Why Casino Gambling Is a Bad Bet for Israel

The economic case for how Eilat and the tourism industry would benefit is dubious, but the real reason to shun gambling is it’s a plain sleazy business.

None other than Israel's premier has been pushing to allow casinos to arise in Eilat, though Israeli law prohibits gambling except through the national lottery and Toto sports betting organization. Allowing in casinos won't save Eilat or help Israel in the long run.
Bloomberg

It’s not that economics and ethics are opposites. They just live in different worlds.

Here’s case in point. In America, there has been a long-running controversy about whether to install safety belts in school buses. Since they became mandatory in cars almost 50 years ago, they have saved countless lives. The cost of installing belts in a school bus is just a few thousand dollars per bus so why should parents risk their children’s lives day after day? “The irrefutable fact is that every child’s life saved by a seatbelt is well worth the cost,” was one U.S. senator’s contribution to the debate last year, with a few snide remarks about profits coming first. As ethical issues go, it seems simple enough: How can a manufacturer have the gall to build a bus without one?

Here’s the answer. America’s 444,000 school buses carry 24 million children to school and back every year, travelling 4.3 billion miles in the process, yet only six children on average die every year in school bus accidents. One study done in Alabama estimated that the cost of each life saved by installing belts would be work out to as much as $38 million because only one person dies in a school bus accident in the state every 10 years.

It sounds crass – private greed versus public good – but society makes those kinds of decisions every day, although we prefer not to think of it them that way. Morally, many would say medical care should be free and immediately available to everyone. Economically we know it’s not feasible, so access to doctors and medicine is allocated by price and/or waiting lists.  Morally, it might be correct for the government to seek perfect income equality, but economically, we know that it would destroy the incentive for people to work hard.

The two worlds of economics and ethics are on a collision course here in Israel now. The prime minster has again been promoting the idea of allowing casinos in Israel, or more specifically in the resort city of Eilat, and last week tasked a government committee to explore the idea.

A sin-and-atonement package tour?

At least on the surface, the economic case for casinos is good. Gambling – or gaming, as the industry prefers to call itself – is a big business. Even in a bad year like 2015, casinos around the world took in $488 billion from punters (after subtracting for payouts). With nothing more than a change in law and a few tens of millions to build and equip a few casinos, Israel could get a piece of the action. For Eilat, there would not only be the winnings the casinos take in, it would mean more people staying at hotels, dining out, shopping and maybe even taking the time to visit the rest of the country. That spells more business, jobs and, for the government, tax revenues.

In fact, the economic case for casinos in Eilat is probably weaker than its supporters make it out to be. Casinos do best when they are part of a bigger holiday package that enables tourists not just to empty their wallets at slot machines but eat out, go to a show and do some shopping – all of which Eilat has to offer, if not quite on the level of Las Vegas or even Macau.

One of Eilat's hotel strips.
Mori Chen

But the other thing casinos need to thrive is no competition, which is how a desert backwater like Las Vegas originally turned itself into the most-visited place on the planet. Eilat wouldn't be alone: competition is in place already and more is on the way.

Europe, which is supposed to supply Eilat with tourist/gamblers, has its own casinos, as do Greece, Egypt and Lebanon, Eilat’s main competitors as a getaway destination for foreign tourists. Meanwhile, Cyprus is moving ahead with plans to develop its own casino resort and even Jordan is talking about it. It’s not clear how Eilat would differentiate itself in this crowded market, except may be to offer a sin-and-atonement package: Three days of poker in Eilat and three days of prayer in Jerusalem, or better yet the other way around to plead for heavenly favor before you hit the slots.

In all events, it’s not as if Israel is desperate to create jobs. The economy is generating them at a remarkable pace and unemployment is at its lowest in decades. Tourism is in the doldrums, but that’s not because Israel doesn’t offer enough attractions but because of war, terrorism and high prices. Casinos don’t solve any of those problems.

Still, the economists can still argue that even in the worst-case scenario, Eilat and Israeli tourism will be better off because however few they may be, more people will come with casinos than without. But the real case against casinos is the moral one.

The immoral effects

There’s what you might call the immoral effects, namely that casino gambling tends to bring with it petty crime and organized crime; also, it encourages gambling addiction (addictive drugs and gambling rewire our neural circuits in similar ways, according to Scientific American) and with it, a host a social ills like personal bankruptcies, divorces and the like.

The casino industry and some researchers might argue that the evidence for this is not overwhelming, and any case, that’s the price you pay for creating jobs. People will gamble illegally anyhow, so why not at least bring it out into the open and collect some taxes in the process. In any case, Israel sanctions gambling through its state-run lottery Mifal Hapayis and its Toto sports-betting agency.

But there is a difference. The take from Mifal Hapayis and Toto goes the state and is spent on building schools, community centers and other things for the public good. Casino winnings go to the operators.

A demolition derby organized by the Malta Motor Sports Association: Such events could arguably be called entertainment. Casino gambling cannot. (The picture shows three cars in horrible shape still being driven).
Reuters

 You could argue that casino gambling just another form of entertainment, no different than a night at the opera or tickets to a demolition derby. But the case for that is pretty dubious: Almost no one would pay for the right to play a round of poker or watch a slot machine spin for hours. People pay because they fantasize – or worse, are addicted to the idea - they’ll make lots back. But the reality is that casino gambling is little more than a massive transfer of money via a system stacked against the players.

In short, casino gambling is at its core a sleazy business. Whatever social value it has as a down-market form of entertainment is more than offset by the social ills it brings with it.  Israel isn’t desperate enough economically to pay the price. We can afford in this case to do the right thing.