Do Casinos Contribute to the Common Good?: A Utilitarian Analysis Andrew Gustafson Creighton University Omaha, Nebraska, USA

Long History of Opposition to Gambling

Ethical Behavior of Casinos Typical Business Ethics Questions Customers: Service, Respect, Care Employees: Respect, Fairness, Compensation Environment: Sustainability Community: Philanthropy, Education Financial Disclosure

Ethical Culture Codes Responsibility (Officer, Go-To person) Training/ Real Discussions Accountability: Tracking, Monitoring, Auditing Enforcement, Follow-Through Reassessment, Ongoing Reform

Philosophical Question: Does Casino Culture Nurture Virtues? Justice: Proper concern for others Or do casinos promote self-centeredness? Prudence: Wisdom to judge appropriate act Or do casinos encourage rash short-term action? Temperance: Self-control and Moderation Or do casinos encourage excessive indulgence? Courage: Ability to face uncertainty, intimidation Or do casinos encourage escapism?

Social Benefit/Utility/Greater Good The Questions of This Presentation: Do Casinos, and what they are, promote the common/greater good? Solutions: How can whatever harm they do be alleviated/Offset?

UTILITARIANISM John Stuart Mill

1. Greatest Happiness for the Many Mill’s social utilitarianism is concerned about the welfare of the many, rather than just the individual.

2.Long Term Benefit Social utilitarianism focuses on the long-term or cumulative benefit, not merely the local, short-term, or immediate benefit. A company which follows this social utilitarianism will be concerned with fair treatment of employees, honest habits with customers and suppliers, and just policies; because acting with justice, fairness and honesty will, in the end, produce the greatest happiness for the many—through increased productivity, a strong reputation, and customer loyalty all leading to a positive outcome.

3. Moral Education/Socialization Mill’s social utilitarianism relies on education and the development of social ties to under gird our moral motivation, so that we will act according to the Greatest Happiness Principle. This is the sort of corporate culture construction which we achieve through strategized ethical training and integrity development.

4. Historical Trends Overall historic tendencies, not particular exceptional particulars, guide the decision. Mill’s utilitarianism is concerned not with static results, but with dynamic trends. When Mill says “actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness” he is looking for derivative rules of action which only usually or more often than not promote the benefit of the many.

Social Benefit/Utility/Greater Good The Questions of This Presentation: 1. Greater Good for the Many 2. Long Term Benefits 3. Moral Education/Socialization towards Higher Pleasures 4. Historial Trends

Apparent Greater-Good/Benefits of Casinos: Economic Benefit Jobs New Businesses (auxillary support businesses) Tax Revenue Public Goods Projects Entertainment

Four Brief Examples of Casino’s Contribution 1. Vegas 2. Bethlehem Pennsylvania 3. Macau 4. Council Bluffs, Iowa

Las Vegas 1940

Las Vegas 2010

# 2 Macau

Macau vs Vegas

#3 Sands Corp in Pennsylvania

Old Bethlehem Steel Mills

Closed 1995

Sands Corp Casino Openned 2009

$743 million property

Small Scale Local Economic Enabling: #4 Iowa West Foundation Since its inception the Iowa West Foundation's grant program (funded by Casinos) has awarded over $200 million that has improved the quality of life of thousands of citizens in 100 area communities in Western Iowa and Eastern Nebraska.

Community Development & Beautification   A high priority is given to community development projects that encourage neighborhood revitalization and create more livable neighborhoods, as well as improving downtowns and community main streets.

Mainstreet Beautification

Economic Development Retain or create family wage jobs that will result in increased economic self sufficiency for area families and residents.  The Foundation's primary economic development role is to serve as a catalyst by building the capacity of the public and the nonprofit sectors to effectively plan and manage economic development projects.

Education   The Foundation has an interest in new and innovative programs that promote life-long learning, academic performance and workforce preparation. Early childhood educational programs and quality daycare programs that address underserved age groups and serve children from economically and educationally disadvantaged families in Pottawattamie County will be seriously considered.

Human and Social Needs   High priority on new and innovative programs that strengthen families, address the needs of underserved youth, provide services to senior citizens, and help our citizens to reach their potential. Examples of such programs include proposals that address the following: homeless/transitional housing needs; the high incidence of teen pregnancy, the lack of available prenatal care; and chemical dependency issues, especially the increase in the region of methamphetamine use.

Examples of Public Art

Jun Kaneko

Critics of Casinos 1. Grinol’s Gambling in America 2. Goss and Morse’s Governing Fortune Question: Do Harms outweigh Benefits?

Grinols’ Taxonomy of Casino Negative Externalities 1. Crime 2. Business/Employment Costs 3. Bankruptcy 4. Suicide 5. Illness 6. Social Service Costs 7. Direct Regulatory Costs 8. Family Costs 9. Abused Dollars

1. Crime Crimes Grinols associates with gambling Organized Crime Assault & Robbery Rape & Murder Larceny & Burglary Auto theft Fraud & Forgery Tax evasion/fraud Confidence games Bookmaking Pimping/prostitution Selling drugs Fencing stolen goods. Grinols and Mustard in an earlier study estimated that approximately 8.6 percent of property crimes and 12.6 percent of violent crimes in casino counties were due to adding a casino.

Crime (Goss & Morse) 56 percent of those in gambling treatment had engaged in stealing to finance gambling. A study by the U.S. Department of Justice which showed that among sample arrestees in Las Vegas, Nevada and Des Moines, Iowa, the percentage of problem or pathological gamblers was three to five times higher than that of the general population. (Goss, 81) The Mall of America had 7.7 more visitors than Las Vegas, yet had a crime rate less than 1/15th that of Las Vegas. In other words, casinos seem to attract crime in ways that non-casino visitor attractors do not.

Response to Crime Critique Grinols admits, usually theft is not counted by economists as a social cost in itself, but only insofar as it increases social expenses of policing and prosecuting. The statistics he provides regarding the increased expensing and prosecuting costs incurred per pathological gambler do just that, but it is questionable whether it is legitimate to include all money or property stolen by pathological gamblers as social costs of gambling. It very well may be that pathological gamblers tend also to be drug addicts or pathological thiefs—which may just as well lead to their thieving fraudulent behavior--in other words, without more data, there is no necessary connection to be drawn between the gambling per se and theft or fraud.

2. Business and Employment Costs Grinols claims that gambling leads to business and lost employment costs in the following two ways: a. “lost productivity on the job because of reduced performance” b. “lost time and unemployment that includes sick days off for gambling, extended lunch hours, leaving early and returning late due to gambling, and firing because of gambling problems such as employee embezzlement.” (135) “Between 21 and 36 percent of problem gamblers in treatment reported losing a job because of their gambling”

Response to Workloss Critique: A. This is a significant fact—for problem gamblers. But we know that problem gamblers make up a very small percentage of the overall population, meaning that 21-36% of a small fraction of the population saw their job loss to be due to their gambling. B. Gambling is one among a wide variety of activities which contribute to lost productivity at work. Personal internet use at work and activities such as fantasy football or office bets during the NCAA sweet sixteen no doubt lead to even more lost productivity than gambling by problem gamblers, overall.

3. Bankruptcy Grinols writes, “Bankruptcy imposes social costs by diverting resources to lawsuits, legal costs, and bill collection costs. Never-paid debts of gamblers are a social cost to the rest of society.” (139)   Iowa Study: “The 298 U.S. counties which have legalized gambling within their borders had a 1996 bankruptcy filing rate 18 percent higher than the filings in counties with no gambling, and the bankruptcy rate was 35 percent higher than the average in counties with five or more gambling establishments” Garrett and Nicols also confirmed a connection between casinos and an increase in bankruptcy in their 2005 research study. (Garrett, 2005) Goss and Morse in another 2005 study also found that bankruptcies in casino counties are higher than non-casino counties over the long run. (Goss, 2005)

Response to Bankruptcy Critique There seems to be some real direct connection between personal bankruptcies and gambling. While there seems to be no doubt that gambling seems to coincide with increased bankruptcies, without knowing the actual net costs of those bankruptcies, it is difficult to know what the real social costs involved are, or how to compare that to the social benefits of casinos.

4. Suicide “Studies report that 15 to 24 percent of Gamblers Anonymous gamblers and hospitalized pathological gamblers have attempted suicide, rates that are five to ten times the average for the general population.” (141) He does provide some examples of people killing themselves at Casinos as evidence that the casino losses were in those cases the primary factors leading to suicide. He concludes that “the full extent of the influence [of gambling on suicides]…remains a question for further research.” (143)

Response to Suicide Critique Of course this correlation could be due to other factors, such as the possibility that pathological gamblers possibly have other personal issues as well, such as drug addictions or other problems leading to suicide attempts, as Grinols admits.

5. Illness Gambling has been linked to headaches, depression, stress-related illnesses, anxiety, moodiness, irritability, intestinal disorders, cognitive distortions and cardiovascular disorders.

Response to Illness Critique It should be pointed out that many things such as marriage, medical school, lack of proper exercise, and long hours at work have also been linked to such illnesses. Grinols himself admits that not enough research exists to substantially show the unique costs of gambling in terms of illnesses.

6. Social Service Costs Grinols points to cost of unemployment caused by gambling for pathological gamblers, including unemployment benefits and foodstamps. He provides no data as to these costs.

7. Direct Regulatory Costs “Gambling has been regulated by government because it historically has been subject to fraud and abuse.” (144) Grinols brings up one statistic—that a 1999 study in Louisiana found that the costs of regulating gambling in the state were 50.02 million per year, which works out to $16.53 per person. Since the study is not cited, it was difficult to verify.

Response to Regulatory Costs Critique Given that the regulating cost is accurate, it is important also to realize that the Louisiana gambling industry’s annual gross revenue in 2004 was nearly $2.5 billion—fourth in the nation after Nevada, New Jersey and Mississippi.   Of course we have regulations in place for the insurance industry, financial sector, accounting firms, and meatpacking among many other industries. SOX, EPA regulations, OSHA, SEC regulations and a variety of other regulations do cost society, no doubt.

8. Family Costs Included among the social costs of gambling by Grinols are the costs of divorce, separation, spousal abuse, and child neglect and abuse. He cites data that in one study 53.5 percent of pathological gamblers reported having been divorced, compared with 18.2 percent of the nongamblers being divorced. (145). He immediately admits that there are other causes to divorce of course.

9. Abused Dollars

Problem Gamblers It was estimated that in 2004 there were approximately 5,726,797 problem and pathological gamblers in the US. (Goss, 73) One study indicated that problem gamblers provide much revenue: 60% of gaming machines, 53% of horse racing, 22% of casino table games, 22% of bingo and raffles and 19% of lottery revenues came from problem gamblers. (Robert Williams and Robert Wood, The Demographic Sources of Ontario Gaming Revnue at 42 (Ontario Problem Gambling Research Center, June 23, 2004.)

Pathological Gambling According to the Diagnostic and Statistical Manual of Mental Disorders   (1) preoccupied with gambling (e.g., preoccupied with reliving past gambling experiences,handicapping or planning the next venture, or thinking of ways to get money with which to gamble) (2) needs to gamble with increasing amounts of money in order to achieve the desired excitement (3) has repeated unsuccessful efforts to control, cut back, or stop gambling (4) is restless or irritable when attempting to cut down or stop gambling (5) gambles as a way of escaping from problems or of relieving a dysphoric mood (e.g., feelings of helplessness, guilt, anxiety, depression) (6) “chasing" one’s losses) (7) lie to conceal the extent of involvement with gambling (8) has committed illegal acts such as forgery, fraud, theft, or embezzlement to finance gambling (9) has jeopardized or lost a significant relationship, job, or educational or career opportunity because of gambling (10) relies on others to provide money to relieve a desperate financial situation caused by gambling (http://govinfo.library.unt.edu/ngisc/reports/appenb2.pdf)

Problem Gamblers are a Minority 1% US Population fit pathological parameters 2% Fit Problem Parameters “…the responsible gambler probably represents the majority of the gambling population. They engage in an activity that apparently gives them pleasure and seems harmless enough. However, for the minority who lose more than they can afford, creating convenient access to gambling creates a significant potential for harm, not only to themselves but also to others…the available data suggest that this minority of the gambling population is providing a significant portion of the revenue.” (Goss & Morse, 267)

Criticisms of Grinol #1: Causal Connection? Grinol often cites a correlation between pathological gambling and some particular social malady, but then immediately admits that correlation does not mean that there is a causal connection. That pathological gamblers are more likely to be divorced or have money problems does not mean that their gambling is what caused these problems. As Goss and Morse write, “What is not clear in each of thee examples [of social costs of gambling] is the extent to which some other dysfunctional behavior might also be a contributing, if not intervening, cause of the event. Problem gamblers often share other pathologies, such as alcoholism, that provide additional basis for causation. A significant correlation appears between alcohol abuse and gambling pathology.” (Goss, 75) One study shows that those who average more than four drinks per day are five times as likely as teetotalers to become problem or pathological gamblers. John Welter et al., Alcohol and Gambling Pathology among U.S. Adults: Prevalence, Demographic Patterns and Comorbidity, Journal of the Study of Alcohol , (September, 20010), 710.

#2: Grinols: Prohibition Solution? A second difficulty with Grinols arguments is that on his logic, we would likely go back to prohibition. It is likely that there are more people who struggle with alcohol abuse than with pathological gambling, and alcohol certainly causes more deaths and probably many more social costs than gambling. But if we intend to outlaw gambling because of the negative effects of the few pathological gamblers on society, then it seems that it would by the same reasoning be reasonable to outlaw alcohol due to the negative effects of alcohol abusers on society.

Prohibition is Unlikely: “Throughout history, Every society that has allowed casinos to cater to local customers has eventually outlawed gambling.” (Rose) “In jurisdictions with significant gambling investments, the prospects of returning to a regime of criminal proscription are remote. As in the ancient myth, the contents of Pandora’s box could not be returned once they had been released into the world.” (Goss & Morse)

#3: Grinnols Ignores the Benefits A third difficulty with Grinols argument is that he really does not adequately account for the benefits of gaming revenues in some situations. Atlantic City is a worst case scenario.   It may be argued that there are particular scenarios where gaming actually avoids some of the major criticisms of Grinols, Goss and Morse—situations where gaming does not cannibalize other jobs, and brings great economic prosperity to an otherwise desolate economic landscape. Las Vegas and Macau may both be huge exceptions to the criticisms that gaming hurts more than it helps.

Goss and Morse: Greater Good From Casinos? Goss and Morse in their book Governing Fortune: Casino Gambling in America provide a lot of legal and economic data.

Help for Tax Burden Relief? (No)   Although tax collections from casinos have gone up, benefits to the taxpayer seem negligible. Casino-state taxpayers haven’t experienced benefits in terms of taxes measured against personal income, and casinos seem to have no impact on property taxes.

Smaller Rural Counties Benefit More What Goss and Morse did find was that “counties with smaller and less dense populations and lower per capita income tend to benefit from casinos more than otherwise situated counties” (Goss, 51)

Mixed Blessing: Casinos = More Jobs, Lower Pay Goss and Morse state that “Our results indicate that casinos tend to dampen income growth but increase job opportunities in the counties where they are located.” (Goss, 66) This is likely explained by the fact that casino jobs do not pay as well as other jobs in the counties represented, so that while there are more jobs in the county, a greater portion of those jobs provide lower income than the previous median income in the county.

Grinol Solutions to the Negative Effects of Casinos? Limiting the size of jackpots Limiting the length of play, access, or the rate of play. Making casinos less arousing Providing less variability in the games Decreasing the inducements to play. Problem with these suggestions: It seems that suggesting these strategies for casinos is like suggesting to Ambercrombie and Fitch that they only sell full length Amish dresses to eleviate the sexualization of women through their catologues.  

Morse/Goss Solution: licensing of patrons of casinos. “Our legal and moral traditions recognize that it is entirely appropriate to constrain behavior that imposes costs on others without their consent…A licensing requirement for gambling patrons would not be inconsistent with restrictions on other activities that potentially impact the community.” (Morse, 260-1)

Candidates for exclusion/denial those receiving public assistance those behind on child support payments those who have filed for bankruptcy. restrict according to income (as Singapore recently proposed)--this seems to unfairly restrict modest income earners from gambling, and not take into account that high income earners can still have problematic gambling habits which harm society.

Conclusions: Greater Restrictions on Problem gamblers by the industry would help alleviate concerns from public and governments Much of the data often used is inconclusive Gambling does seem to have direct connections to bankruptcy rates, and some social costs. Gaming in most cases brings some jobs but drives down wages. Iowa West and Other such foundations can provide useful public goods.

With Great Wealth, Comes Great Responsibility “The family that perseveres in good works will surely have an abundance of blessings.” -Chinese Proverb “Wealth is not to feed our egos, but to feed the hungry and to help people help themselves.”-Andrew Carnegie A man of humanity is one who, in seeking to establish himself, finds a foothold for others and who, desiring attainment for himself, helps others to attain. -Confucius