Vice Squad
Wednesday, November 26, 2003
Gambling Cascade

One of the chief factors that lies behind the spread of legal gambling
in the US in the past 40 years has been competition among
jurisdictions. When a state sees that many of its citizens are
going to a neighboring state to gamble, its incentive to get
a piece of the tax action grows. And even when a state already
permits some forms of legal gambling, competitive pressure can
promote further expansion/liberalization. Delaware might be feeling
some of that pressure right now, according to this post at
Slacktivist, as Maryland and Pennsylvania look to gambling revenues
to help make up for state budget shortfalls.

The mobility of people and/or their vice expenditures presents serious
complications for analyses of vice policy. Nevada has relied upon vice
tourism for years, and the Netherlands is also a vice destination. As
vice consumption (and production) generally comes with associated
externalities, the prospect of attracting vice tourists dissuades some
potential liberalizations. But if a liberalizing jurisdiction demonstrates
that the externalities are manageable, then it might find that its
comparative advantage in providing vice is short-lived, as neighboring
jurisdictions liberalize. In the case of gambling in the US, the moral taint
has declined substantially in recent decades, and the forces of positive
feedback are in the ascendant. But as Jerome Skolnick has pointed out,
the moral ambiguity of vice means that in the future the pendulum is
likely to swing in the opposite direction (see this early Vice Squad post).
When that happens, there can be positive feedback in strengthening
controls, because as one jurisdiction regulates more strictly, neighboring
areas will see increased vice tourism, and the increased externalities (or
perceived moral taint) that comes with it.


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