The Regulation of Gambling minimising costs_ maximising benefits

Presentation to The Faculty of Law, University of West Bohemia in Pilsen, Prague By Prof Peter Collins University of Salford January 2009 PART ONE The Regulation of Gambling: minimising costs, maximising benefits Objectives • To explain why gambling is an industry which the public requires to be exceptionally vigorously regulated • To explore the consequences of this for maximising economic benefits • And minimising negative social impacts The principles of paternalism (Plato, Marx, Theocracies) Throughout most of human history it has seemed obvious to both theorists and practitioners of politics that: • Government should ensure that people live the best possible (most fulfilling) lives that they are capable of • Decisions about the common interest should be taken by those best qualified in terms of knowledge and virtue to do so, i.e. an elite of moral and political experts Paternalism and Gambling • Gambling is a vice which prevents people from living the best possible life they are capable of living • Therefore government should prevent or discourage people from gambling, regardless of whether non-gamblers are harmed The Principles of Political Liberalism (Locke, Voltaire, Adam Smith, US Founding Fathers, J.S. Mill) • The principle of equal liberty: governments should ensure that all individuals have the maximum amount of freedom to decide for themselves how to live their lives as is compatible with everyone else having the same amount of freedom • The only ground on which an individual’s freedom may be legitimately curtailed is to prevent harm to others but not to prevent harm to him/herself Liberalism and Gambling: Political Morality • Gambling is a form of recreation which people enjoy • It does not harm others even if it harms the gambler him/herself • Therefore government should allow people to gamble Liberalism and Gambling: Economic Morality • People should be free to spend their own time and their own money on goods and services of their own choosing, including gambling products and services • People should be free to use their own energies, talents and resources to sell goods and services including gambling services, and government should not interfere in transactions between willing buyers and willing sellers including the buying and selling of gambling opportunities, except to prevent the use of force and fraud The principle of democracy • Decisions affecting the common good which will be binding on all members of a community should be taken in accordance with the wishes of the majority of members in the community • This is achieved by compelling governments to conform their conduct to the demands of public opinion on pain of losing office in free elections in which all count for one and none for more than one Democracy and Gambling • In most modern societies, which contemplate liberalising gambling law there are some people who think gambling should be banned; others who think it should be treated like any other form of entertainment; and a majority who think its availability should be restricted The democratic consensus always rules out a free market because the demos/people: a) believes that excessive gambling harms others as well as the gambler b) accepts that addicts cannot exercise freedom of choice c) remains to a substantial extent paternalistic with respect to gambling But the democratic consensus also say that if people want to gamble the government should stop them and should make it possible to do so, albeit within the confines of greater than normal regulation • • The Root of the Democratic Consensus • Why has gambling been so widely accounted a vice and why do we still regulate its supply more vigorously than, say, alcohol? • The Sociobiology of Gambling The Democratic Consensus and Gambling Gambling must be regulated so as to minimise negative social impacts and maximise positive economic benefits Therefore: • We will have some new gambling but not too much • It must be located in venues which enhance rather than detract from the attractiveness of the area • It must deliver amenities and/or economic benefits to non-gamblers as well as gamblers • It must above all be regulated so as to minimise the risks of problem gambling What the Industry will tell you constitutes good policy • • • • To minimise problem gambling risks government should restrict supply and therefore competition. Therefore if government: Allows us to do what we want to do: sell our product in a free market Does not require us to do what you don’t want to do: e.g. pay high taxes Prevents our competitors from doing what they want to do: sell their products freely Require our competitors to do what they don’t want to do: pay high taxes Then we will make masses of money which is obviously what government exists to ensure Governments and gambling tax policy: The basic economics • Limiting the supply to prevent problem gambling risks enables higher prices to be charged and abnormal profits to be made • These abnormal profits could be returned to punters by regulating prices but • High prices are thought to discourage excessive gambling especially by the poor • Government would prefer to capture the abnormal profits to spend on popular public interest profits since gambling taxes are relatively little noticed and resented • Gambling taxes ought to be redistributive from richer to poorer not vice versa. Taxation options for government • The options: high gambling privilege taxes; auctions; beauty contests • Lotteries; betting; LPMs • Casinos: Beauty contests harness the creativity of the private sector to deliver maximum value to the public in the jurisdiction • Beauty contests enable operators to make exceptionally good profits if they can deliver more value to the general public for less cost than their competitors Dishonest Arguments about problem gambling? • Anti-gamblers whose objections are religious, moral or aesthetic • And existing businesses who don’t want competition Form an unholy alliance and claim: • that all additional gambling opportunities will lead to increased problem gambling and is therefore too much Dubious claims made by the unholy alliance • Problem gambling is very widespread: the incidence of false negatives should be stressed but not of false positives • The harm caused by problem gambling is vast, e.g. problem gamblers adversely affect the lives of on average of ten other people • The cost to the taxpayer far exceeds receipts by the exchequer NB. Anti-gamblers are often aided in these arguments by problem gambling service providers and researchers in pursuit of funds, status and a sense of moral superiority Honest Arguments about problem gambling • There is no way of deciding between the rights of nonproblem gamblers to exercise freedom of choice and the need to protect problem gamblers: it is a matter if judgment to which neither prohibition nor unfettered free markets are the answer • Education about gambling reduces the risks of increases in problem gambling • Location of continuous, rapid-action, high stakes forms of gambling should be in venues which inhibit impulse gambling • People should be able to, or even required to preset limits as a matter of ordinary consumer protection Conclusion • Gambling is a public private sector partnership in which both government and the industry have an interest in ensuring that the industry is both profitable and favourably regarded by the public • Well regulated, gambling has the capacity to deliver modest economic benefits to those most in need • Well regulated the harm that gambling does can be kept to a minimum, especially through education PART TWO Remote Gambling What is “remote” or “e-”gambling? “Any opportunity to participate in any form of gambling without those who place the bets and those who take them (i.e. the consumers and suppliers of gambling services) being in the same place” What forms of gambling can be delivered remotely • • • • • • Lotteries, incl those offered on cell phones Bingo Casino games like roulette and blackjack Virtual gambling machines Competitive games like poker Fixed odds betting on horses, sporting and other events like reality TV • Exchange betting • Spread betting • Prize competitions incl TV games like “Millionaire” i.e. everything that can be delivered on land can be delivered in cyberspace What are the vehicles of delivery? • • • • • Telephones Personal computers accessing the internet Interactive Television Mobile/Cell Phones Integrated devices offering telephony, internet access and television. Where do/will consumers consume? • At home • At work • Wherever they have some free time e.g. while waiting for public transport or to see a doctor • In internet cafes • In existing land-based gambling outlets • In purpose built gambling venues e.g. the internet sporting café. Where do/will suppliers supply • Wherever costs and regulatory burdens are lowest consistent with maximising profits through optimising combination of consumer spend and market share • Ideally, this means low tax jurisdictions with sensible but not onerous regulations which enhance public perceptions of the legitimacy and social responsibility of the industry • It also means jurisdictions which will keep out competition preferably by granting suppliers a monopoly Regulatory problems • Where does the gambling take place? • How do you tax it? • How do you ensure that the games are: crime-free and honest? • How do you ensure informed consent amongst consumers and minimise the risks of excessive gambling Why is the world of e-gambling in shambles? • Many governments have state monopolies on some or all of the commercial gambling which goes on in their jurisdiction • Many governments respond to prohibitionist pressure • Many governments want to attract e-gambling suppliers to locate in their jurisdiction • Land-based industries lobby for protection: the usual unholy alliance between big business and religious puritans, cp USA, Europe E-Gambling and Problem Gambling: The Negatives • Remote gambling is the most convenient form of gambling available wherever you are 24/7, permitting all forms of gambling for unlimited stakes and prizes, and therefore the most dangerous from the point of view of impulse gambling and excessive gambling • Extreme convenience of paying esp on telephone or TV rental accounts It is very hard to regulate so as to enforce the implementation of safeguards • There is no control of advertising • Problems of player identification, esp minors E-Gambling and Problem Gambling: the Positives • Every transaction is recorded so patterns of risky play are easily identified • Loss limiting facilities are easily introduced • Problem gambling education is easily delivered • Access to Responsible Gambling sites is only a click away • Counselling can also be delivered “remotely” How can e-gambling be controlled/regulated? • As with child pornography and using the internet to promote/facilitate terrorism, i.e. by raiding consumers’ homes • By criminalising ISPs (Italy) • By criminalising bankers (USA) • By international agreements – as with all other e-commerce What needs to happen in general • International agreement that this is not like child pornography • Recognise that prohibition does not work, leads to criminal control of the industry, and is morally offensive given that most people don’t either cause or suffer any trouble • Recognition that this is only part of the general problem of regulating (and taxing) e-commerce What needs to happen about problem gambling and e-gambling • Secure agreement about what it is appropriate and effective to do to minimise the harm caused by problem gambling • Use technology to tame technology by accentuating the positives of player-tracking, loss-limiting, e-consumer education and ecounselling etc • Stop vested interests, especially governments in the US and Europe, from lying about all this • Be alert to the wider civil liberties issues PART THREE Problem Gambling: Policy, Treatment and Prevention The Brief Invitation to: • Think about “Myths, Reality and Ethical Public Policy” in such a way as to • Contribute to “Solution-Focused Debate” Interpreted as invitation to reflect on • what we know and what we don’t know • what we should be doing in relation to minimising the incidence of, and harm caused by problem gambling Outline The Context - Peculiarities of the Gambling Business in relation to the problem gambling issue: • Psychological • Commercial • Political • Economic • Fiscal • Epistemological • Moral Implications for: • Policy • Treatment • Prevention In respect of minimising the incidence of, and harm caused by problem gambling Peculiarities of the Gambling Business (1): Psychological • What is being bought and sold: periods of a peculiar form of pleasure – Pascal on the psychology of gambling • The pleasure of playing (and sometimes winning) – like solitaire • The pleasure of fantasising – like soft financial pornography • The pleasure of simulated danger – like roller-coasters • The pleasures of social stimulation – like not sitting alone at home watching daytime TV • As with all pleasures there is the danger of habitual overindulgence (as with alcohol) but which, because unlimited sums of money may be involved, is potentially devastating – the issue of problem gambling Peculiarity of the Gambling Business (2) Political Context • Commercial Gambling is always a Partnership between Government and operators • In which both parties have an interest in profits and • Both parties have an interest in ensuring that the business enjoys broad public approval • Otherwise voters will demand banning or restrictions which damage profits and tax revenues • And this depends on the industry and government not being seen as negligent and exploitative in respect of problem gambling and problem gamblers Peculiarities of the Gambling Business (3): Economic When it is proposed to legalise gambling • Some people think we should treat gambling like any other pleasure product, e.g. chocolate, and allow adults to decide for themselves in a free market; • Others think gambling is wicked, dangerous, cretinising, subversive of the quality of life in communities and/or ugly and should be prohibited – all of which feature in what people mean by problem gambling • Between these extremes a majority position or democratic consensus emerges which says we should have some of this but not too much • Consequently there is never a free market in gambling services as there is in e.g. the sale of chocolate but always a restricted and highly regulated one • And the restrictions and regulations are mainly justified in relation to problem gambling Peculiarities of the Gambling Business (4): Commercial 1. Because the industry is highly regulated profitability depends on getting government to: • Allow you to do what you want to do • Not make you do things that you don’t want to do • Prevent your competitors from doing what they want to do All this depends mainly on how your business is perceived in relation to problem gambling 2. Because of the problem-gambling-based “democratic consensus” competition will always be restricted. Consequently: • licences to sell commercial gambling products and services will always be scarce and therefore very valuable • And, since demand for the product does not greatly decrease if the price is raised – like cigarettes and alcohol but not like soft drinks or vegetables – abnormally large profits are potentially available to the holders of monopoly or oligopoly licences by offering worse odds or higher minimum bets Peculiarities of the Gambling Business (5): Fiscal • In a democracy government behaviour is determined by the need to win votes either by doing things which are popular in themselves or by raising relatively unresented taxes in order to pay for public services which will make them popular • Gambling taxes are relatively unresented • And, because competition is restricted out of concern for problem gambling and demand is inelastic, high prices can be charged for gambling products and governments can (and should) capture the abnormal profits • Either through high gambling privilege taxes (as in most of Europe) or by selling licences for cash or investment (as in Australia and South Africa) or by owning the industry as in Canada, Holland, Austria, and Illinois Peculiarities of the Gambling Business (6): Epistemological Given that the issue is so vital to the popularity of governments and the profitability of industry why do we know so little about problem gambling, including • How to define and measure it • Why a few people become problem gamblers while most people do not • How to prevent it and how to treat it cost effectively Because • of the difficulty of the subject • but also because of vested interests including those of industry, government, anti-gamblers and ourselves as researchers and treatment professionals But • We do have some knowledge, which we can supplement with good judgment, on the basis of which we can make progress in the areas of public policy, prevention and treatment • We can also be clear and honest in the exploration of value judgments Peculiarities of the Gambling Business (7): Moral “We have a duty to prevent avoidable suffering; the availability of commercial gambling causes problem gambling and thereby avoidable suffering; therefore we have a duty to prevent the availability of commercial gambling.” But: • Would prohibition in fact reduce the suffering or would the gambling merely go underground or the problematic behaviour manifest itself in other ways? • Is not the price of living in a free society where adults – and not their governments - choose for themselves how to live their own lives that some people will make very bad choices? Implications for Policy What is gambling like from the point of view of public policy? • Pace Ralph Nader, gambling is not like smoking, let alone like crack cocaine, but like drinking alcohol - though it is not implicated in car crashes or (to anything like the same extent) in public and private violence • Problem gambling is also a function of economically self-damaging behaviour like credit card abuse and compulsive shopping General Reasons for Legalising Commercial Gambling • A legal industry is better than an illegal industry • Adults should not be prevented by government from deciding for themselves how to spend their own time and their own money in pursuit of pleasure • Governments should not interfere in transactions between willing buyers and willing sellers except to prevent the use of force and fraud by one party against the other • It’s a good way of raising money for good causes/generating relatively unresented taxes both general and hypothecated • It will attract additional tourist spend and prevent local “spending abroad” (Not much applicable to any jurisdiction not close to others where gambling is illegal) What is to be done about Problem Gambling? Responsible Gambling Policies and Programmes • Balance between consumer choice and consumer protection • Confine high stakes, high and frequent prizes, rapid action gambling to “inconvenient” venues, i.e. those which constitute an “outing” • Ensure people know what they are doing • Hence programmes of treatment (mainly for 1%); public awareness (for a further 4%) and research, especially in what effectively protects the vulnerable minority without spoiling the pleasure of the vast majority who experience no problem at all (cp shopping)