Tuesday, January 7, 2014

What does the rise of casinos say about the rest of our economy?

As someone with some research on the casino market, I found today's post by Tim Harford about the Vegas-isation of the economy to be fascinating.  I think the parallels Harford draws are interesting and insightful.  Even if you're not drawn in by casinos, I hope you'll be drawn in by his post.
What if the future of capitalism is not to be found in Shenzhen, Abu Dhabi or the Massachusetts Institute of Technology Media Lab – but in the Nevada desert? Natasha Dow Schüll, an anthropologist, has spent 15 years conducting field research in Las Vegas, culminating in a disturbing book, Addiction by Design. We are used to thinking of Vegas as a city of gaudy spectacle and the green baize of poker, blackjack and roulette tables. It is now a city of slot machines, which have grown like weeds because they are fantastically profitable. And the spread of machine gambling offers a worrisome portent of developments elsewhere in the economy. 
Three slot-machine innovations stand out: first, confusion by design; second, addictiveness by design; third, the use of play money. All have been made possible by the digital automation of the machine itself, which in Las Vegas as elsewhere eliminates the skilled service jobs of croupiers and replaces them with highly paid jobs in interface design and low-paid work as a security guard or waitress.
I have the feeling that Harford views the trend for these market innovations (exploiting confusion, addiction, and play money) as responding to a common shock, possibly technology, or a cultural shift.  That's possible, even plausible, but what if exposure to casinos causes people to take more risks elsewhere, or prefer other products that have casino attributes?  Research by Chi Liao, a Ph.D. student from University of Toronto, suggests that there might be some truth to this claim (paper here).  You might quibble with the details of that paper, but the idea strikes me as plausible and important, given the recent rise of casinos.

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