Monday, June 30, 2014

Online Gambling

Good article about Online Gambling.  Here is an excerpt: IGAMING DEVELOPMENTS – CHRIS CHRISTIE AND SHELDON ADELSON


The news out of New Jersey hasn’t been stellar of late, and Chris Christie is taking the heat for it. He famously, or rather infamously, predicted last May that New Jersey would earn $180M a year from a 15% internet gambling tax. He ended up with only $12M, about 7% of what he expected. If Christie had understood basic economics, he wouldn’t have made such a prediction. But Christie doesn’t understand basic economics, just like most politicians and government bureaucrats who make their living interfering with the economy.

iGaming Developments - Chris Christie and Sheldon AdelsonThe first crucial thing to grasp about the gambling industry is that it is not productive on net, meaning it does not produce tangible wealth. Rather it is essentially consumptive of wealth. This is not to badmouth gambling, but just to explain the nature of the industry in that it is a consumer industry. Producer industries are farming, construction, technology, that sort of thing. It’s the same with the restaurant industry, supermarkets, and the entire entertainment industry. These are consumer services that consume wealth, not produce it. The only thing gambling produces on net is consumer satisfaction, which is not tangible wealth.

Understanding that, Christie’s woes stem from the fact that the only way a consumer entertainment industry can bring in net revenue to a given territory is by attracting foreign wealth from outside its jurisdiction. Otherwise you are only dealing with the same pot of money, and just dividing it differently between industries.

The reason Nevada and Atlantic City earn money for their state governments is not because gambling in those states magically increases revenue from within. It is because Las Vegas and Atlantic City attract capital from areas outside of Nevada and New Jersey, and a percentage of that capital goes to tax revenue. If theoretically Nevada and New Jersey were to outlaw gambling for non-Nevada and New Jersey residents, there would be no net gain from the gaming industry in those states.


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