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Casinos, Crime, And Community Costs
Original Article By: Earl L. Grinols and David B. Mustard
The Review of Economics and Statistics Vol 88 No 1 (Feb., 2006)
Major Topic: Economics
Minor Topic: Politics

Précis:

         Before 1978 the only place in the US to host casinos was Nevada. By 1990 all Americans lived with relatively easy access. This expansion provides ideal conditions for a country wide experiment on the effects of casinos on crime by comparing crime in casino hosting counties to crime in adjacent non-hosting counties.

         Understanding the link between crime and casinos is important for four reasons: 1) the casino industry has grown hugely; 2) it has grown to be a major lobbying force; 3) the industry generates huge externalities costs (on the order of $40 Billion annually in the US); and lastly 4) there has been a lack of objective and convincing research on the casino-crime relationship.

         The lack in good research is due to six reasons. Up to the date of this paper, 1) no one has studied the intertemporal effects of casinos on crime; 2) existing research has focused in on small samples; 3) some studies looked at arrests instead of crime rates; 4) many studies are guilty of variable bias because they have not had proper control variables; 5) the theoretical links and explanations have been shunned; and finally 6) many studies are sponsored and paid for by interested parties. The authors have overcome or avoided these six problem reasons.

         The authors' conclusion is: "...that crime increases over time in casino counties, and that casinos do not just shift crime from neighboring regions, but create crime. We estimate the crime-related social costs in casino counties at approximately $75 dollars per adult per year" in 2003 dollars. (an adult is someone 20 years and older).

         The data looks at all 3165 US counties from 1977 to 1996 and compares crime levels using the FBI's Uniform Crime Report on a county by county basis and on a crime by crime basis. Then the authors compare the crime rates from the time a casino opened in its home county and in non-hosting counties.

         During the time period crime generally went down across the USA including in some casino-hosting counties. This general trend has been used to delink casinos and crime. Therefore a better study is to determine the relative decline of crime in casino and non-casino hosting counties. The authors' conclusion is: "...crime rates in counties that opened casinos during our sample increased relative to crime rates in noncasino counties." In specifics: the crime level drop was three times larger in non-casino hosting counties than in hosting counties.

         A pattern emerged: when a casino opened crime would decrease slightly. Within 2 to 3 years crime returned to a pre-casino hosting level. By the fifth year after a casino opened all types of crime counted (robbery, aggravated assaults, auto theft, burglary, larceny, rape and murder) were higher than pre-hosting rates in spite of a country wide general downturn in crime rates.

         This pattern can be explained by noting that there are two temporary crime reducing forces at work (improved legal earning opportunities in 1) more jobs at the casino and 2) in business associated with the construction of the casino) which are overtaken by 5 delayed and stronger growing forces that work to increase crime. The five forces are: 1) the draining of the local economy which starts after the casino opens; it takes time for the local business to exhaust their resources; 2) lowered information cost to some crimes (for example potential victims like big winners and tourists are more easily spotted); 3) the creation of problem and pathological gamblers is a delayed phenomena; most studies show 2 to 3 years for a problem gambler to develop, exhaust his/her resources and resort to crime. 4) attraction, organization and expansion of crime syndicates' operations take time; 5) casinos increase the demand for unskilled and lower income employees which may alter the make up of residents in the community towards those more likely to engage in crime.

         For each crime category the authors give a set of predictions that any new casino hosting county will experience based on the past data they have collected. First for violent crime: for aggravated assault the crime rate dipped a little bit in the first and second year then rose above the start date crime rate after the third year and stayed up beyond the third year. For rape there were statistically significant changes until the third year with increasingly significant increases into the fourth and fifth year after a casino opened. Robbery trended up immediately in the first year that a casino opened and every one of the five years. Murder: casinos seem to affect murder rates the least; they go up but not by a statistically significant amount.

         Secondly for property crime: larceny reached pre-casino levels two years after the opening of a casino and continued up after that. Burglary dipped until the fourth year but not by a statistically significant amount; then it shot up by the fifth year. In the fifth year burglary was statistically significantly greater. Auto theft seems different entirely. Auto theft was in most cases rising in statistically significant amounts even before a casino opened. However after 1991 auto theft began to decrease (likely due to the introduction of Lojack an electronic auto tracking system); during this time non-casino counties experienced a decline in auto theft rates that casino hosting counties did not.

         The authors claim that a look at their data and that of others substantiates the claim that casinos create crime more than they attract crime. The social cost to having a casino in an American county was $75 per adult however this does not count the cost of lost productivity, social service and welfare nor the increase in crime in neighbouring counties.

        

Added on: 2013-12-19 13:58:30
Précis by: James Jeff McLaren
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