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Analyze The Impacts Of Gambling

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Gambling, as an activity can be considered as a social evil as it does not cause any attrition to the overall welfare of the residents of a society. The report tries to analyze the impacts of gambling and the implications of its over consumption in an economic perspective. Gambling can be done in different ways, like lotteries, using poker machines, table games or scratches. In the previous year, it has been observed from the recent statistics that the residents of Australia have been involved extensively in the above-mentioned practices of gambling. The most extensively used mode of gambling were the usages of the electronic machines, which can be seen as the predominant source of revenue generated from gambling as a whole in the country. With around 198,300 machines in use across the nation, in 2009, there was a revenue generation of a strikingly huge amount of $59,700 from gambling in the country. Apart from the revenues from gambling, the revenues generated from the taxes and duties on this activity are one of the significant sources of revenue for the country and create an employment of 35000 people. The report tries to discuss the socio-economic costs of this activity and tries to emphasize on the policies, which helps in reduction of this activity with regards to the usage of the poker machines (Philander, 2013).

Gambling: Social and Economic Costs:

Gambling, as an activity, is mainly used for the recreational purposes by the residents of Australia. According to the stakeholders of the industry, the activity is beneficial socially to the residents as through the gambling activity they can take out time for recreation from their otherwise stressful life. They also state that the activity helps in offering intangible advantages to the communities, including improvement in the elderly citizens’ quality of life and forming a high cohesion in the environment. However, there can be the presence of costs and benefits which cannot be tangibly gauged by the individuals while doing this, which falls in the social costs of gambling. This is related to the externalities that can be generated In the society as a whole from the gambling activities (Thomas et al., 2012).

The social and the economic costs of the gambling activities in this context are discussed below:

  • Crime cost- The cost of crime in related to incarceration spending and involvement of the police can directly and indirectly cost around 152 million and 174 million.
  • Business/ Employment Costs- Gambling may lead to loss of jobs or overall productivity and costs incurred by the employers in this process.
  • Bankruptcy- This involved the social cost in the form of legal expenses.
  • Cost of social service- This cost is incurred in relation to the loss of jobs, productivity and the gambling behavioral issues minimization treatments. The cost can indirectly go up to 174 million.
  • Family cost- Gambling can lead to upsurge in the domestic violence, unsettling behavior and separation in marital relationships, thereby giving rise to a cost in relation to the family dynamics (Wu & Chen, 2015).
  • Lobbying costs- The resources used in gambling have an opportunity cost as they could have used for other useful and productive purposes contributing to the welfare of the society.

Gambling: Effects on economic efficiency:

Gambling is such an activity that its addiction leads to a pathological consumption trend thereby leading to an uncontrollable desire to gamble. This soon becomes an obsession and thereby the life of the individual is hugely affected. The trend of over-consumption leads to the unfair utilization of time and money of the concerned individuals. In this case, 1.4 million of the residents are found to be involved in this activity, which also has negative implication on the terms of trade of Australia.

There can be direct as well as indirect effects of gambling activities on the economy of Australia. The direct effects of gambling leads to net addition of resources in the community, as the casinos can be seen to have implications on the income and job scenarios of the country. These indirect benefits in the income and employment scenarios can be related to the commodities provision to the patrons of gambling. The indirect effects can be seen in this context when the income of the employees leads to increase in the expenditures, thereby creating even more employment scopes. To estimate the indirect effects of this activity, the input-output model is used, which evaluates the impacts of this activity on the efficiency and development of the Australian economy. The model deals with the dynamics of output of one industry as input to others and deals with the effects of the activities of one industry on the demand and supply sides. The model also takes into account the multiplier effects, which causes cyclical and rippling implications on the economy. The model can take into account the negative externalities of over-consumption of this activity, which leads to an inefficient equilibrium differing from that of the socially optimum one. As the marginal private benefits of the individuals directly participating is bigger than the marginal social benefit of the economy as a whole, there are spillover effects, which can be shown with the help of the following diagram:

The demand for gambling is inelastic to changes in price as it falls under the category of addiction. This implies that the imposition of taxes or duties on the activities of gambling does not cause much difference in the demand for gambling. This may in turn lead to black marketing of the activity thereby proving that taxations do not lead to an efficient solution to the problem (Gu, Li & Tam, 2013).

Policies to reduce the problem:

  1. a) Pigouvian tax implementation- This kind of tax is imposed in the activities which is related to negative externalities in the economy. In this case, this kind of tax imposition can help in increasing the efficiency in the market as the negative externality can be ruled out by imposing a Pigouvian tax of the same amount. The proper resource allocation can help in decreasing the problem of unbalanced growth too. This can lead to creation of the dead-weight loss on part of the government, which can lead to decrease in the gambling activities in the market (MacKenzie & Ohndorf, 2016).
  2. b) Poker machines quota- The game played in poker machines does not require any skill and is specifically game of chance. These machines have RTP by 90% in Australia As per the recent reports; Australians annually lose $12 billion due to the usage of the poker machines. Therefore, imposition of restrictive quota on the poker achiness can help in curbing the negative externalities.
  3. c) Non-price policy implementations:
  4. i) The strategies of intervention of families to help in curbing the gambling activities of an individual can prove to be beneficial.
  5. ii) The program of Research of National Gambling, an all-state funded program, if properly implemented can prove to be effective in reducing the problems.

iii) The country has implemented various awareness generation programs, including revelations of the myths that have been prevailing in the economy of the country, which can also be effective in this cause.


From the above discussion, it can be asserted that there are various negative implications of the gambling activities on the overall welfare of the citizens of the country. With the consistently increasing influence of the same on the communities in the country, it is increasingly becoming mandatory on part of the regulatory and the governing bodies of the country to implement measures which can prove to be beneficial in curbing the gambling activities of the country. The negative externalities of gambling can be reduced by generation of awareness, imposition of Pigouvian tax, establishment of quotas on the poker machines and breaking of the myths prevailing among the citizens regarding the so-called benefits of the country.



Gu, X., Li, G., & Tam, P. S. (2013). Casino tourism, social cost and tax effects. International Gambling Studies, 13(2), 221-239.

MacKenzie, I. A., & Ohndorf, M. (2016). Coasean bargaining in the presence of Pigouvian taxation. Journal of Environmental Economics and Management, 75, 1-11.

Philander, K. S. (2013). A normative analysis of gambling tax policy. UNLV Gaming Research & Review Journal, 17(2), 2.

Thomas, S. L., Lewis, S., McLeod, C., & Haycock, J. (2012). ‘They are working every angle’. A qualitative study of Australian adults' attitudes towards, and interactions with, gambling industry marketing strategies. International Gambling Studies, 12(1), 111-127.

Wu, S. T., & Chen, Y. S. (2015). The social, economic, and environmental impacts of casino gambling on the residents of Macau and Singapore. Tourism Management, 48, 285-298.


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