Gambling in America, By EarlGrinols. Cambridge, UK: Cambridge University Press, 2004. Pp. 232. $45.00. ISBN 0521830133.

Abstract

[Author Affiliation]Georgia CollegeBy Earl Grinols.Cambridge, UK: Cambridge University Press, 2004. Pp. 232. $45.00. ISBN 0521830133.Professor Grinols has been involved in the casino gambling debate in the United States since the early 1990s. Even before much empirical data were available, Grinols was staunch opponent of legalized casinos. His recent book, which discusses casino gambling only, builds on his previous publications and continues his antigambling tradition.In the introductory chapters, Grinols provides history of gambling in the United States, noting that most states had constitutional bans on gambling in 1900. Only 100 years later, the ban on gambling has been reversed in most states. Grinols discusses the development of the casino industry, the politics behind it (chapter 3), and notes that the industry would be ordinary were it not for the fact that casino gambling, particularly by problem or pathological gamblers, may cause externalities.Beginning in chapter 4, Grinols discusses various aspects of the casino industry. Since gambling began spreading in the United States outside of Nevada and New Jersey (1991-present), there have been variety of economic impact studies. Grinols correctly notes that many of these have been seriously flawed. The studies, which are frequently funded by the casino industry, often argue that the number of jobs provided by the casino industry is proxy for the benefits of casinos. (Tax revenue is the other major selling point for politicians considering legalizing casinos.) Grinols correctly points that more jobs do not necessarily imply that development follows. In many cases, the new casino jobs may just other jobs in the community. The effect of new casinos on labor markets is an issue that has not received adequate attention in the literature.Grinols makes the argument that casinos act like restaurants and do not attract outside dollars to the community. As result, casinos cannibalize other industries. Furthermore, if the casino's corporate headquarters is outside the community, this money leaves the local economy, thus providing no benefit to the community. If instead, casinos acted like factories, where outsiders came and spent their money, and the money remained in the local economy, there could be an growth effect from casinos, like in Las Vegas. This argument is reminiscent of mercantilism, which focuses on the inflow of money. Obviously, tourism can play an important part of an economy, but exports are not necessary for development to occur.In chapter 5, Grinols develops formal cost-benefit model of gambling. Items included on the benefits side of the ledger include net increase in profits measured across all businesses, net increase in taxes measured across all taxpayers, consumer surplus, consumer surplus, capital gains to consumers induced by the activity, and gains from relaxation or elimination of nonprice constraints on consumer choices (p. 97). Only the item real resources consumed to deal with harmful externalities appears on the cost side.Grinols simply drops consumer surplus from the analysis, and explains a reasonable first approximation is that the net effect of casino on capital gains and consumer surplus considerations is small. If firm and household prices are invariant to the amount of gambling..., capital gains on endowments and consumer surplus drop out (p. 107). This treatment of consumer surplus seems odd. Grinols argues that the only benefit from having new casinos in state is distance consumer surplus; because the gambler does not have to travel as far to casino, their costs of consumption are lower. Should not the first casino in Mississippi, for example, be treated as new product or brand of entertainment in that market? There is an entire literature (e. …