The Central Statistic of Casino Profits

The_Goose_That_Laid_the_Golden_Eggs_-_Project_Gutenberg_etext_19994.jpg  from Wiki

The_Goose_That_Laid_the_Golden_Eggs_-_Project_Gutenberg_etext_19994.jpg from Wiki

When Governor Cuomo in 2012  proposed  new commercial casinos he said they would need regulation.  Casino promoters can’t dismiss the concept,  which  has several aims.  One specific to casinos is to mitigate gambling addiction and problem gambling.*  Promoters don’t deny these  can be outcomes of   “gaming.”  Another goal of regulation, applied also to the banking or securities industries, is to protect investors and tax-collecting entities against in-house predatory practices, organized crime and tax dodges.

Casino owners want regulation of how they handle consumers and accounting about as much as do big banks or brokerages: the least possible.   In any business, regulation hurts profits by constraining practices (say, payday loans) and limiting externalities.  For example, a company no longer free to discharge waste into a waterway faces new costs; raising prices may lose it business if competitors don’t raise theirs too.   Casinos are uniquely  intent on profit for its own sake. For them, that’s the be-all and the end-all.   Typical  industries, even those as controversial as “Big Pharma” or “Big Oil” make a product of real use to someone.  The casino business has only one tangible product,  in which it cannot take pride:  addicted and problem gamblers.  That product fuels it.

The central  statistic  of  casinos:  a  large proportion  (Grinols and Omorow** estimated 35-50%)  of  the  gross returns after winnings are paid out comes from compulsive and  problem gamblers — about 4% of the adult population — who comprise maybe 12.5%  of casino users.  Most of that 35-50% is from addicted gamblers.   From this statistic comes

The central dilemma :  if  casino owners  acted effectively to steer  into lasting recovery all pathological and problem gamblers in their sphere and  to prevent the creation of new ones,  profits would  drop by at least 35%.  How would that play on the bottom line?  Not well at all.

Resolution: publicly express concern on problem gambling but make it go on  under a façade of “prevention”  methods structured to fail.   Accede to customized and toothless “regulation” that won’t interfere with the real business.

Recall the goose that laid the golden eggs.  Casinos do not lay the golden eggs their promoters claim; they are gilded base metal.  Whether the bird’s owner knows this or not,  whether  he stores or markets the eggs,  the owner (assuming  he has more common sense than the yokel in the story, who killed it) will cosset the bird.  He won’t let  anyone  change her diet or re-house her.  To an owner eager for  eggs that look golden, regulation threatens the health of  the goose,  jeopardizing  her output.

Legislators weighing the proposed amendment in New York State to legalize new casinos must ask three questions. “Would those casinos knock themselves out  to profit 35%-50% less than many others do?” That’s obvious: No

“Do I really believe NYS can and will properly regulate casinos if they don’t want it?”    Someone very credulous might say so.  No one else will.

“Is it fair to NYS residents to commend to them, by an “Aye” on second passage,  a sham I don’t believe in.”  The response to that should be a third NO.

*These two categories of  “disordered gambling behavior”  are distinct.  About 1% of North American adults are past-year pathological (addicted)  gamblers, another 3% or so past-year problem gamblers. Sometimes for brevity (not clarity) the two categories are lumped into “Problem Gambling.”

** Grinols, Earl L. and J.D. Omorow (1997) “Development or Dreamfield Delusions? Assessing Casino Gambling’s Costs and Benefits.”   Journal of Law and Commerce 16, 1, 49-87.

The opinions are those of the writer, Stephen Q. Shafer and do not necessarily reflect those of all members of Coalition Against Gambling in New York.  Permission is granted to quote from this post at any length or to reproduce the entire post as long as the source is cited using the permalink above.

 

 

 

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