Does Gambling Really Boost the Economy?

I am a firm supporter of economic liberty. If a company wants to open a gambling facility, I am all for that. I can agree that the local authorities – on a County level, of course – can regulate where the gambling facilities are, given the fact that they can have detrimental effect on teenagers. That’s as much regulation on gambling as I think is affordable. The rest should be taken up by the parents, and by the self-discipline of the individuals. The market should be free of government interference. After all, even if the government bans all gambling, people are still going to gamble. Under Communism in Eastern Europe, all gambling was banned. And we still played poker and all kinds of other games. Government regulations don’t work there.

But I also think that myths and false claims about gambling must be exposed. It is one thing to argue for economic liberty. It is completely another to make false claims concerning the supposed benefits of gambling for the economy.

Americans for Tax Reform, a national anti-tax group run by Grover Norquist, has started a campaign in Texas to lobby the lawmakers to permit gambling in the state. The benefit? It supposedly boosts the economy. “Permission of gaming involves no government handouts and has proven to provide a real economic multiplier,” is the statement of the group in a letter to Texas lawmakers.

Now, like I said, I support economic liberty. I think gambling shouldn’t even need a permission from the government; just like any other economic activity that is not based on sin, indecency, fraud, or violence. And I don’t even want to mention the unhealthy connection between Americans for Tax Reform and Jack Abramoff.

But the claim that gambling somehow boosts the economy is preposterous.

It doesn’t create new value. It only feeds on value that is already created. Men and women who would normally save their money, when they gamble, they spend that money on an illusion. It is not like buying a car where one has better means of transportation after they have spent the money. Or like buying groceries from the supermarket. Or even like going on a vacation to recover and get back to work with renewed strength. The only profit is for the owners of the casinos.

That’s why the gambling industry can’t exist of itself. It needs an economy that will sustain it; and it lives off of it like a parasite. That’s why in nations where gambling has grown beyond a certain limit, the economies deteriorate. (Check some places in India, China, or Eastern Europe about it.) A nation can never produce too much food, or too many cars, or too many clothes, or too much healthcare. These increase the welfare of a nation. But a nation can have too much gambling; beyond a certain limit, gambling destroys the economy.

I sometimes get together with a group of Christian friends. We have fellowship, drinks, and we would play some Texas Hold’em. If gambling really helped the economy, how does our friendly game help the economy? And if every house in Texas had a nightly poker game, would that boost the Texas economy?

The only thing that gambling does is make money change hands faster. And since money is taxed not when it sits in bank accounts but when it changes hands, the only beneficiary of gambling – in addition to the casino owners – is the government. The more people are lured to spend money on illusions, the more taxes. But government revenue is not the same as the economy. In fact, as we have seen in the history of Europe and the US, the more government revenues, the worse the economy.

So, yes, I am all for permitting gambling – with only the local governments having their regulations about it, not the state, and certainly not the Federal government. But we need to understand the difference between economic liberty and economic fallacies. Liberty is always better than government intervention and regulations. But liberty also requires more self-discipline, more personal responsibility, and more wisdom and understanding. Defending liberty through economic fallacies will only help bring more tyranny.