Gambling Pays Off
September 2, 1999
Sometimes economists take a break from writing on such weighty topics as savings, trade and investment, and write about something more fun. Gambling, for example. One recent example is an article in the Journal of Economic Perspectives by William Eadington, professor at (no kidding) the University of Nevada at Reno.
It's a timely topic.
- The growth in gambling revenue has skyrocketed from just $540 million in 1970 to more than $25 billion in 1997.
- More than half the states permit some kind of casino gambling, while as recently as 1978 only Nevada did.
- Gambling has caused a population boom in Nevada, one of the three fastest-growing states in each of the last four decades.
How economists ought to think about gambling, Eadington says, is a source of dispute.
- One view holds that gambling is an example of socially unproductive profit seeking because, for gamblers whose predominant motivation is to increase their economic well- being, they are wasting their time.
- Why? Because even for the most skilled players, there's a house advantage in all games, from five percent with slot machines down to less than one percent with blackjack -- but of course, most players aren't skilled.
- On the other hand, one can view gamblers as rational economic actors purchasing a commodity that offers entertainment and excitement and also holds out the prospect of greater wealth.
Source: Macroscope, "Gambling Fever," Investor's Business Daily, September 2, 1999.
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