Villanueva: Games of (no) chance or (no) choice (part one)


GAMBLING or playing “games of chance”, the more socially-acceptable term, is one of the habits that some people have which makes other people raise their eyebrows with judgment, shake their heads in disappointment or stifle a gasp in disbelief when they discover, especially through the grapevine, that one person is into this vice.

The influential leadership of the Roman Catholic Church has always been very vocal in their opposition against gambling operations, saying that it is by nature immoral. I would not dare challenge the Church’s moral stand against gambling since they are the foremost expert on morality. A rational being as I am, blessed by God to use my intellect and reason, I may provide some insight with the use of economic theories or concepts.

Let’s start with those who have a contrasting view on games of chance. Why do many people, including and especially those men in cassocks, believe that gambling is immoral or essentially bad?

Looking at the supply side of the market, the gambling operators or firms invest capital and land in order to provide the necessary services. Their investments are not meager amounts, and as every rational business owner would aim for a faster return on their investments and maximize their profits.

Casinos and other gambling firms mostly operate as an oligopoly, since there are very few firms that compete in the market, while in some cases, operate as a de facto monopoly, where it is the only firm in the market because there are significant barriers that prevent new firms from entering the market. Obviously, the substantial amount of capital needed may be considered as the biggest hindrance in entering the industry.

These gambling firms essentially provide entertainment. Somehow, they find ways on how people may be entertained and provide these ways for them. When they find these ways, they may be able to invest to buy physical capital which will then be used to entertain people. Of course, as any business enterprise would aim for, they also need to make profit out of their business; from the capital they have invested in it.

However, looking at the demand side, in order for people to be entertained, they also need to pay a certain price for it. The price they have to pay are in the form of their bets. My students are split whether it is a merit or demerit good. Merit goods provide positive effects on consumers, while demerit goods are otherwise. It is their opinion that gambling results to eventual overall loss of the player.

Externalities (effects to third parties) of consumption are also points of dilemmas. The negative externalities include the effect on the family of the player. The loss would eventually add up and it would have an effect on the budget of the family, especially to address the basic necessities: food, shelter, clothing, education and health.

Positive externalities would be towards the betterment of society. The PAGCOR which governs all casino operations in the country collects funds that will go to the President’s social fund, which will be redistributed back to the poor according to how the President would want the funds be spent.

In part two, let us continue this analysis by identifying whether these games of chance really will result to no chance of winning after all, and if the players are actually given no choice whether to play or not.


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