Odds-on for unhappiness

26 February 2018 12:28

Compared with alcoholism and drug addiction, ‘problem’ gambling is seen as substantially smaller problem. Looking at problem gambling as a serious public health issue, we need to know what harm it causes to the people who suffer from it. Economist Ian Walker estimates the cost of the harm to the UK’s 300,000 problem gamblers is at least £25 billion a year - the same as the entire annual budget for Secondary education.

In the UK there are believed to be one-third of a million problem gamblers - a form of addiction where the urge to gamble overrides any concern for the future consequences of losing money. So fewer than 1% of the UK’s population of 45 million adults, but still equivalent to the number of people who live in Coventry or who work in the City of London. Problem gamblers are more likely to be young, single and male - but there’s no strict stereotype, they can come from any background.

An Institute of Public Policy Research study in 2016 claimed problem gambling was costing £1.2 billion a year in terms of costs for the health service, criminal justice and welfare systems. In purely financial terms, this is dwarfed by the cost of an addiction like alcohol. The Institute of Alcohol Studies estimated the harms associated with alcohol abuse in the UK to be £21 billion each year, as a direct result of crime, work absence and health problems, and this figure grows to £55 billion when includes the full picture of wider ‘harm’.

These figures only consider the external costs - how addictions affect the people and world around them, not the costs that individuals impose on themselves. Economists have traditionally viewed consumers as rational – The dominant concept that economists have adopted for thinking about addiction is ‘rational addiction’. People choose to spend money on what they enjoy doing, the buzz of it, and the possibility of seeing a return. But increasingly the world of economics is taking more seriously the idea that behaviour is more complex than their traditional model of rationality. In particular, there is plenty of evidence that people are not good at making long term decisions for themselves. If there is the remote chance of falling victim to long term addiction, individuals may still may be tempted to risk it.

Major losses

We looked at data from 7,000 UK households – in particular, the relationships between what people said about their wellbeing, whether they’re a problem gambler and their income. A key question was asked: on a scale of one to 10, how did they feel about their life these days? 

On average, responses showed a high level of wellbeing, with very few scores under five, a small number of 10s, and most around the 8 or 9 mark. The average score among non-problem gamblers as 8. But the average score of problem gamblers was 6.5. This difference of 1.5 is large given the small range of responses in the large sample of people. For example, the gap in well-being between married and divorced people is typically smaller than 1.5; and even comparing married to widowed the difference in score is less than 1.5.

It is useful to monetise this abstract number, so one can more effectively compare problem gamblers with other social issues and costs and expenditures. In financial terms we can see from the sample data that to generate an increase of 1.5 - to take problem gamblers back to average levels of happiness and wellbeing - people would need to have their income trebled. Based on average UK incomes, this would be £77,000, equating to an annual impact on the wellbeing of problem gamblers as a whole of £25 billion.

Changing the odds

An initial instinct when faced with these kinds of figures is to look to increased regulation, particularly in order to provide more protection for low-income and disadvantaged groups. But there isn’t much evidence to support this. The USA, for example, has a far more highly-regulated market for gamblers - you’ll need to go to the track to bet on a horse race, and to a licensed reservation or remote Las Vegas to play a roulette table - and yet, levels of problem gambling are around three times that of the UK.

A better solution would be target the problem gambler group more specifically, as it’s relatively small. But how? Young single men are in the ‘most likely’ category, but the overwhelming majority of young single men are still not problem gamblers. Investment into schemes to protect and treat problem gamblers across the world is tiny. In the USA, there are three and half times more people with substance misuse issues than gambling problems. But there’s 300 times more money spent by the authorities on substance misuse.

Treatment itself is problematic, as recent research has questioned the use of the most typical response, Cognitive Behavioural Therapy. Funds could perhaps best be targeted towards finding the most effective schemes, practices and treatments to prevent the slide from risk-taking and fun into addiction. A key factor is the way in which problem gamblers tend to ‘discount’ the future, looking for immediate gratification; in other words it’s about access and ways in which the thrills can be deferred. This works to an extent with Lotto, in that you need to wait days, if not a whole week, for the next draw. The gambling industry has become smarter in terms of opening up access to betting via online opportunities and through the introduction of Fixed Odds Betting Terminals (FOBT) which combine the tactile appeal of fruit machines or roulette wheels with modern technology and analytics. Problem gamblers may be twice as likely to buy Lotto tickets but are fifty times more likely to use an FOBT. Right now we know little about access - a map of the location of FOBTs might well show low-income areas are being targeted, preying on people who aren’t looking for a big, life-changing win, but using gambling as a means of getting money that sees them through the week – but tempts them into a cycle of debt and gambling for small and possibly misleading rewards.

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