The Economic and Social Costs of Gambling

Gambling involves risking money or other items of value on the outcome of a game of chance. It includes betting on sporting events such as horse races and football accumulators, lottery games, scratch cards, video-draw poker machines, slot machines and two-up, and card games like blackjack or roulette. It also includes speculating on business, finance or insurance-related issues. It does not include bona fide business transactions valid under the law, or contracts of indemnity or guaranty and life, health or accident insurance.

Often, people who gamble do so for social reasons, for example to take their minds off problems or to meet friends. They are also motivated by a desire to win money, which stimulates the brain’s reward system. This is why gambling can be so addictive.

However, the way we understand gambling has undergone a significant change in recent years. It has moved from being seen as a harmless pastime to being considered a psychological disorder. This change has been reflected or stimulated by the various editions of the Diagnostic and Statistical Manual of Mental Disorders (called DSM), published by the American Psychiatric Association.

There are many causes of problem gambling, including genetic predisposition, boredom susceptibility, impulsivity and a poor understanding of the random nature of events. These factors, together with the false belief that gambling is a low risk, high reward entertainment choice can lead to addiction. People who are predisposed to gambling addiction have a difficult time controlling their behaviour and can often become trapped in a cycle of losing and winning. The early big win they experience can create an illusion of control and give them a natural high, but it is very hard to replicate this feeling, so they keep throwing the dice or pulling the lever of the slot machine hoping for a repeat performance.

Research on the economic and social costs of gambling has largely focused on its negative impacts at the individual, interpersonal and community/society level. Personal and interpersonal impacts are invisible and include financial and non-financial costs, such as reduced quality of life, family distress, stress and depression. These impacts are not easily quantified and are often ignored in calculations.

Community/society level externalities are monetary and include costs of crime, such as property theft and violent crimes, and police and prison cost per problem gambler. They can also include health-related quality of life weights, known as disability weights, that are used to quantify the impact on a person’s life. These are more easily measured and can be taken into account when calculating the cost of gambling. Nonetheless, there are methodological challenges to assessing these costs, including how to measure them and how to identify the impact of different forms of gambling. Moreover, it is challenging to differentiate between societal and community/society impacts that are indirect and those that directly affect the gambler. This is a key factor in understanding how to calculate the cost of gambling. In addition, it is important to distinguish between the effects of different forms of gambling, for example between casino and non-casino gaming.