Supercasinos: based on bad economics.

This article was written for Rethinking Economics

The supercasino controversy in the UK is a classic example of bad economics being applied to a policy under consideration. As a result, the government utterly failed to properly grasp the wide-ranging social and economic consequences of the proposed policy – to allow massive Las Vegas style “destination casinos” in the UK.

Gambling addiction is, without a doubt, awful. This hardly seemed to be taken into account when the enormous new gambling venues were proposed, however. Policymakers were not considering the terrible problems that the casinos might cause, they were instead fixated on comparing a few comforting, easily-measurable variables. The entire project seemed to be based on whether on not the construction costs outweighed the direct income from the casinos and the number of jobs created.

Having concluded that these three variables indicated that the casino was a good idea, enthusiastic New Labour politicians would not be moved in their support for the casinos. It took a change of Prime Minister from Tony Blair to Gordon Brown to halt the badly thought-out project. Why did they become so enamoured with these hulking gambling stations? What caused so many politicians to disregard the obvious negative side-effects of constructing these casinos? After all, every job created is created with money taken in from a gambler. That gambler stands at risk of becoming addicted to gambling, potentially ruining not only their own lives, but the lives of those around them too.

There was some rumour of corruption surrounding then-deputy PM John Prescott, who had spent several weeks holiday on the ranch of a man who wished to construct the first supercasino in what was then the disused Millennium Dome and is now the wildly successful O2 Arena. Given that the first casino ended up being planned, before the policy was scrapped, for construction in Manchester, this does not seem likely to be the sole explanation of the government’s folly.

Instead, I believe it relies on economics’ unhealthy obsession with measuring things, and the even more unhealthy tendency to simply ignore that which is too difficult to be measured. Taking the example of supercasinos, the point is illustrated rather well. It is fairly easy to consult with the potential casino operators on their expected staff numbers, and hence get a figure for the number of jobs you expect to create. It is much harder to go about defining, measuring and predicting the number of lives that will be negatively impacted by gambling addictions of varying degrees.

This leaves us with a situation where one was the central justification of the policy (and creating jobs is a valid government objective) yet the other – the primary downside of the policy – was basically ignored by those responsible for it. Trying to measure the human and social cost of the policy would be tremendously hard and imprecise – but that does not mean it is worth doing.

Gambling problems are not only prohibitively expensive for the person suffering from them, they have many other side effects. They can potentially ruin personal relationships with significant others, children, family and friends. The knock on effects, for example, that a gambling addiction will have on the education of the children of those affected, will not have been taken into account during the policy creation.

Illegal activity to obtain money to gamble with is also, unsurprisingly, common among problem gamblers, which will have many unanalysed negative consequences. Other mental health issues become more likely in problem gamblers, which are desirable to avoid for their own sake and also for the strain treating them puts on the national health budget and dealing with them puts on society at large.

In short, the UK government was guilty of massively underestimating the downsides of a particular policy due to the fact that the upsides of that policy were far more easily measurable than the downsides. Thankfully the proposed policy was abandoned eventually, but it can far closer to reality than it ever should have done. We should rethink economics to place more emphasis on the human and social cost of decisions that we all too often characterise as purely economic.

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