Fool’s Gold: A Review of Goodman’s Work on Gambling

Governor Glendening appears unequivocally to have ruled out the legalization of casino and slot-machine gambling in Maryland for the remainder of his term.1 Nevertheless, the ease with which state public officials have altered their stances over the past few months suggests that continued lobbying by casino interests is unlikely to disappear. This is why Robert Goodman’s recent book, The Luck Business, is such important reading for legislators.2 Until the governor’s announcement, Maryland stood close to following a well-worn path, one full of dangerous lures and hidden traps, upon which other states have walked and foundered.

That course is as predictable as it is sad. State-sanctioned lotteries break the gambling taboo and give rise to the notion that gambling is the drug of choice for an ailing economy. Legislators, hungry for dollars, are aware that the public feels overtaxed. They see in gambling a new source of revenue and job creation. Gambling initiatives are then sponsored, despite the wariness of the general public. The bill passes, gambling is legalized, and the result is often disappointment.

The public’s trepidation is well-founded. According to Goodman, there are many studies that show that gambling does not produce the net revenue stream and employment opportunities expected. This is because gambling activities do not create wealth; they just “annibalize” other industries. The discretionary income of the local residents is simply sucked up by casinos. Restaurants, clothing stores, theaters and other retail shops suffer in direct proportion to the gambling industry’s success.

In Atlantic City, for example, almost half the restaurants closed within ten years of gambling’s legalization. After only four years, half of the city’s retail businesses had closed. Goodman cites an economist’s report prepared for an Illinois commission that found the increased employment generated by the riverboat gambling industry to be balanced by a decline in jobs in nearby areas.3 In the same chapter, he cites a business survey performed in Natchez, Mississippi, shortly after the introduction of gambling in that town. The study revealed a 10 percent to 20 percent decline in sales among 70 percent of the local businesses.4 A 1991 University of South Dakota study noted that the introduction of gambling machines in bars and convenience stores in South Dakota was followed by a decline in sales among clothing stores, auto dealers and recreational services.

In Maryland, last year’s governmental task force on gambling recognized the potential for significant economic dislocation upon the introduction of slot machines, even without competition from other states. Noting, for example, that casinos employ few workers per million dollars expenditure, it concluded that net unemployment would rise and that well-established, non-gambling businesses would suffer as a result of an expansion of casino gambling in the state.5

This is why, says Goodman, gambling’s financial benefits often fall short of projections. A state’s gambling revenue stream can be affected by the countervailing loss of sales tax receipts and by new unemployment benefits paid out following the loss of business in the non-gambling retail sector. Moreover, it can also be affected by the rise of a new kind of criminal activity. Electronic slot machines, says Goodman, create an entire population of addicted gamblers. A 1992 report in Minnesota noted that 60 percent of pathological gamblers engage in crime to support their habit.6 Another study by the American Insurance Institute reports that 40 percent of all white-collar crime has its roots in gambling.7 This new criminal activity leads to increased state spending for court time, police work, incarceration, counseling and rehabilitation – all decreasing the net increase in revenues that states hope to gain through gambling.

The Human Element

The human element in gambling addiction can also be quite devastating. Gambling may be a form of entertainment for those who are well off, but for most low-income people gambling is viewed as an investment option, reports Goodman. In states that have legalized gambling, these people suffer most because they spend a significantly higher percentage of their income on gambling than the wealthy do, at great risk to themselves and their families. This has been confirmed in studies of gambling behavior in Massachusetts, Kansas and Wisconsin, as well as in an extensive, nationwide study performed by researchers at Duke University.8 Perhaps even more worrisome is the fact that pathological gambling is growing in this country almost twice as fast among high-school and college-aged youth than among adults, adding another item to the already long list of social pathologies blighting young lives.

Goodman also notes that states can become dangerously dependent on gambling revenues. Legislators often boast that gambling is good because it generates money for education, the environment and economic development. But this money often contributes only a small fraction to these budgets, for example, in the education programs of Idaho and Montana. In California and Florida, it has merely replaced, not supplemented, state education funds. While the first few years of a new gambling activity may bring in large amounts of revenue, studies have shown that increases soon begin to flatten. The novelty wears off. With diminished receipts from an injured non-gambling retail sector and a population that expects gambling revenue to take the place of education bond issues, the state can find itself with a vested interest in expanding gambling activity, advertising it and otherwise encouraging it, as described by state Senator Chris McCabe (R) elsewhere in this journal.

Businesses that have grown dependent on gambling for revenue also become emboldened to ask the state for relief when receipts from gambling taper off. New Jersey initially supported a modest gambling plan, with carefully devised restrictions including limiting the amount of floor space that could be dedicated to slot machines, making 24-hour gambling illegal and outlawing electronic keno (the addictive game so prevalent in Maryland). But the state soon found itself pressured by gambling interests to ease these restrictions. Eventually, it gave way. The Maryland public should recognize that the provision in the 1996 would-be casino bill permitting no more than 11,500 slot machines in the state would very likely have been challenged in short order.

De Tocqueville’s Views

In the long run, the psychological consequences of legalized gambling are perhaps more serious than the economic dislocation it produces. Americans, Alexis de Tocqueville once observed, are taught at a very early age that nothing is achieved without great effort, that to win a prize one must advance slowly and steadily toward it.9 There is nothing more pernicious than for a child or teenager to come to believe that life is filled with easy short cuts, that a goal need not be worked towards over time, but can be quickly and easily satisfied. It is precisely this attitude that motivates some young men to become drug dealers, as they desire glamour now and are disinclined to work entry-level jobs at the minimum wage. Moreover, adults can only come to feel cynical when they see lottery winners and other gamblers accomplish in a minute what took them a lifetime. The effects of legalized gambling are corrosive. Most people are destined to work dutifully and diligently outside the limelight, and for this reason the virtues of hard work, self-discipline and responsibility must be emphasized over chance.

In The Luck Business, Goodman provides Marylanders an important service. He provides them the opportunity to glimpse the future, to see what lies just below the horizon, and to backpedal before it is too late. The option of legalized gambling will perennially glitter before the eyes of legislators worried about declining state revenues and a stagnant economy. Fortunately, it is never too late to splash cold water on their faces, to remind them that much of what they see before them is only a mirage. The Luck Business should be required reading in Annapolis and beyond.

Dr. Dworkin is the co-director and CFO of the Calvert Institute.

End Notes

[Top] 1. Thomas W. Waldron, “Glendening Says No Slots as Long as He’s Governor,” (Baltimore) Sun, August 13, 1996, p. 1A.

[Top] 2.Robert Goodman, The Luck Business (New York: Free Press, 1995).

[Top] 3. State of Illinois, Illinois Economic and Fiscal Commission, Wagering in Illinois: A Report Updating the Economic Impact of Gambling Activities, Illinois Economic and Fiscal Commission (Springfield, Ill.: Illinois Economic and Fiscal Commission, January 1994), p. 1.

[Top] 4. Mimi Miller, presentation on riverboat gambling in Natchez, Mississippi, Riverboat Gambling Panel, National Conference of State Legislatures Annual Conference, New Orleans, July 26, 1994.

[Top] 5. State of Maryland, Joint Executive/Legislative Task Force to Study Commercial Gaming Activities, Final Report of the Joint Executive/Legislative Task Force to Study Commercial Gaming Activities (Annapolis, Md.: Department of Legislative Reference, December 1995), p. xi.

[Top] 6. Minnesota Planning, High Stakes: Gambling in Minnesota (St. Paul, Minn.: Minnesota Planning, March 1992.

[Top] 7. Earl L. Grinols, testimony before the U.S. House of Representatives, Committee on Small Business, September 21, 1994.

[Top] 8. Goodman, Luck Business, pp. 47-52.

[Top] 9. Alexis de Tocqueville, Democracy in America, Vol. II (New York: Vintage Books, 1990), p. 151.

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