When Welfare Economics and Gambling Studies Collide

The betting and gaming sector attracts a lot of interest from outside parties. Those within the sector view their products as leisure activities competing in a tough market place, whilst groups outside of the industry question the (ethical) nature of these products and their contribution to society. There are few industries (tobacco and alcohol included) which not only have to face the daily struggle to earn a profit but also have to fight to justify their very existence. In this chapter we will try to unravel some of these often emotive issues and examine the link between gambling and welfare. We will critically appraise different measures of welfare and existing studies that attempt to measure welfare effects. We will consider the consequences/impacts of the expanding gaming market on individual and social welfare. It is not however, our intention to provide a full appraisal of the benefits and costs of the betting and gaming sector, the focus here is to provide a better understanding of the methodologies that practitioners use to address welfare issues, so that we can more clearly evaluate the results of such studies in order to make sensible, evidence-based, policy decisions. It is hoped that the chapter provides a valuable introduction to the important theoretical concepts on which the existing empirical studies are based. We shall present only first principles of welfare economics in order to make the material accessible to a board audience.