Research

This section will present various research perspectives related to the Expansion of Casino Gambling in Florida, as well as casino culture and gambling in general – and what we lose by such a focus -like better public spaces, education and productive jobs. Gambling itself is not the issue – we already have some of it – but the bigger issue relates to the scale of gambling and its potentially devastating impact on downtown Miami.

———————————————————

—————————————————–

MEASURING INDUSTRY EXTERNALITIES: THE CURIOUS CASE OF CASINOS AND CRIME

Early L, Grinols, University of Illinois, Department of Economics

David B. Mustard, University of Georgia, Terry College of Business

March 2001

Abstract: The philosophy of externalities and corrective policy is much better developed theoretically than it is in application. It falters the roadblock of inability to measure the size of externalities. This paper exploits the connection between casinos, an industry that did not exist outside Nevada prior to 1978, and crime using county-level data for the US between 1977 and 1996, a period spanning the introduction of casinos to states other than Nevada. We articulate reasons why casinos may both decrease and increase crime. We show that casinos increased crime after a lag of 3 to 4 years, consistent with the theoretical predictions of the role of problem and pathological gamblers. Furthermore, by studying the crime rates in counties that border casino host counties we show that the data suggests casinos create crime, and not merely move it from one area to another: Neighbor county data indicate that casino crime spills over into border areas rather than is moved from them. Last, we explain why other studies have failed to identify a strong link between casinos and increased crime rates. The data indicate that 8 percent of crime observed in casino counties in 1996 was attributable to casinos. The average annual cost of increased crime due to casino was $65 per adult per year.

  • Prior to 1978, there were no casinos in the United States outside of Nevada. Mainly since 1990, casinos have expanded to the point where the vast majority of Americans are now within relatively easy access of one. But, casino gambling is not just another entertainment. On a national basis, research suggests that it generates externality costs greater than $37 billion annually, making casino gambling one of a handful of the most costly social problems. Crime is one of the biggest components of these social costs.
  • Theoretical Connections Between Casinos and CrimeCasinos may increase crime through direct and indirect channels.
    • Economic Development: Casinos may raise crime by harming economic development, the opposite of the indirect effect discussed above. While some commend casinos for bringing development, others criticize them for draining the local economy attracting unsavory clients and for outgrowths like prostitution and illegal gambling-related activities.
    • Increased pay-off to crime: Second, casinos may increase crimes by by lowering the information costs and increasing the potential benefits of illegal activity. Because casinos attract gamblers and money, there is an increased payoff to crime from a higher concentration of cash and potential victims.
    • Problem and pathological gambling: Crime may increase through problem and pathological gamblers. Pathological gambling is a recognized impulse control disorder of the Diagnostic and Statistical Manual (DSM-IV) of the American Psychiatric Association. Pathological gamblers (often referred to as “addicted” or “compulsive” gamblers) are identified by repeated failures to resist the urge to gamble, reliance on others to relieve the desperate financial situations caused by gambling, the commission of illegal acts to finance gambling, and the loss of control over their personal lives and employment. Problem gamblers have similar problems, but to a lesser degree. The latent propensity to pathology becomes overt when the opportunity to gamble is provided and sufficient time has elapsed for the problem to manifest. Lesieur (1998) estimated that pathological gamblers are one or two percent of the population and problem gamblers are another two to three percent. A well-cited Maryland study found that 62 percent of the Gamblers Anonymous group studied committed illegal acts as a result of their gambling. 80 percent had committed civil offenses and 23 percent were charged with criminal offenses. A similar survey of nearly 400 members of Gambler’s Anonymous showed that 57 percent admitted stealing to finance their gambling. On average they store $135,000, for a total of over $30 million.
    • Visitor Criminality: Crime may rise because casinos attract visitors who are both more prone to commit and be victims of crime. For example, Chesney-Lind and Lind (1986) suggest that one of the reasons tourist areas often haver more crime is that tourists themselves are the targets of crime. However, visitors per se do not necessarily increase crime. In the following section we show that visitors to national parks do not increase crime. Therefore, if casino visitors induce crime, it is because they are systematically different than national park visitors or visitors to other attractions. Also, more problem and pathological gamblers will visit casinos than other attractions. One anecdotal example of the different clientele casinos attract is the large increases in pawnshops that occur when casinos open. Other tourist areas do not experience similar increases. These mechanisms should have different impacts across crimes.
    • …the effects of casinos will change over time. Reduction of crime through improvements in labor market opportunities will be observed prior to the casino opening. Because casinos take time to build, and low-skilled people may be hired before casino openings, crime reductions could precede the openings. Both the positive and negative economic development theories imply that a casino will have an impact after operating. Over time, the development effects will grow, whether positive or negative. The nonresident effect should appear with the casino’s opening, but may also expand with time as more nonresidents are attracted. Effects operating through problem and pathological gamblers will not be felt for the first few years. Enough time must elapse for a gambling habit to develop and the full extent of gambling pathology to be reached. Because crime data are reported annually and casinos could open in a given year as late as December, there may not be a discernible effect on crime rates until several years after they open.
  •  Conclusions: Our analysis of the relationship between casinos and crime is the most exhaustive ever undertaken in terms of the number of regions examined, the years covered and the control variables used. Using data from every U.S. County from 1977 to 1996 and controlling for over 50 variables to examine the impact of casinos on the seven FBI Index I crimes (murder, rape, robbery, aggravated assaults, burglary, larceny and auto theft), we concluded that casinos increased all crimes except murder, the crime with the last obvious connection to casinos.
  • Most offenses showed that the impact of casinos on crime increased over time and began about three years after casino introduction. This pattern is consistent with the theories that problem and pathological gamblers commit crime as they deplete their resources, that nonresidents who visit casinos may both commit and be victims of crime, and that casinos lower information costs of crime and increase the potential benefits of illegal activity. These effects outweigh the potentially positive effects on crime that casinos may have through offering improved labor market opportunities.
  • According to our estimates, between 3 and 30 percent of the different crimes in casino counties can be attributed to casinos. This translates into a social crime cost associated with casinos of $65 per adult in 1995 and $63 per adult in 1996. These figures do not include other social costs related to casinos such as crime in neighboring counties, direct regulatory costs, costs related to employment and lost productivity, social service and welfare costs. Overall, 8 percent of property crime and 10 percent of violent crime in counties with casinos was due to the presence of the casino. Although robbery, the offense that exhibited the largest increase, is classified as a violent crime, it is more appropriately classified as a property crime in that its motivation is financial.
  • We also investigated whether the crime in casino counties is attracted (moved) from other regions or is created. Counties that neighbor casino counties generally experienced crime increases whose pattern matches the pattern in casino counties, but smaller. This indicates that crime spilled over from casino counties into neighbor counties, rather than shifting crime from one area to another.

________________________________________________

FIU Metropolitan Center

Policy Briefings

Whither Genting? Framing the Policy Questions for Gaming in Miami-Dade and the Region

Issue 4, November 2011 P a g e | 1

My purpose here is to neither praise nor bury Genting or the other large-scale Las Vegas-style gaming establishments now envisioned as a result of possible legislative changes in the upcoming Florida legislative session. Instead, I raise some policy questions that should be addressed before their advent. My overarching concern is that local decision makers are informed about the impacts of Vegas-style rollout, thinking not only about the near-term but its impact years, if not decades, down the road.

Question 1: Will the Gaming Industry’s Political Contributions “Truncate” Discourse about the Pros and Cons of Gaming? Money talks in American politics. The gaming industry shouts. In 2010 the industry contributed over $12 million at the federal level alone. My concern here is not simply with the “go/no-go decision.” It is with the details of implementation down the road on a number of factors, including gaming rules and payments to local governments and the like. Media coverage suggests that the industry already has a full-court press on; the public and interested stakeholders will need to remain vigilant in order to have their voices heard.

Question 2: Will Miami-Dade’s Gaming be “Destination” or a “Hybrid?” My forecasting training tells me that advocates and developers seem to guarantee that Miami-Dade’s gaming will be “Destination-oriented,” suggesting that the preponderance of gaming dollars will be coming from outsider pockets. From my vantage, the real question is proportionality: Out of every $100 gambled, how much will come from locals or outsiders? Will it be 50/50? Will it be 30/70? In the absence of legislation that precludes locals from the establishments, it is a question decision-makers should ponder.

Question 3: What will Gaming do the Area’s Wage Structure? If there is a $64,000 question in this policy debate, this would be my choice. As we emerge from the “Great Recession,” one could argue that our unemployment rate of 12.1% is the big problem, with no decline expected soon. But as Miami-Dade’s Chief Economist Robert Cruz reported at our recent State of the Economy Forum, median family income has Florida voters have rejected allowing full-fledged casinos three times at the ballot box since 1978. However, last month’s Florida Appeals Court decision that allows state legislators to expand gambling without voter approval has brought gaming to the forefront of media attention in South Florida. Recently, Senator Ellyn Bogdanoff (R-Broward) and her colleague, Representative Erik Fresen (R-Miami), introduced legislation for the upcoming session that would bring Vegasstyle resorts to Miami-Dade and Broward counties. The bill will allow three casino licenses for companies investing at least $2 billion. The bill limits the space the resort casinos can dedicate to gaming to just 10 percent. The Genting plan for a $3.8 billion casino-and-hotel complex along Miami’s Biscayne Bay has received the most attention but other potential projects are contemplated as this is written.

The FIU Metropolitan Center is dedicated to informed public policy. My intent in this “thought piece” is to lay out critical issues for public discussion in coming months. The size and scope of these projects warrant serious consideration of their potential impact on the economy and quality-of-life throughout Southeast Florida. The discourse on the costs and benefits of allowing casino gaming in South Florida is an important one as it shows the concerns and hopes of residents and businesses in the region. My hope is that the public and decision-makers examine high-stakes gaming’s impacts in other communities to assess potential policy outcomes closer to home.

dropped 12% since 2007. High stakes gaming may create jobs that benefit real wages, particularly for lower income groups. However, higher aggregate income may be offset by higher rents, and it is conceivable that ripple effects from gaming may impact hiring (positively or negatively) in other sectors.

Question 4: What are the Social and Administrative Costs of Rollout? Much has been written on the social costs of gaming, with efforts to draw a causal bead on linkage to prostitution, bankruptcy, and other negative spillovers. This literature is occasionally criticized as reflecting the biases of its financial supporters. But there is an academically-based literature that is worth studying in framing potential social impacts. At a more granular level, gaming will impact infrastructure usage and will likely cause changes in long-standing traffic and commuting patterns. Evidence from other jurisdictions may provide some useful guidance to decision-makers on what to expect locally.

Question 5: Does Vegas-Style Gaming Foster “Path Dependence” in the Local Economy? Will Vegas-style gaming foster a �������lock-in” of hospitality and retard diversification of our economic base? Perhaps only history will answer that question. What’s clear is that a number of factors such as media coverage (will we live to see a Jackson-based “Miami Hope?”), education quality, tax subsidies (including tourist development), housing costs, and other drivers foster—most notably from my vantage, the absence of military R and D— make for a tourist-driven economy, not just the climate. Viewed in this light, Genting and its stable mates might be viewed as ���final nails” or an impetus to ask some tough questions about prior efforts at diversifying our economic base, and what is realistic to expect in that vein?

Question 6: What Impact Will Vegas-Style Gaming Have on the Region? Gaming in Miami will impact all of Miami-Dade and ripple across the border into Broward and Monroe Counties. Housing costs, rentals (both residential and commercial), commutes and a host of other quality-of-life factors are likely to change with the large-scale projects envisioned. Recent FIU Metropolitan Center housing studies address the impact of already rising housing and commute costs for South Florida workers. If experience in other venues is predictive, housing and rental will increase significantly in areas proximate to the development, and small restaurants and merchants will be squeezed. “Racinos��� and other gaming in neighboring Broward may suffer, with negative consequences for their respective communities. Lower-paid workers may benefit from the wages of newly-opened casinos but find themselves with long commutes in search of affordable housing. One thing seems certain: the economic impact of the proposed casinos will transcend municipal and county borders; the public and interested parties should act accordingly.

SOME REFLECTIONS ON GAMING in ATLANTIC CITY My hometown of Vineland, New Jersey is less than 35 miles from Atlantic City. I have fond memories of family visits on weekends; I was in Atlantic City when Lyndon Johnson won the Democratic nomination for President in 1964. One could say that as a youth I caught the tag end of Atlantic City’s “Glory Days” as a family resort. When gaming started in 1978, the Vineland Public Schools lost significant numbers of teachers to the gaming establishments in Atlantic City—salaries and tips of dealers and pit bosses were much higher than entry- and mid-career teachers. Nowadays when visiting, I see Transport of New Jersey buses making stops throughout Vineland, bringing gamers and employees down Route 40 to Atlantic City. Upbringing aside, my instruction and research at FIU focus on local government finance, which typically includes lotteries and gaming as a revenue source and economic development approach. Thus a brief comment on Atlantic City and its experience with gaming seemed in order.

Legislation passed in 1976 allowed Vegas-style gaming in Atlantic City; Resorts International was the first casino opened in 1978. At the time, gaming was embraced as an economic development strategy to revitalize Atlantic City as a tourist and convention hub. I believe most observers would acknowledge that writ large—gaming in Atlantic City resuscitated a dying resort. At its peak before the “Great Recession,” the casinos employed nearly 40,000 workers and generated over $5.2 billion in revenues. Unemployment in Atlantic City was 18.1 in 1977. It is currently 11.6%, but was well below 6.0% in the mid- 2000s. While many “mom-and-pop” eating and retail establishments opened prior to 1978 have closed, the city now has upscale outlet shopping and the recently opened (2003) Borgata has brought a mix of stores and restaurants consistent with a ���Destination” resort. Overall progress notwithstanding, Atlantic City’s history underscores issues that are likely to ensue with Genting and other establishments: Atlantic City’s Infrastructure and Redevelopment Have Been Limited to “Pockets” Around the Casinos: Skeptics of Atlantic City’s redevelopment frequently state that “Atlantic City was a slum beside the sea before casinos and now it’s a slum by the sea with casinos.” There is considerable truth to this assessment. Part of the problem was poor municipal management. But academic analysis would suggest that Atlantic City’s experience is not unique. Research by Terance Rephann and others finds that casinorelated economic development is centered on the properties and surrounding city and county governments generally fail to capture significant shares of economic gains. Improvements to Atlantic City’s infrastructure (convention center, roads, bus terminal, and airport) took decades to materialize and only did so after concerted efforts from elected officials at the local and state levels to earmark a piece of casino revenues for this purpose. The Atlantic City Experience Reminds Us that No Industry is Immune to the Economic Cycle: Since peaking in 2006, casino revenues have declined by 31.0%. Five of the city’s eleven casinos have either entered into or recently concluded bankruptcy proceedings. One property (the Tropicana) has changed hands four times since its establishment in 1981. Contracts covering unionized workers at the 10 of the 11 casinos expired this past September 15th; management has asked for cuts of nearly $3.00 from their average hourly base wage of $12.00 along with increased contributions to pension and health benefits.

Miami would be a “Late Adapter” in the Gaming Market: In her 2010 and 2011 assessments of the Atlantic City market, Emily Sze of HVS notes that Atlantic City’s biggest problem is not the “Great Recession”: It is competition from neighboring Pennsylvania and New York, with nascent operations in Maryland and Delaware. Along the east coast, Connecticut has become a hub of Indian gaming. Experience with diffusion of the lottery suggests that neighboring states and jurisdictions that do not have gaming may feel compelled to enter the market to preserve their “piece of the action.” Sands CEO Sheldon Adelson’s recent comments (November 2, 2011) in the Miami Herald that he would only support one facility in Greater Miami speak to possible saturation in a maturing industry. Thirty-four years ago, Atlantic City was the alternative to Las Vegas. Today, Miami would join a host of other cities and Indian reservations that have adopted gaming as an economic development tool.

What is the upshot? At a minimum, local officials should review the voluminous academic literature on the economic and social impact of gaming. It would certainly help to frame a debate as something other than “op/ed” pieces in various media outlets. My next suggestion would be for local decision-makers to interview their colleagues in other communities to garner first-hand, “grounded” assessments of the benefits and costs of gaming. Lastly, it would be appropriate for the actors in the Tri-County area to conduct econometric estimates of high-stakes gaming. While there are undoubtedly “lessons to be learned” from Atlantic City and other venues, each region’s unique demographic and economic situation makes for differences in economic impact. Ultimately, residents and tax payers should know what to expect, short- and long-term, from what is a “high stakes” decision in the future of the community.

_____________________________

An Analysis of the relationship of alcohol to casino gambling among college students

David Giacopassi, University of Memphis;  B. Grant Stitt, University of Nevada; Reno, Margaret Vandiver, University of Memphis.

Published in the Journal of Gambling Studies, Vol. 14(2), Summer 1998.

Abstract

Research has found significant overlap in the problem drinker and pathological gambler populations. This finding leads to the question of whether the pairing of drinking and gambling at lower levels of intensity is similarly related to a variety of negative consequences. The data for the present study were gathered in Memphis, TN, and Reno, NV, from questionnaires completed by 835 students in two universities. The data indicate that about one-fourth of students who gamble in casinos frequently or always drink while gambling. Drinking when gambling is significantly related for males, but not for females, to size of bet, obtaining additional money while at the casino, and losing more than one can afford. The analysis suggests that an increased effort should be made to inform even casual drinkers and casual gamblers of the dangers of pairing these behaviors.

*…Certainly the conventional wisdom is that a relationship [between social drinking and casual gambling] does exist. Most casinos provide free drinks to gamblers. By providing free drinks, casinos are seeking to provide a “gambling tonic” to spur betting and possibly to cloud judgment and loosen the social restraints normally firmly attached to the purse strings.

* Doweiko (1990) writes of “the unity of addictive disorders” (p.2) and includes compulsive gambling, alcoholism, and drug addiction as examples of addictive disorders that may share a common foundation…Rosenthal and Lorenz (1992) estimate that approximately one-half of all pathological gamblers have or had a problem with alcohol or with an illicit drug; conversely, they estimate that 20% of substance abuse patients have had problems with gambling.

*Do university students from Nevada, a state that has had legalized casino gambling for many years, exhibit different patterns of drinking and gambling only recently has been introduced?

*To determine the relationship of drinking to gambling, 420 students at the University of Memphis and 415 students at the University of Nevada, Reno were given questionnaires.

*It should be noted that despite the fact that the legal age for casino gambling in Nevada and Mississippi is 21, underage gambling was relatively common in each sample with 24.2% of the underage UofM students and 52.7% of the underage UNR students stating that they had gambled in a casino on at least one occasion.

* Those males who usually drink when they gamble are significantly more likely to place higher wagers, to obtain additional money while at the casino, and to have lost more than they could afford than are those males who do not usually drink while they gamble.

_______________________________________________________________

How Is Casino Gambling Linked to Broader Issues of Inequality and the
Proper Role of Government?
“Why Pope Benedict Disagrees with Paul Ryan on Income Inequality, Economic Principles”

Wednesday at Congressman Paul Ryan’s (R-WI) speech on “fear, envy and politics of division” at the Heritage Foundation, Rep. Ryan was asked about a new Congressional Budget Office report detailing the incredible rise of income inequality in the U.S.–a rise that makes clear the reality that a very small group of very wealthy Americans (the 1%) are doing extraordinarily well financially while everyone else stagnates or falls behind.
Ryan said he hadn’t read the report, but dismissed the general idea that income inequality is anything to worry about (as his speech title reveals, he thinks talking about the subject is the real problem):
Let’s not focus on redistribution, let’s focus on upward mobility…If these studies are used as justification for erecting new and more barriers for making it harder for people to rise, all that will do is reduce our prosperity in this country.
As Jonathan Chait points out in his thorough takedown of Ryan’s speech at Daily Intel, Ryan’s confusion about access to opportunity is stunning. Chait writes:
Unfortunately, Ryan’s understanding of reality is a complete inversion of actual reality. ‘Equality of opportunity’ bears no relation to the reality of the American economy or any economy. Parents can benefit their children by giving them money, better schools, better home environments, tutoring, camp, and other advantages. Opportunity is overwhelmingly unequal.
And as Matt Yglesias notes, the barriers that actually prevent social mobility are things Ryan shows no interest in addressing–problems like access to healthcare or affordable housing, nutrition and health disparities between rich and poor children, or the rapidly rising costs of higher education. For Ryan, funding key social programs that expand opportunity (not guarantee “equality of outcome,” as he dismissively claims) by requiring the richest Americans to pay more in taxes is a spiteful �����redistribution of wealth.”
Noting his particular disapproval of this phrase, I asked Rep. Ryan–a Catholic–whether he thought the Pope was engaging in class warfare rhetoric as well when he used this exact redistribution language in his most recent encyclical on the economy, Caritas in Veritate. His response was both disappointing and telling:
FPL: Pope Benedict said that the wealth creation of the market should be balanced by the political redistribution of that wealth. Would you call that class warfare language?
RYAN: You can interpret these in different ways. If you read the totality of these encyclicals, that one in particular, I think you can derive different lessons from it. What I think he’s probably getting at–read “Without Roots”–a book he wrote when he was then Cardinal Ratzinger with Marcello Pera, the President of the Italian Senate at the time–phenomenal piece going at the roots of moral relativism.
And so when he’s talking about the extreme edge of individualism predicated upon moral relativism, that produces bad results in society for people and families. And I think that’s the kind of thing he’s talking about.
So do I believe that we ought to have some kind of international system of dividing the pie–no. And I don’t think that’s what he’s calling for.
So look, I believe that the social magisterium…is very helpful and it does not pick which of the two philosophies between the left and the right are right or wrong. That is up to the prudential judgment of lay people who are practicing or practicing as politicians.
Ryan starts by trying to turn Benedict’s specific economic concerns back to a more general cultural critique of “moral relativism” to explain away the Pope’s language. But you actually don’t need to guess what the Pope meant to say; he says it very clearly in the encyclical in question. (paragraph numbers in parentheses)
First the Pope specifically rejects the Ayn Rand-ian, free-market vision of profit-driven self-interest producing the best results for all of society:
Profit is useful if it serves as a means towards an end that provides a sense both of how to produce it and how to make good use of it. Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty (21).

Therefore, it must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution(36).
Most notably, the Pope goes right at the topic of income inequality, and directly disputes Ryan’s assertion that it’s not a matter for concern:
The dignity of the individual and the demands of justice require, particularly today, that economic choices do not cause disparities in wealth to increase in an excessive and morally unacceptable manner (32).
Instead of leaving “the market” to its own devices, the Pope says we need to play an active role in shaping and directing the economy to produce just results. That includes political efforts to redistribute wealth when the market has failed to distribute it fairly.
The social doctrine of the Church has unceasingly highlighted the importance of distributive justice and social justice for the market economy, not only because it belongs within a broader social and political context, but also because of the wider network of relations within which it operates. In fact, if the market is governed solely by the principle of the equivalence in value of exchanged goods, it cannot produce the social cohesion that it requires in order to function well (35).
In fact, one of Benedict’s biggest concerns in the letter is the reality that as wealth and capital become more globally interconnected, political redistribution of wealth at a national level is becoming insufficient to rectify the disparities. This is the problem that has the Pope considering ways to actively encourage economic decision makers to act more ethically and justly as well and (yes Rep. Ryan) develop stronger authority to regulate them on an international scale.
Perhaps at one time it was conceivable that first the creation of wealth could be entrusted to the economy, and then the task of distributing it could be assigned to politics. Today that would be more difficult, given that economic activity is no longer circumscribed within territorial limits, while the authority of governments continues to be principally local(37).

The processes of globalization, suitably understood and directed, open up the unprecedented possibility of large-scale redistribution of wealth on a world-wide scale; if badly directed, however, they can lead to an increase in poverty and inequality, and could even trigger a global crisis. It is necessary to correct the malfunctions, some of them serious, that cause new divisions between peoples and within peoples, and also to ensure that the redistribution of wealth does not come about through the redistribution or increase of poverty: a real danger if the present situation were to be badly managed(42).
Ryan’s further “prudential judgment” dodge is only half-right. It’s true that the Catholic church largely avoids weighing in with doctrinal authority about the specific policies of any given political movement. But he’s wrong to suggest the Church has no opinion on broader economic or political philosophies.
As Caritas in Veritate makes clear, the underlying themes of Ryan’s speech–dismissal of income inequality as “class warfare” and the clinging to supply-side economics (or supply-side fairy tales, as Chait rightly calls them) ����� are clearly at odds with Catholic principles on the economy.
http://blog.faithinpubliclife.org/2011/10/why_pope_benedict_disagrees_wi.html