[caption id="attachment_12538" align="alignleft" width="300" caption="Harrah's might be in our future, 'cause that's some jobs, baby!"][/caption] Casinos, like convention centers, over-expand, cannibalize each others' customers, and eventually end up in the hole. Let exhibit A be Foxwoods, in Ledyard, CT. The New York Times Sunday mag chronicles its troubles this week. With $2.3 billion in debt (and a probable $600 million haircut for investors), Foxwoods, which is the largest casino in the Western Hemisphere, is a perfect laboratory in which to observe the casino life cycle. Opened in 1992, it quickly became fabulously profitable, in part by busing in Chinese-American gamblers from New York City's five boroughs. (I was there for that and remember well the scene.) Inevitably competition bloomed, beginning with the Mohegan Sun and now, 20 years out, with casinos and slots parlors up and down the East Coast. Massachusetts is on the verge of legalizing them too, and Maryland is (fitfully, alas) beginning its own casino boomlet. How we arrived here is a story seldom told. Gambling has always been vice. The public policy question was always about the degree to which prohibition kept it in check. Then came the idea that governments would be better off regulating and facilitating it than trying to stamp it out. As the piece in the Times puts it:
account leaves out the state lottery boom of the early ‘70s, which truly touched off the legalization fad. Just about every lottery state (Connecticut included) promised lottery revenue to public education. And every state then reneged on its promise by slowly withdrawing the general revenue funds from education, leaving school funding pretty much where it was before the lottery riches arrived. It's one of those grand scams (like "commercial-free" cable TV) that a few people remember. But I digress.
piece surveys the cost-benefit landscape admirably:
(Maryland is 67 percent of slots; Connecticut's rake is a mere 25 percent). The industry itself has grown powerful, deploying economists and lobbyists to D.C. and across the land to tout the economic benefits of gambling.
This notion that gambling "creates jobs" is both central to the industry's argument and frankly specious. Yes, building rich mahogany suites for high rollers is a productive enterprise, and someone has to put together the slot machines and roulette wheels upon which the enterprise turns. But to count overall "gaming revenue" as productive income discounts the opportunity cost of substituting entertainment of any kind (let alone entertainment that principally consists of taking peoples' money away by mechanical means) with the creation of durable goods or the provision of socially useful services. Economically speaking, a dollar spent repairing a bridge or outfitting a children's hospital returns more to society than a dollar flushed down a slot machine. Economists used to understand this concept. No longer, it seems. While gambling lobbyists swarm all over every state capital, there are no comparable legions of slick lawyers and consultants touting the benefits of, say,
The money that might otherwise be invested in these things (yes, creating jobs, etc.) is spent instead on subsidies to ever-expanding
, casino builders, stadiums and the like.