Playing for Money

The opponents of gambling aren't putting all their cards on the table.

In late October, the Los Angeles vice squad swooped down on the Bowl Weevils, a bowling team of five housewives, and charged the women with illegal activity: wagering a total pot of $15.50 on their games. Why does a state that spends $4.4 million a year to promote its lottery continue to outlaw even such innocuous forms of gambling?

More often than not, support for gambling restrictions comes less from high-minded moralists than from potential competitors. In Florida, opponents of the liberalization of gambling laws include Disney World and even parimutuel betting operations. Opposition to legalized parimutuel gambling in Texas comes from neighboring states that already allow such betting. At stake is a significant amount of money. In the United States, outlays on commercial gambling represent about 2 percent of personal income, a figure comparable to the amount spent on restaurant meals and beverages.

It's nothing new to find self-interested lobbying behind gambling restrictions. In 1388 Richard II secured the passage of a statute requiring people to buy items necessary for the martial arts and to stop spending money on "football, casting of stone, and other such importune games." About a century and a half later, Henry VIII passed a law condemning gambling on the grounds that it diminished military ability, since people used their spare time for gaming rather than archery. Both laws were enacted in response to petitions from the bowyers, fletchers, stringers, and arrowhead makers—the military lobby of the time.

Although the notion of gaming as a threat to military preparedness is no longer used to justify prohibition, other old ideas still cloak the self-interest of groups threatened by competition from gambling. In antiquity, during the 16th and 17th centuries, and well into the 20th century, the clergy deplored gambling on the grounds that a belief in chance is detrimental to mental health—which could, however, be improved by a belief in Providence. Rituals of hope, they said, must focus on the church, not on casino tables, lottery outlets, pubs, dancing halls, or any other diversions from religion. (Today, of course, most states that outlaw other forms of gambling do allow church-sponsored Bingo.)

In the 1920s the New Jersey Chamber of Commerce offered a two-pronged explanation for its opposition to gambling. First of all, the chamber said, retailers and established sources of entertainment such as movie theaters lose business during the racing season. Also, it claimed, petty crimes "increase enormously." The second complaint, about a phenomenon associated with any kind of tourism, is understandable only when viewed in light of the first.

A less blatantly self-interested argument, that gambling hurts productivity, may make a comeback as American economic performance slips relative to Japan's. Under similar circumstances, the argument made significant headway in Britain around the turn of the century. With Britain's productivity, competitiveness, and education falling behind those of the Americans and the Germans, the most pressing question was how to restore the nation to its former glory. Prohibiting gambling was perceived as a step in that direction, since, some claimed, it would make the poor work harder and encourage them to invest their money in British industry rather than "waste" it on betting.

The 1906 Street Betting Act, which stayed on the books until the 1960s, did not solve any of Britain's problems. Called by later critics a "class law," it allowed betting on horses at the racetracks, which were frequented by the rich, but prohibited the off-course betting enjoyed by the working classes. Ironically, the law was passed with the support of members of the Labour Party. They thought that if the poor spent their time on drinking, gambling, and reading racing papers, their instruction in the benefits of socialism would be slowed down. If gambling were prohibited, the poorer people's willingness to turn to politics would be greater.

The labor leaders' opinion was probably shaped by the fact that the demand for tips and racing news had played a large part in the development of the popular press—half the evening papers started in the 1870s and ' 80s had a close association with sports and gambling. To think that if betting were prohibited the working class would spend its time reading or listening to political treatises may sound improbable to us today. Yet labor leaders apparently acted on the idea.

And, like many other gambling prohibitions throughout history, the law was hopelessly ineffective. The working classes continued to gamble, and illegal bookmaking flourished. The bookmakers bribed the police and enforced gambling contracts with the help of protection rackets and gang violence. The prohibition resulted in resentment among the working classes and contempt for authority, leading the press to declare that by the 1920s confidence in the police was at its lowest ebb in 50 years.

Another popular argument against gambling is that betting hurts the poor. (This objection is sometimes expressed by officials of governments that raise money through lotteries.) In 1793 the revolutionary government in France abolished all lotteries on the grounds that they attract those who can least afford to lose money on them. Six years later, the Loterie Nationale was born. The reason for the reversal was that, deprived of French lotteries, people played foreign ones illegally, so the government lost currency as well as revenue.

In the United States, state governments have run lotteries since 1964, when New Hampshire started a sweepstakes to finance local education. Since then 31 states have followed suit, using what was once considered a great social evil to raise money for noble causes such as education and services for senior citizens. The state lotteries have created new interest groups opposing competition in the gambling industry. The bureaucrats who run the lottery operations, the politicians who spend the money they raise (some $5 billion net in 1988), and the constituents who benefit from the spending all have a strong incentive to resist liberalization of gambling laws. Supporters of state lotteries apparently do not care about the impact of gambling on the poor, who disproportionately play the lotteries as well as illegal "numbers" games. Certainly no concern for poor or compulsive gamblers is evident in the feverish advertising of the state lotteries.

Instead, advocates justify the government monopoly on the grounds that, if the state did not control it, gambling would be dominated by the Mafia and riddled with fraud. History shows that gambling has indeed been associated with crime and violence—but only because the industry was illegal. And while criminal elements were among the first businesspeople to open gambling operations when some games were legalized, there was nothing sinister about this: After all, they were the only ones with the necessary knowledge and experience.

Moreover, since for many games both the entrepreneurs and the employees came from the poorest strata of the population, their initiative should have been encouraged. In Britain, mass betting was the most successful example of working-class self-help in the modem era.

As for fraud, history indicates that legalization is also the best antidote. In France before the Revolution, baccarat was played in illegal gaming halls with a great deal of cheating. Following the advice of de Sartine, chief of the French Sûreté, the government legalized baccarat, and there was no complaint of cheating thereafter.

In addition to the groups that fear competition, corrupt police officers have benefitted from restrictions on gambling. During the 1960s, New York's legislature passed a series of tough new antigambling laws that increased penalties and made convictions easier. The results: Few convictions were obtained, the association between gambling and organized crime grew stronger, and the Knapp Commission found that gamblers' money was the main source of police bribes. In a given instance, a typical officer on the gambling squad might receive $300 to $1,500 for himself and similar amounts for his superiors. These revelations led New York City's police commissioner to stop enforcing certain aspects of the gambling laws. He argued that a relaxation of enforcement would not increase the amount of gambling but would diminish corruption, improve police morale, increase public confidence, and allow resources to be focused on violent crimes.

Despite the historical lesson that prohibition either causes or aggravates the problems associated with gambling, the trend toward liberalization has been slowed by objections from parties whose motives are often suspect. Even when opponents of gambling seem sincere, their arguments are recycled from centuries ago; they have been repeated so often that familiarity with them passes for evidence. The power of delusions can be strong, especially when the delusions serve one's interest.

Reuven Brenner is an economics professor at the University of Montreal and a member of the Centre de Recherche et Developpement en Economique. His most recent book, co-authored by Gabrielle Brenner, is Gambling and Speculation, published by Cambridge University Press.