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The Honolulu Advertiser
Posted on: Monday, February 15, 2010

Economically, gambling is a bad idea

By Leroy Laney

All the bills proposing gambling are unsettling. As an economist, I've often had questions about the desirability of various forms of gambling, in good times and bad but especially the latter. Here are some economic reasons I oppose it for Hawai'i:

• Tourism may be in a slump now, but over the years Hawai'i has been very successful in cultivating a unique image of safety, natural beauty, and the Aloha Spirit. That ambience would be threatened by the introduction of something that conflicts with Hawai'i's brand image and culture.

• If you hold 'em, you can't fold 'em. Casino gambling isn't something we can just try for a few years and then get rid of it if it doesn't live up to expectations. The industry has a well-paid and experienced lobbying arm that will fight to keep it here and expand it.

• We always hear more about gambling success stories than its failures. Since the spread of gambling that began nationally in the early 1990s, gaming has been disappointing in a number of places. Where it has been more successful, other sectors of the economy have been adversely affected.

• Will casinos keep local people home to gamble rather than going to Las Vegas? Clearly, many locals go there for a vacation and will continue to do so. Those who do stay home will spend money at the tables they might otherwise spend on other things. The same goes for our visitors. That can be a zero sum game, too, and if they really want a gambling vacation, places like Las Vegas will continue to have the comparative advantage.

• Locate a casino only on Hawaiian Home Lands? In several Mainland situations, casino success on an Indian reservation has led to efforts to establish other casinos elsewhere to get slice of the pie. Additionally, clear evidence shows that social problems from gambling are often far higher on the reservations.

As David McClain and I pointed out in an article in "The Price of Paradise" some years ago, gambling works best in places that are either big enough to cope with its undesirable side effects, or so poor that they have no alternative. Hawai'i is not so desperate that it must roll the dice on the many side effects such as increased crime, divorce, and other social problems.

The same goes for a lottery. Evidence shows most lottery tickets are bought by lower income and less-educated people. And since they are all state-run, a lottery is simply a very regressive tax, even if voluntarily paid, on those people. Considering the odds of winning, it's actually just a tax on people who are bad at math.