14.5 Case Studies

Casinos and Crime

Source: Photo courtesy of emdot, http://www.flickr.com/photos/emdot/22751767.

Earl Grinols and David Mustard are economists and, like a lot of people, intrigued by both casinos and crime. In their case, they were especially curious about whether the first causes the second. It does, according to their study. Eight percent of crime occurring in counties that have casinos results from the legalized gambling. In strictly financial terms—which are the ones they’re comfortable with as economists—the cost of casino-caused crime is about $65 per adult per year in those counties.http://casinofacts.org/casinodocs/Grinols-Mustard-Casinos_And_Crime.pdf.” contenteditable=”false” aria-describedby=”footnote-area” aria-label=”Footnote”>

When casinos come to town, the following specific crimes increase:

1. Robbery (in all three major categories: of individuals, of their homes, of their cars)
2. Aggravated assault
3. Rape

The crimes also increased to some extent in neighboring counties.

Situation: A casino regular runs out of money after a string of bad cards. She coasts out to the street and drops her purse in front of an out-of-towner. When the chivalrous guy bends over to pick it up for her, she picks his back pocket. With the

Casinos and Crime

Source: Photo courtesy of emdot, http://www.flickr.com/photos/emdot/22751767.

Earl Grinols and David Mustard are economists and, like a lot of people, intrigued by both casinos and crime. In their case, they were especially curious about whether the first causes the second. It does, according to their study. Eight percent of crime occurring in counties that have casinos results from the legalized gambling. In strictly financial terms—which are the ones they’re comfortable with as economists—the cost of casino-caused crime is about $65 per adult per year in those counties.http://casinofacts.org/casinodocs/Grinols-Mustard-Casinos_And_Crime.pdf.” contenteditable=”false” aria-describedby=”footnote-area” aria-label=”Footnote”>

When casinos come to town, the following specific crimes increase:

1. Robbery (in all three major categories: of individuals, of their homes, of their cars)
2. Aggravated assault
3. Rape

The crimes also increased to some extent in neighboring counties.

Situation: A casino regular runs out of money after a string of bad cards. She coasts out to the street and drops her purse in front of an out-of-towner. When the chivalrous guy bends over to pick it up for her, she picks his back pocket. With the $400 stolen from the wallet, she heads back into the casino, spends $140 on hard liquor, loses the rest at the roulette table, and goes home. She wakes up alone, though some underwear she finds on her floor makes her think she probably didn’t start the night that way.

Casinos and Crime

Questions

1. In a sole proprietorship one person owns a company and legally takes full responsibility for the business’s actions. In fact, in many casino states and counties laws protect owners from liability claims arising from problems caused by gambling. In ethical terms, however, if you’re the sole proprietor of the casino, do you feel any responsibility for this episode? Why, or why not? If you feel responsibility, to whom would it be? What could you do to set things right?
   1. You own only 5 percent of a partner-owned casino, and don’t pay too much attention to what goes on inside. In fact, you don’t like gambling and only invested in the enterprise as a favor to a friend. Do you feel any ethical responsibility for this episode? Why, or why not?
2. You’re an equal partner in a nonprofit organization that runs the casino to support the cause of building schools for children in impoverished sections of Peru. You spend a few months every year down there building schools and giving free English-language classes. In ethical terms (and regardless of what the law allows), do you believe anyone involved in this episode should be able to sue you personally for their suffering? Why, or why not?
3. Large public corporations protect their owners from the legal implications of what the corporation does through an organizational structure: a board of directors acts as a buffer between the owners (the shareholders) and the hired executives who actually make day-to-day decisions.
   1. Say that the casino under discussion in this set of questions is the MGM Grand Hotel & Casino in Las Vegas, which is owned by a large, public corporation. You have five shares of stock inherited a few years ago when a relative died. You are legally protected from liability claims. In ethical terms, however, do you believe that anyone involved in this episode should be able to sue you personally—or just plain blame you—for their suffering? Why, or why not?
4. The woman in the story is your eighteen-year-old daughter. Does that change any of your answers? Explain.
5. An externality in the economic world is a part of the cost of a good or service that isn’t paid by the producer or by the consumer; the bill is, in one way or another, left for others to pay. What externalities probably belong to casinos? Are there any positive externalities that probably belong to casinos?
6. Pigouvian taxes (named after economist Arthur Pigou, a pioneer in the theory of externalities) attempt to correct externalities—and so formalize a corporate social responsibility—by levying a tax equal to the costs of the externality to society. The casino, in other words, that causes crime and other problems costing society, say, $1 million should pay a $1 million tax.
   1. In terms of casinos, would such a tax more or less satisfy any ethical claim that could be made against them for the social problems they cause? Why, or why not?
   2. The way these social scientists measured the cost of each crime was, more or less, by totaling the quantifiable costs—that is, those things that could receive a price tag fairly readily. If, for example, your car gets stolen and sold for parts by a desperate gambler, you can put a price on the crime by checking the car’s Blue Book value. Added to that there are administrative costs—at the police station, the insurance company—and those too may be figured in terms of time and wages. Still, quite a bit of the cost of crime escapes (as the authors readily admit) their measure. Their calculations don’t include lost productivity, social service, and welfare costs. They also don’t include emotional costs, and distress of the victim. Is there any way for those costs—especially the emotional suffering—to be put into dollars and cents? If so, how? If not, is there some other kind of requirement that could be strapped onto casinos to help make them socially responsible for their activities?