Saturday, April 25, 2009

This is to add on to Uyen's post, on gambling and economics.

Negative externalities (Statistics)
  • 25% compulsive gamblers attempted suicide
  • 672000 college students are addicited
  • 35 million teens are addicted

Possible causes:

  • Convenience of online gambling
  • Teens treat online gambling as a game
  • Glamourisation of gambling in movies and television series (E.g Casino Royale)

Government legalising gambling:

  • Addiction -> inelastic demand
  • If it is still banned, there will be black markets and illegal gambling

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Social Marginal cost = Private Marginal Cost (PMC) + External Marginal Cost (EMC)

Private Marginal Cost:

  • Wages for workers
  • Land for building casinos and other gambling outlets (E.g Singapore Pools outlets and Singapore Turf Club)
  • Law enforcenment units and counselling for addicted gamblers

External Marginal Cost:

  • Rise in crime rates by gamblers, affect the safety of other Singaporeans
  • Affect investment as investors do not wish to set up factories/ businesses in a place with high crime rates.

Social costs is all of the above mentioned.

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Private Marginal benefit:

  • Increase in government revenue from taxation of casinos and Singapore Pools
  • More convenient to place bets for gamblers.
  • Prevent money lost to other countries when gamblers gamble overseas.

External Marginal benefit:

  • More jobs created for other Singaporeans.
  • Lower unemployment rate and possible effects due to unemployment.
  • Attract tourists to gamble here.
  • Attract investment in the gambling industry.

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Thus the government legalise gambling when marginal cost is lower then the marginal benefits.

Si Ying =D

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