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Gambling: A sure thing?

An in-depth look at Ninth District gambling, from state lotteries to Indian casinos to Internet gambling.

March 1, 2003


Douglas Clement Editor, The Region
Gambling: A sure thing?

All life is a gamble. From the crapshoot that sets your genetic code to the wheel of fortune (or misfortune) that is daily existence, being alive involves uncertain outcomes. Most of us are risk-averse and go to great lengths to diminish insecurity. We take vitamins and avoid dark alleys to improve our life chances. We spend thousands of dollars each year on health, home and car insurance.

But we also gamble with our money—in fact, a lot of our money. We enter raffles, join football pools, purchase lottery tickets, bet on horses and play at casinos. We buy risk—for fun and fortune. If we're honest with ourselves, we know not only that we're going to lose most of the time, but that our total gains from occasional wins aren't likely to exceed our cumulative losses. (Otherwise, there wouldn't be a gambling industry.) But every time, we're hoping to beat the odds. And more important in a financial sense is the simple fact that for many people, gambling is entertainment—as enjoyable (or more so) as going to a concert or watching TV.

Over the last 30 years, this slim hope of riches and zealous pursuit of pleasure have led to geometric growth in expenditures on gambling in the United States and the Ninth District. Just one example: Before Michigan began its lottery in 1972, not a single district dollar was spent on state lottery tickets. Now, all six states have adopted lotteries—North Dakotans just voted for theirs in November—and we spend upwards of $1.3 billion a year on them. And as an institution, gambling has shifted dramatically from a cultural pariah linked with underworld crime and dubious morality to a socially acceptable, government-sanctioned and corporate-managed form of entertainment.

In this fedgazette, we take a look at gambling in the Ninth District, a region with a wide range in per capita gambling expenditure and in types of gambling pursued. And while a host of political, social and economic issues could be addressed, we focus on just a few: Do state lotteries really generate big tax revenues, as often assumed? What about other forms of state-sanctioned gambling? And Indian casinos: They can't be taxed by state or federal governments, but they do generate both benefits and costs. Why is the debate that surrounds them so often off the mark? And finally, Internet gambling: What are policymakers doing to address what experts say is the fastest-growing segment of gambling expenditure?

Douglas Clement
Editor, The Region

Douglas Clement was a managing editor at the Minneapolis Fed, where he wrote about research conducted by economists and other scholars associated with the Minneapolis Fed and interviewed prominent economists.