The main problem with the fascination with casinos by those who want to promote economic development is that casinos don’t produce new wealth. They simply provide a way for people to spend money they already have.
Now, there is nothing wrong with a business like this, as long as such a business is created in the marketplace. If people go there, they do so only because they value the entertainment it provides. But generally, the proposals for gambling are anything but market-friendly. Either some kind of monopoly protection or economic development incentive is always part of the mix.
Of course, the economists with spreadsheets and multipliers and econometric projections will tell you that gambling will boost the economy. They’ll point to the new jobs crated by construction and service personnel in the casino as evidence. The problem with this is that these projections ignore the fact that the money involved already exists and would already have been used for creating new jobs somewhere else.
The fallacy of the gambling as economic development argument stems from the Keynesian economic fallacy that spending drives an economy. And a new casino fits right into this. We see a new casino and we see the new jobs it creates and it makes sense. But what we don’t see puts the lie to this idea.
What happens to money that is not spent? It is put in a bank. But it doesn’t just stay there; the bank takes the money and loans it to a businesses. Or today more and more people skip the banks and give the money directly to a business by investing in the stock market. In either case, this money is not sitting their idly while the economy is falling apart. It is being used by these businesses to expand, to create more jobs, to invest in new processes and new equipment.
All this is going on behind the scenes while people supporting more casinos and more tourism are begging policy makers to create another monopoly for special interests to operate a casino or spend more tax dollars on economist development to benefit their projects.
In either case, money is being siphoned from productive uses in the economy and being given to less efficient producers who often need subsidies or special protection from government to operate. The losers are the taxpayers and the economy.