Considering legalization of gambling
Massachusetts is considering legalization of gambling. The two newspaper articles (Cahill, 2008; Bailey, 2007) provide you with two opposing viewpoints. Your assignment is to apply concepts from this course to this proposed public policy. Is there a market failure issue illustrated here? Explain.
Maximum length: 2 pages. You only need two freestanding sources for this assignment (i.e., the two newspaper pieces—it is not necessary to cite the textbook), which should be cited using conventional bibliographical style. No additional research is needed. N.B. Do not repeat the articles or take a stand on legalized gambling; simply make clear in your own words what the market/government failures are.
The presence of casinos in many states in the U.S. had been subjected to many different reactions. But the majority believes that casinos are economic tools that can raise the revenue of a particular state. Since its conception, casinos have become a popular attraction for tourists and many patrons. As a result, casinos have become good financial sources of revenue for the government. Moreover, in Massachusetts, a public policy was set up for the first gambling place in the state. However, this initiative had experienced some kind of market failure because of the numerous negative reactions on the social and economic effects of the casinos in Massachusetts.
One major factor that contributed to the market failure is that casinos have the capacity to instigate or stimulate addiction among gamers or casino enthusiasts. This condition unfortunately becomes a social cost wherein the drawbacks of having casinos are directly experienced by third parties. This is an externality issue which in this case can make a negative impact on the society. According to Steve Bailey, “To pay for the human collateral damage in the name of economic policy, the governor has proposed a “best in class” program to support gambling prevention and addiction services” (Bailey, 2007).
Setting up this program does not guarantee that it will prevent “domestic violence” from manifesting; in fact it could possibly even facilitate the escalation of violence in the future. In addition, casinos can lead to more traffic congestions that can result to the intensification of pollution in the state (Cahill, 2007).
Even though the state would greatly benefit economically from casinos, the revenues from it would not cover all the public goods specifically the “education of workers, public health services, and infrastructures.” More so, local businesses would not also benefit from destination casinos. As Steve Wynn have said, “There is no reason on earth for any of you to expect for more than a second that just because there are people here, they’re going to run into your restaurants and stores just we build this [casino] building here” (Bailey, 2007).
This statement of Wynn indicated that small scale enterprises cannot compete with destination casinos in terms of market share. There is a tendency for these casinos to consume the disposable income of the customers of the existing small businesses in the state thus the reduction of income of local entrepreneurs. According to a policy analyst of Federal Reserve Bank of Boston, she said that “The empirical evidence we reviewed suggests that, in most cases, large casinos in highly populated areas, such as the proposed West Warwick casino, have little secondary economic impact” (Bailey, 2007). In conclusion, the main cause for the market failure of destination casinos in Massachusetts is its negative impact on public goods and the general welfare of the citizens.
Bailey, S. (2007, September 19). Collateral damage. Boston Globe.
Cahill, T.P. (2007, September 18). Massachusetts’ fortune is with gaming. Boston Globe
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