Clarification of the social costs of gambling

As U.S. states and countries around the world consider legalizing casino gambling, the social costs of gambling continue to be hotly debated. This paper examines the social cost issue from a welfare economics perspective, and discusses the 2005 paper by Thompson and Schwer, published in this Journal. Their article exhibits a number of problems common in gambling research, including a flawed conception of social costs and a variety of measurement errors. For example, Thompson and Schwer count many costs borne by individuals as “social costs.” In addition, many of their cost estimates appear to be arbitrary. As a result, the Thompson and Schwer social cost estimate is likely a serious overstatement of the actual costs.