How Will the Downturn Affect the Gambling Economy?

Question: Will the downturn in the economy have a lasting effect on the Las Vegas gambling economy? I am a “low roller” and even I am receiving many free offers for rooms in Las Vegas.

Paul Solman: Let’s hope so. Having just finished, while on holiday in Lisbon, two superb and wise books that argue for the importance of a moral point of view in their respective disciplines, I feel moved (and justified) to get on my high horse for this answer. (The books are Harvard psychologist Jerome Kagan’s An Argument for Mind on the history of psychology over the past 50 years (and his role in it) and Cold War historian John Gaddis’ The Landscape of History.)

In recent times, economists have generally skirted the issue of the Good. The assumption is that something called “utility” (satisfaction) sums up what humans do and therefore SHOULD shoot for, maximizing it as rationally as possible. How do we know what “utility” IS? By what people demonstrate they desire — their “preferences.” How do they demonstrate? By buying, paying, consuming. Thus “consumer preference” is the be-all and end-all of a market system. The implicit (if not, as often, explicit) goal of an economy is the greatest Good for the greatest number (“utilitarianism”), which is the summing of utility as revealed by consumer preference.

Of the several objections to this reasoning, the “utility” of gambling is one. Literature, common experience and now neuroscience all provide ample documentation that gambling can become an addiction not unlike drug or alcohol use. Many, if not most, of us can indulge without harm. Some very notably cannot. I have recently mentioned here my allegiance to the work of George Ainslie and his book, Breakdown of Will. I urge you to read it if you’re interested in a formal explanation of the neuro-mechanics (what Ainslie calls “pico-economics”).

The casual point is that some of us are born marks. Our brains are overmatched by gambling. We cannot resist and are beguiled into showing a “consumer preference” for an activity — gambling — that is detrimental to the long-term interests of ourselves, of those near and dear to us, and even — to the extent that we live in a welfare-state with something of a safety net — to the rest of society, with taxpayers picking up the tab for our hapless gambling-related transgressions.

There is also evidence that those most vulnerable to their gambling neuro-circuitry are those least able to afford it. Thus, the same vicious circle occurs as with health. The sicker you are, the poorer you are…the sicker you become, etc., downward and downward. That’s one of the key arguments for universal health insurance. By the same logic, the more you gamble, the poorer you become…the more desperate you become to make the big score and get even. See the insights of evolutionary psychology and now behavioral economics for further confirmation.

So John of Scottsdale (sounds like an ancient English lord), I hope that recession and its devastating unemployment will mean that what happens in Vegas will not happen to as many overmatched Americans as before the fall. If that means a low-roller such as yourself can get a better deal, congratulations. By definition, low-rollers (relative to their resources) are not overmatched. Just take care to stay that way.

Meanwhile, I DO worry about what the Great Recession might do to lottery players and other candidates for Gamblers Anonymous. Will they become more desperate and thus gamble more, descending into the maelstrom? If anyone has data on this, please comment below.