Economist Andrew Russell explores the differences between community benefit and in-principle arguments for the existence of a legal gambling industry and why the latter is vital in winning over sentiment.
When I was corresponding with this publication’s Managing Editor Ben Blaschke, he made a remark I found quite intriguing. He said (paraphrasing) that Australian governments seemed ashamed of their casino resorts, despite their quality as tourism assets and their ability to attract international visitors. Why, he wondered, do Australia’s governments not actively promote Australia’s gambling sector as a tourist attraction?
When he asked that question, I immediately thought of Ayn Rand.
Why would a discussion about casinos, gambling regulation and tourism economics within present-day Australia remind me of a Russian-American novelist and philosopher who sold millions of books, scandalized the culturati and intelligentsia of mid-20th-century America, and died over 40 years ago?
The reason is that one of her arguments – that free-market economics had to be defended not on “community benefit” grounds but on in-principle grounds – is currently relevant. The Australian gambling industry is in the crosshairs of both societal disapproval and regulatory crypto-prohibitionism (despite the industry having greatly expanded over the past few years, with the government’s approval and encouragement at every stage).
Australia’s largest casino firm, Crown, is now owned by an American hedge fund, and its second largest, Star, is (at the time of writing) about to be bought by an American gambling conglomerate, thanks to the fallout from a money-laundering scandal. The social costs of community gambling remain a tense political issue, and greyhound racing is under severe scrutiny. It is not wrong to suggest that the Australian gambling industry is having its very existence challenged.
The relevance of Rand’s argument is easily established by analogy. Her argument for an in-principle defense of free markets was simple: the community benefits of free markets had already been proven by the historical record, and leading economists of her time had recently proven beyond any reasonable refute that the market mechanism was a necessity for an efficient and broadly prosperous economy. Yet despite that, the reigning cultural-intellectual leading lights of the West still persistently held onto the belief that Marxist social experiments were promising and admirable (and even to this day, despite professional and academic economists all having accepted the Mises-Hayek argument that the market mechanism is a practical necessity, and despite the fall of the Soviet Union, despite the killing fields of Pol Pot’s Cambodia, despite the mass impoverishment of oil-rich Venezuela under “Bolivarian Socialism”, the universities still churn out legions of miseducateds who swallow anti-market kool-aid).
The reason for this, she argued, is that necessary elements of free market economics – such as aspiration toward material enrichment, the acknowledgment and protection of property rights and the profit motive – trigger a lot of moral squeamishness in our society.
After all, whilst mass prosperity has mostly been achieved in the West, it still has critics who decry it as “mindless consumerism” and scream “how dare you!” at us for preferring material comfort over Gaia-sanctified poverty. Members of the Western left habitually compare property rights to a spoiled child not wanting to share his toys. As for the profit motive, “profit” is practically a swear word to many and triggers howls of “greed!” from that poverty-fetishist on the Petrine Throne. Free markets had already proven, beyond refute, their benefits to the community, and yet people were (and still are) continuing to join movements promising to abolish profit and property and embracing policies that would inevitably destroy prosperity, too. Clearly, the community benefit argument for free markets wasn’t (and still isn’t) sufficient to win the debate. As such, Rand argued that free markets needed to be defended in principle, that property rights needed to be defended as necessary goods and that the profit motive needed to be defended as morally acceptable.
The Australian gambling industry’s situation is similar. The community benefit of having it – including not only the additional revenues for the public hospitals and the donations to philanthropic causes and the employment provided by the industry, but also the value to both Australians and visitors to Australia provided by gambling entertainment and glamorous integrated resorts – is simply beyond refute. Yes, problem gambling exists, but as shown at the Regulating the Game 2025 conference in Sydney in March, it is the gambling industry itself that is leading the fight against it. To put it bluntly, you’d have to be completely uninformed or intellectually dishonest to believe that the costs of legal gambling outweigh the benefits, and the economic analyses make this absolutely clear (this is true across non-Australian jurisdictions too, see for example Douglas Walker’s 2007 book The Economics of Casino Gambling).
Yet despite the industry’s easily-demonstrable community benefit, the screws get tighter, the regulations get tougher, the taxes get higher and the scapegoating of industry by government intensifies. And these tougher regulations often penalize not just the gambling provider, but the gamblers themselves (see Death by a Thousand Cuts Pt 2 in the March edition of IAG). Why does this continue to happen?
The answer is moral squeamishness over gambling itself. The industry has already proven its community benefit, therefore it is clear that the industry’s “Social License to Operate” cannot be fully defended without morally defending the activity of gambling itself and unapologetically asserting the right of adults to engage in it should they choose. If gambling is considered sin – by the government and/or by the voters and/or by even the gamblers themselves – the industry and the gamblers themselves will continue to accept economically-unjustifiable punitive regulation and taxation. Gamblers and industry will meekly point to the charity donations made by big casino firms, as if buying an indulgence. Gamblers and industry will apologetically point to the animal welfare initiatives of horseracing and greyhound racing yet forget that the enemies of gambling don’t really care about animal welfare anyway. As gambling economist Khalil Philander wrote in a 2013 paper on the subject of gambling taxation, the value judgment of “gambling as sinful” has always influenced policy towards the sector. It is time this value judgment is forcefully rejected and purged from policymaking.
The gambling industry, gamblers themselves and non-gamblers who advocate for the right of people to gamble, need to stop asking for forgiveness whilst on their knees, and proudly stand up to defend gambling and the gambling industry on principle. No, gambling by informed adults is not necessarily immoral. Yes, adults have a right to gamble and the government must respect that right. And an industry that provides individuals with the opportunity to exercise that right has its own right to exist. Such a defense is necessary to ensure the sector’s survival.
