[L]ittle progress has been made in researchers’ ability to adequately identify and measure the potential costs of legalized gambling.
[D]espite the best efforts of researchers, the actual social cost of gambling is still unknown.
From “Challenges that Confront Researchers on Estimating the Social Costs of Gambling” by Professor Douglas M. Walker, Ph.D.
This year, decisions will be made in several states to determine whether gambling will be added to each one’s respective economic mix. This promises to trigger a flood of studies, surveys and information on all aspects of gambling that will dissect, inspect and scrutinize the activity in every way possible. And no subject will receive more attention than the social costs of gambling.
Studies that have been conducted on social costs will be placed into the public arena for debate, and these studies will offer wildly varying “precise” cost figures. New studies will make an appearance, which are likely to offer still different ranges for social costs. The results will be showcased by the media and by contending groups of opponents and proponents.
At the very least, the results of any study that purports to predict the social costs of gambling should be viewed with exceeding caution, and most should be dismissed out-of-hand. These are the conclusions drawn by a white paper we at the American Gaming Association (AGA) commissioned because we are perplexed that opponents of gaming continue to make claims that social costs outweigh the benefits, yet the communities where casinos exist remain our strongest supporters. We wanted to better understand the issues involved and to promote a meaningful debate.
Challenges that Confront Researchers on Estimating the Social Costs of Gaming by Douglas M. Walker, professor of economics at the College of Charleston, argues that researchers who have attempted to identify and quantify the socials costs of gambling have missed the mark by a wide margin. As Dr. Walker says in his study: “Early research estimated that social costs ranged from about $13,000 per pathological gambler per year in the U.S., up to more than $30,000 per year. A decade of debate in the literature and in political discourse has resulted in little consensus on the validity of any of the numbers.” He also notes that studies conducted on the effect and costs of casino gambling on crime are wanting and contends that before researchers can truly begin to estimate social costs, four critical elements must be addressed:
(1) comorbidity, or the idea that many pathological gamblers have other coexisting disorders;
(2) survey data validity;
(3) measuring government expenditures relating to the treatment of problem gambling; and
(4) the counterfactual scenario, which refers to “the situation that would have otherwise been.”
In the case of comorbidity, it has been discovered that people who are pathological gamblers often suffer from a number of coexisting disorders, such as drug or alcohol dependence. It is also possible that pathological gambling is a symptom of a more basic addiction disorder. Whatever the case, Walker points out that researchers have failed to “allocate the harm among coexisting disorders.” The result is that costs of the various disorders are generally dumped into a single basket labeled “social costs of gambling” regardless of whether the behavior leading to the costs was a result of problem gambling or drug addiction, or other coexisting disorders.
As to the survey data validity, Walker says estimates of social costs often result from surveys that use questionable methodologies, including those that ask problem gamblers to estimate what their problem has cost when it isn’t clear that respondents even understand how to accurately calculate gambling losses.
His issue with measuring government expenditures related to problem gambling goes to the point that, simply because government spends money on something does not make it a social cost. Otherwise, spending on education, research, public safety and unemployment benefits should be labeled social costs, but they are not.
Finally, with regard to the counterfactual scenario, Walker makes an interesting case that researchers who conduct studies on the social costs of gambling have failed to consider what would have been the case if gambling were not introduced into a community. What if another industry or none at all settled there? Would crime increase or decrease? Would tax revenues and employment figures go up or down? Until these issues are acknowledged and addressed, a fully accurate reading of social costs cannot be made.
Indeed social costs are associated with any type of economic development, including bringing a casino into a community. But Walker’s paper very clearly shows there are deep flaws in current estimates attributed to gambling. These are complex issues that do not yield to easy answers. It is understandable that communities and researchers with good intentions turn to existing estimates to extrapolate what the impact might be, but Dr. Walker’s paper makes it clear that good, solid research has not yet been produced.
What we can rely on is what is happening in gaming communities. The continued support of gaming by people in places such as Iowa, where citizens continually reaffirm by overwhelming vote their decision to bring casinos into the state, is easily measureable. Can anyone really believe that gaming would continue to be supported if the social cost estimates of gaming opponents were true?
Researchers should be focused on finding real data that could inform policy decisions. For example, if a person is labeled a “problem gambler” and receives treatment for this malady without consideration given to the fact that his or her problem could result from a cocktail of challenges, the “cure” won’t take, and the effort and funding to help the person could be in vain. This result could have important policy implications for jurisdictions beyond those considering gambling. After all, problem gamblers are not exclusive to communities that host gambling. Furthermore, the lack of a methodology to allow a community to better understand what the result would be of not welcoming gambling into its economic mix leaves that community in a vulnerable position.
Dr. Walker has sounded a call to action for researchers working to identify and measure the potential costs of legalized gambling. He has identified areas that require attention and offered solid reasons to accord that attention. Walker does note that “there is currently no way to deal with these issues.” That is the challenge he lays out, and it is one that should be embraced by the research community.