Since writing about the plight of the Atlantic City gaming industry last week, I unexpectedly found myself, as fate would have it, in a casino in western Pennsylvania—exactly the kind of cozy venue that is putting the screws to New Jersey’s depressed island gambling getaway.
Open for little more than a week, it was like a glittering magnet in the rural highlands. I found a parking spot not far from the front entrance. And yet a stretch golf cart materialized to save my wife and me the trouble of walking. Once inside, the vibe of favorable first impressions lingered. The dealers at my blackjack table were raw and inexperienced. But the players seemed forgiving and jovial, freely dispensing advice from the blackjack “book.” For my part—I’m hardly an ace at blackjack, if you’ll pardon a pun—I enjoyed the low-intensity setting.
The whole experience struck me as a mostly positive exercise in dynamism. Whatever one’s opinion of the morality of gambling—I am not opposed, in principle, any more than I oppose drinking alcohol, while recognizing the massive potential for abuse in both cases—a business had clearly provided a product that people want. Which is another way of saying that it had created wealth. And it had created jobs in a state where unemployment remains higher than the national average, and is actually climbing.
And yet once is forced to admit: we’re talking about a tightly controlled and compromised sort of dynamism. A casino in the mountains is an attraction because there is nothing like it for hundreds of miles. The thing it supplies—legal gambling—appears to be in high demand because state laws have created an artificial scarcity.
Listen to Adam Davidson of NPR’s Planet Money, writing about a possible casino venture in the Catskills region of New York:
Whatever you think of gambling, its regulations are mesmerizing. Gambling is outlawed in one way or another in all 50 states, but almost all — except Hawaii (surprisingly) and Utah (less so) — have exceptions. Most offer state-run lotteries. Thirty allow Indian casinos. Seventeen have full-scale non-Indian casinos (New York and Massachusetts are poised to join that group.) In each case, government officials limit the number of casinos and determine where they will be located.
Economically speaking, these anticasino regulations are the single greatest profit generator for casino operators. By limiting the number and location, and therefore artificially keeping the market underserved, governments essentially guarantee outsize profits for those in business. (The New York City Taxi and Limousine Commission, which limits cab licenses, ensures a similar regulatory oligopoly, as do many state liquor-distribution regulators.) If there were unlimited licenses, each casino operator would have to compete — like every restaurant or movie theater — with all the others.
We actually have some idea how casinos fare when they’re forced to operate in something more like a free-market environment: and it’s the aforementioned example of Atlantic City. Where once it shared a duopoly over casino gambling with the state of Nevada, it is now swarmed by competition in Connecticut, Pennsylvania, Delaware, and Maryland. The result is an ugly picture of declining revenue and layoffs. According to the Philadelphia Inquirer, Pennsylvania itself has found it’s not immune to the effects of increasing supply: the state “reported its first year-over-year decrease in gross slots revenue in June—down nearly 2.0 percent, from $2.48 billion to $2.43 billion.”
The incremental ramp-up of casino gambling has lent the industry the benefit of novelty and curiosity. But as they become more commonplace, the novelty will wear off—and with it, casinos’ ability to generate new jobs and wealth and government revenue.