I made a rare journey to my local Native-American run casino last night at the urging of two of my friends.
As I entered the casino, I was engulfed by cigarette smoke, a rarity since Minnesota passed an indoor smoking ban several years ago (since the casino is on a Native American reservation, they are not obliged to honor this). I took a first glance around the casino and I notice a high number of minorities-a rarity in my ethnically homogeneous Minneapolis suburb.
They appeared to be mostly Hmong and Somalian; the two largest immigrant groups in Minnesota. In general, both are very economically depressed. I briefly glanced into the high stakes area, and saw roughly the same demographic composition.
Granted, I did visit at around midnight on a Tuesday, but it appeared to me that the majority of the casino’s patrons were gambling more than they could afford. Some may say that I am inaccurately dismissing these people as poor by appearance alone, but I feel that I generally have a good grasp of deducing such things I grew up in an affluent suburb, but often work with the poor, so I feel I have a decent grasp of the dichotomy between the appearance of the poor and the middle class, at least in my own neighborhood.
The aspect that startled me the most was the amount of money that these people were spending. The game of choice is generally blackjack, since the slots and video poker machines have terrible odds and low/sporadic payouts. Most of the tables had a $10-$25 minimum bet, meaning that an individual would have to be willing to shell out at least $100 in order to stand a decent chance of winning anything.
After wandering around for about a half-hour, I finally sat down at one of the rare $5 tables and put down $50. In about 10 minutes, I was out of money, so I put in an additional $10, resolving to call it a night after that. Eventually, I managed to work my way out of that hole and won a whopping $45. I have a degree in statistics, so I understand the odds and strategies of blackjack fairly well, but upon playing, Keynes’s fabled "animal spirit" consumed me. I was completely absorbed in the game. Even though I was dealing with such a trivial amount of money, I was ecstatic when the dealer busted and completely distraught upon losing a hand. I don’t really have a predisposition towards addiction; I don’t drink or smoke or take any drugs, but I honestly felt that same euphoria that one feels after a chemically induced high after gambling.
There is a subfield on the frontier of economic research; neuroeconomics, which has received increasing attention as of late. Among other things, they examine the neurological effects of economic actions (risks and rewards). One of the interesting conclusions I have found, and I cannot provide an exact citation, but the gist of the argument is Here
Basically, the feeling that one gets after gambling is nearly neurologically equivalent to that from drug use. So compulsive gambling can alter the neurological structure of the brain, much like alcoholism or chemical dependence.
My experience prompted to write the following diary. I divided up the negative aspects of government sanctioned gambling into 3 parts.
- It further distorts the distribution of wealth, especially among minorities.
Light (1977) states:
Even where disposable family incomes are above the poverty level, wasteful or destructive expenditures may deplete a family’s reserve until income is no longer adequate.
It is (or was) especially prevalent among inner-city African-American families, as Light goes on to state:
Director of Political Affairs forthe Congress of Racial Equality, Ed Brown (1973) has claimed that in Harlem alone blacks wager "at least" 300 to 500 million dollars a year on numbers.If only 300 million dollars were wagered yearly, this betting gross would represent about $300 for every black person in Harlem or 16 percent of family income.
For a more modern example, take state-run lotteries. Haisely (2008) states that state lotteries have the lowest payout of any form of legal gambling, and that about half of all families with income of less than $25,000 play the lotteries, and those that do have average expenditures of $550. She describes this type of behavior as a "poverty trap" where individuals make irrational economic decisions that prevent them from improving their fiscal situation.
- There is often social pressure against strategizing, and those that play conservatively are often subject to derision, as shown by Zola (1963).
While these men cared when they lost, such depression was remarkably short-lived, perhaps until post-time of the next race. Little systematic effort was made to retain one’s winnings. These men never stopped while ahead, nor reduced or even maintained the size of their bets after having won. If a person was ahead at the end of the day, it was more likely because there were no more races than through any conscious effort to accumulate profits. At Hoff’s, there was no prototype of the conservative gambler who quit while ahead. People who did were disliked, and not only by the bookies. Instead of admiring them, the regulars shook their heads and called them "cheap bastards."
- Even for those that actually beat the odds and manage to make a profit from gambling, the gain is generally not socially beneficial. Zola wrote:
A further distinction was made between gambling and other spheres of economic activity. A man was not expected to share his profits with his family and was thought a "damnfool" if he even told them of his winnings. The fact that most gambling activities take place in a context institutionally defined as "recreation" helps to emphasize this dissociation from ordinary utilitarian activities.
Society generally looks down upon substance abuse, but takes a blind eye towards gambling. Note that 2 of the 3 studies I cited were over 30 years old. This has not been a major area of study. The behavior of compulsive gamblers (which are excluded from Haisely’s study) has certainly not fully been examined.
It is very paradoxical that we tax the hell out of alcohol and cigarettes primarily to generate state revenue, but also as an economic disincentive to discourage people from drinking/smoking, yet we enable gambling via state-run lotteries, slot/video poker machines in gas stations, and government-sponsored casinos, all of which are generally viewed as non-controversial revenue generators. Haisely stated that, in 2007, state lotteries generated $17 billion in net revenue. Gambling-enabling legislation seems to have little trouble passing on ballot initiatives; it is certainly much more politically appealing than a tax increase.
I don’t necessarily agree with abolishing state-run lotteries, but I believe we should reform them. Haisely proposed a tenable alternative-make the state-run lotteries actuarially fair (less the cost of administration), i.e. if individuals bet $1, their expected return should be approximately $1. This could be accomplished by reducing the jackpot and the variation in prize returns, which would increase the number of winners.
Additionally, I believe that we should provide more in the way of financial education for the poor. In addition to the whole issue of gambling addiction, many people view the lottery as a form of saving or, at the very least "delayed consumption." Numbers banks of the 40s and 50s were generally supported because they provided credit to low-income houses when regular banks would not.
We need to offer both financial education for the poor and create financial institutions which are willing to let them open checking and savings accounts with no fees, low overdraft penalties and decent rates of return. Only then can we ever hope to attenuate our incredibly skewed distribution of wealth. However, when thinking about a ballot initiative to support slot machines, casinos, or a state-run lottery, remember that you are in effect voting for a tax on the poor.
Sources:
Haisely's paper is available here: http://www.aeaweb.org/...
Observations on Gambling in a Lower-Class Setting
Irving Kenneth Zola
Social Problems, Vol. 10, No. 4 (Spring, 1963), pp. 353-361
(article consists of 9 pages)
Published by: University of California Press on behalf of the Society for the Study of Social Problems
Stable URL: http://www.jstor.org/...
Numbers Gambling Among Blacks: A Financial Institution
Author(s): Ivan Light
Source: American Sociological Review, Vol. 42, No. 6 (Dec., 1977), pp. 892-904
Published by: American Sociological Association
Stable URL: http://www.jstor.org/...
(note: you need a subscription to JSTOR to read the last 2)