Economic Analysis of Gambling


Gambling can be a very fun activity, but it is also very addictive. Those who are addicted to gambling usually have financial, work, and relationship problems because of their habit. It is important to understand the risks involved with gambling and to learn how to control your impulses.

Positive Effects

Gambling benefits the community by generating more jobs, increased income, and tax revenue. It may also increase the local economy’s competitiveness. However, the economic effects of gambling can be difficult to measure and may vary from community to community, time to time, and type of gambling (e.g., lotteries, casinos, riverboat gambling, pari-mutuel betting, sports betting).

Negative Effects

The negative effects of gambling include social costs to families and employees who are pathological gamblers, economic costs to communities, and the psychological costs of a problem gambler’s actions. Among these are emotional pain and other losses experienced by family members, loss of employment for the employees of pathological or problem gamblers, and lost productivity.

Benefit-cost Analysis

Cost-benefit analyses are one of the most effective methods for determining whether or not the social and economic costs associated with a particular behavior are larger than the benefits resulting from it. They can be used to estimate the net impact of a new gambling establishment on a community’s economy, and can be particularly useful in assessing the potential effects of a casino on a local water supply.

Most gambling-related economic analysis studies fall into three categories: gross impact studies, descriptive studies, and benefit-cost studies. The first category, gross impact studies, often focus on the direct economic effects of gambling and ignore costs (e.g., environmental impacts of a casino or the loss of wetland land by a riverboat casino). In these studies, costs are generally identified, but there is little attention paid to the value of benefits to society.