Gambling is a type of betting where you risk money or something else of value on an event with no known outcome, such as a football match, scratchcards, or fruit machines. The wager is based on ‘odds’ set by the company who runs the game, so it’s not certain whether you’ll win or lose.
Generally speaking, there are two main types of gambling: legal and illegal. Legitimate gambling, such as casinos or sports betting, can be a profitable business that provides employment and tax revenue for the economy. However, if you gamble in an illegal way, there are penalties and other consequences.
Benefit-cost analysis can determine the net effect of gambling on society by comparing the benefits that it creates with the costs it imposes. But this approach is not perfect, as benefits and costs are often difficult to measure.
A more realistic estimate of the net impact of gambling on society requires the use of an alternative approach, called externality cost analysis. This method of analysis takes into account the fact that many of the economic effects associated with gambling – such as criminal justice system costs, social service expenditures and lost productivity – are not easily measured.
In addition to assessing the overall costs of gambling, externality cost analysis also attempts to determine whether these costs are higher than they might otherwise be, if gambling were not introduced into an area. In general, this is a very tricky analysis to conduct, because the cost of pathological gambling can’t be precisely quantified.
The key question is whether the additional debt incurred by people who engage in pathological gambling represents an actual cost to society, or simply a transfer, a temporary redistribution of money from one group in the economy (lenders) to another (borrowers), which can be undone by repayment. This analysis can be tricky, because it requires estimating the cost of indebtedness from several sources, including debtors, creditors, and the bankruptcy courts.
This analysis may require a detailed look at the history of the community before and after the introduction of gambling, to make sure that any positive or negative changes aren’t due to other factors. For example, if per capita income increases after the introduction of gambling but before and after other positive changes in the economy (e.g., the creation of new businesses), then some of the increase could be due to the other factors mentioned above.
These effects are often overlooked in analyzing the positive and negative aspects of gambling. Instead, most studies concentrate on gross impact, which merely looks at the total number of gambling-related jobs created or the amount of money gambled.
There are several other types of research that attempt to examine the negative impacts of gambling. They include studies that seek to determine the impact on the health of people who engage in gambling and those who have been affected by the behaviors of problem gamblers. These studies are sometimes more rigorous than others, because they aim to study a population over a longer period of time and assess the impact on individual health.