Casinos and Crime

Earl Grinols and David Mustard are economists and, like a lot of people, intrigued by both casinos and crime. In their case, they were especially curious about whether the first causes the second. It does, according to their study. Eight percent of crime occurring in counties that have casinos results from the legalized gambling. In strictly financial terms—which are the ones they’re comfortable with as economists—the cost of casino-caused crime is about $65 per adult per year in those counties. [1]

When casinos come to town, the following specific crimes increase:

Robbery (in all three major categories: of individuals, of their homes, of their cars)

Aggravated assault

Rape

The crimes also increased to some extent in neighboring counties.

Situation: A casino regular runs out of money after a string of bad cards. She coasts out to the street and drops her purse in front of an out-of-towner. When the chivalrous guy bends over to pick it up for her, she picks his back pocket. With the $100 stolen from the wallet, she heads back into the casino, spends $40 on hard liquor, loses the rest at the roulette table, and goes home. She wakes up alone, though some underwear she finds on her floor makes her think she probably didn’t start the night that way. She can’t remember.

Based on the case study entitled “Casinos and Crime” answer the following questions:

1. In most casino states and counties, laws protect owners from liability claims arising from problems caused by gambling. In ethical terms, however, if you’re the sole proprietor of the casino, do you feel any responsibility for this episode? Why or why not? If you feel any responsibility, to whom would it be? What could you do to set things right?

2. You’re an equal partner in a nonprofit organization that runs the casino to support the cause of building schools for children in impoverished sections of Peru. You spend a few months every year down there building schools and giving free English-language classes. In ethical terms (and regardless of what the law allows), do you believe anyone involved in this episode should be able to sue you personally for their suffering? Why or why not?

3. Say that the casino under discussion in this set of questions is the MGM Grand Hotel and Casino in Las Vegas, which is owned by a large, public corporation. You have five shares of stock inherited a few years ago when a relative died. You are legally protected from liability claims. In ethical terms, however, do you believe that anyone involved in this episode should be able to sue you personally—or just plain blame you—for their suffering? Why or why not?

4. Pigouvian taxes (named after economist Arthur Pigou, a pioneer in the theory of externalities) attempt to correct externalities—and so formalize a corporate social responsibility—by levying a tax equal to the costs of the externality to society. The casino, in other words, that causes crime and other problems costing society, say, $1 million should pay a $1 million tax. In terms of casinos, would such a tax more or less satisfy any ethical claim that could be made against them for the social problems they cause? Why or why not?