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We're all suckers when a government bets on casinos

John Lehmann/The Globe and Mail

Frances Woolley is a professor of economics at Carleton University

On Wednesday, I received a call from a reporter desperately trying to find a credible expert prepared to speak in favour of the OLG's plans to build a downtown casino in Ottawa. "We need balance," he said. Which made me wonder, does balanced journalism mean finding people to support stupid ideas?

There are two ways of approaching the economics of casinos. One is to start with the basic premise that gambling is just a form of entertainment. There is no fundamental difference between visiting a casino and going to watch a Leafs game – in both cases, the odds of winning are less than one might like.

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Yet, if gambling is just another form of entertainment, what is the justification for providing it through an OLG monopoly? Most people accept that competition is the best guarantee of quality goods and service. Why should gambling be any different?

Indeed, if there was more competition in the gambling market, there is the possibility that products would emerge that harnessed people's propensity to gamble in positive ways. For example, banks in countries around the world offer lottery linked savings accounts. Why force people to choose between saving and buying a lottery ticket when people could earn lottery tickets by saving?

A second way of approaching the economics of casinos is to start with the presumption that gambling is a potentially dangerous activity, like drinking and smoking.

Study after study, as summarized in this recent comprehensive review, finds that lottery and other gaming revenues come disproportionately from lower income people. Instant games, such as slot machines, are particularly insidious. They prey on those who seek instant gratification, and study after study shows that success in life is strongly related to the ability to defer gratification, to avoid eating the marshmallow.

This same review found no evidence that increased gaming revenues lead to better or improved public services. U.S. studies have found that the introduction of presence of state lotteries ear-marked for education is associated with lower levels of education funding. Correlation is not causation, but the experience south of the border is enough to cast doubt on the argument that higher gambling revenues will lead to better funded schools and hospitals.

Even under the present OLG regime, there are those who gamble to excess. A 2007 study by University of Lethbridge professors Robert Williams and Robert Wood found over one third of OLG revenue comes from the 5 per cent of gamers who are "problem gamblers."

I appreciate the sacrifice that those people, and their families, are making to pay for schools and hospitals for the rest of us, but surely there must be a fairer way of raising revenue?

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About the Author

Frances Woolley is a professor of economics at Carleton University, where she teaches public finance. Professor Woolley is a former Secretary Treasurer of the Canadian Economics Association, and currently co-editor of Review of Economics of the Household. Her research on taxation and the family was awarded the Purvis Prize in 2001 and the John Vanderkamp Award in 1997. More

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