcement harms people more than the harm the laws prevent in a number of ways (privacy violations, monetary cost of enforcement, excuses for a more militarized police force).

For an example, check out this account of the repercussions of a raid on a gambling establishment in Texas.

Esther said...

Thanks for your thoughts, Seth!