David Frum Explains How Casinos Hurt Cities

By Richard Nelson

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August 7, 2014

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David Frum has a superb piece today in The Atlantic about the effect that casinos have on cities and local economies. The short version: It’s not pretty.

Frum begins by explaining a curious trend. The post-recession economy has lent to gaming floors fewer and fewer able-budgeted customers. “Affluent and educated people visit casinos less often than poorer people do for the same reasons that they smoke less and drink less and weigh less,” Frum explains. In other words, casino gambling is becoming most patronized by those least able to support it. Nevertheless, Frum writes, more cities are seeking to invigorate stagnant economies through new casinos. This is resulting in casino “saturation,” which in turn handcuffs the revenue that casinos do manage to generate.

Frum writes that the reason casinos fail the local economy is that the consumer experience of casino gaming is totally self-referential. Casinos profit enormously from those addicted to gambling, while other types of local businesses do not.

While the gaming industry argues that the total number of problem gamblers remains small, that small minority is crucial to the industry’s profits: One Canadian study found that the 75 percent of casino customers who gamble most casually provide only 4 percent of casino revenues. A range of studies reviewed by IAV estimated that between 40 to 60 percent of casino revenues are earned from problem gamblers. And as Amy Zietlow observed in an important study commissioned by IAV, those problem gamblers increasingly are drawn from the ranks of the vulnerable elderly. Half of casino visitors are over age 50, but casinos market themselves to the over 70 and even over 80 market, to whom gambling offers an escape from boredom and loneliness into a hypnotic zone of rapid-fire electronic stimuli.

Frum concludes thus:

As casino expansion reaches its limits, the towns and cities that turned to gambling to escape their problems may discover that they have accepted a sucker’s bet: local economies that look worse than ever, local residents tempted into new forms of self-destructive behavior, and a dwindling flow of cash to show for it all.

Frum’s essay is convincing. His data is relevant and his analaysis of the casino’s reliance on problem gamblers accords with much that opponents of big gambling have argued for many years. This issue has particular relevance for those in the Commonwealth. Kentuckians have watched their local economy plumb national depths in recent years as a Democratic governor vows to continue his warpath towards expanded gambling. This is further proof that Governor Beshear is wrong about expanded gambling and conservatives are right.

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Director, Commonwealth Policy Center