The Economic Impact of Gambling


Gambling is an activity where someone wagers something of value on the outcome of a random event. It may be a fun group activity to do with friends or family, such as a trip to a casino in a neighboring state, or it could be online gambling on the internet where the excitement is all but guaranteed.

Most people gamble for enjoyment only and with money they can afford to lose. However, for some, it becomes a serious problem that can have life-altering effects. For this reason, many governments ban or restrict gambling. Some even penalize it with prison sentences for those caught. The nascent international research literature suggests that college-aged people have the highest rate of problem gambling, which is probably a reflection of larger developmental issues in this population.

The costs of pathological gambling are well documented in the literature, and include criminality, financial difficulties, and disruptions of interpersonal relationships. The literature also discusses the social costs of gambling on those closest to the gambler, such as family and friends.

Several approaches are used to study the economic impact of gambling, including cost-benefit analysis, cost-of-illness, and economic assessment. Studies using a cost-benefit approach attempt to quantify changes in well-being, including both benefits and costs, and include intangible harms that are not monetary in nature (e.g., the pain and suffering of pathological gamblers). Cost-of-illness studies tend to focus on monetary harms and neglect positive impacts. Studies that use a social welfare approach consider the real and transfer impacts of gambling, as well as both positive and negative impacts on society.