Selling hope, casino-style

When a jurisdiction considers introducing legal casino gambling, the public debate tends to be dominated by the yes-or-no question concerning the opening of casinos. This (understandable) focus takes as a near-given, then, the manner in which casinos themselves operate. Nevertheless, the benefits and costs of casino gambling are closely tied to details of casino behavior. These details are particularly vital because much gambling behavior is suggestive of less-than-rational decision making by consumers. Indeed, the gambling behavior of approximately one percent of the population is sufficiently problematic that it is categorized as a type of mental illness – and a much larger percentage of casino patrons fall into this unhealthy category.  

In the spirit of libertarian paternalism or “nudging” (Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness, Yale University Press, 2008), regulations can be instituted that offer some protection against disordered gambling, without impinging in a serious way on the choices of ardent but content and (arguably) rational bettors. Among the potential licensing provisions that could nudge problem gamblers into more considered decisions are: voluntary or mandatory time or loss limits; mandated closing hours or breaks; accessible self-exclusion programs; information provision on expected prices, accumulated losses, and time; marketing controls; membership and waiting period requirements; and government ownership. This paper examines the prospects that such regulations hold for reducing disordered gambling, and develops recommendations for casino regulations that are likely to improve social welfare relative to current standard practices. [The title of this paper is an homage to a pivotal book about lottery gambling by Charles T. Clotfelter and Philip Cook, Selling Hope: State Lotteries in America, Harvard University Press, 1991.]