The Economic Impact of Gambling

Gambling involves betting something of value (either money or another object) on a random event with the intent to win. The activity can take many forms, from placing a bet on a horse race to purchasing a lottery ticket. Despite the numerous ways gambling is conducted, there are some common elements to all forms of the practice. These include the risk of losing money, the possibility of becoming addicted to the activity, and the potential for negative social impacts.

The economic impact of gambling can be difficult to determine, largely because benefits and costs are often intangible. In addition, it is often difficult to quantify the effects of pathological gambling. Nevertheless, benefit-cost analysis can be used to attempt to understand the impact of gambling on society.

In a broad sense, the term “gambling” refers to the wagering of something of value (either money or an item of intrinsic value) on a random event, where skill and knowledge are not involved. This includes activities such as horse racing, boxing, numerous playing-card and dice games, cockfighting, recreational billiards and darts, and bingo. In some cases, such wagering is informal and casual, and participants do not expect to win or lose a large amount of money. In contrast, professional gamblers have a deep understanding of the games they play and use strategy and skill to win substantial sums of money on a regular basis.

There are several different types of gambling, including commercial, social, and illegal. Commercial gambling is conducted by organized enterprises and can take the form of casinos, racetracks, dog races, and poker tournaments. Social gambling may involve small bets on a card or board game with friends, participating in a sports betting pool, or buying lottery tickets. Illegal gambling may consist of bribes, blackmail, or other illegal activities.

Although there are a number of studies that purport to investigate the economic impacts of gambling, few have achieved a high level of credibility. Those that have been successful generally fall into one of three categories. The first type, gross impact studies, tend to focus on only a single aspect of gambling’s economic impact and fail to provide a balanced perspective.

The second category, net impact studies, is more balanced but also falls short of being comprehensive. Unlike gross impact studies, net impact studies generally attempt to estimate the full range of benefits and costs associated with gambling. This can include a distinction between real and economic transfers, tangible and intangible effects, and direct and indirect effects.

Intangible impacts can be extremely difficult to measure, but they must not be ignored. For example, the increased debt incurred by pathological gamblers can be considered a real cost to society, but it is also important to consider the transaction costs associated with the indebtedness (such as credit reporting fees, bankruptcy proceedings, and collection actions). In addition, it is essential to factor in the lost productivity of family members and coworkers who are affected by the behavior of their pathologically gambling spouse or significant other.