Negative externality of gambling
There is a presence of lot of social and economic cost to families and individuals due to gambling. The social cost in case of gambling exceeds the benefits. A large number of activities of the gambling support takes place in the region of Tasmania. There has been increase in the growth of gambling in Australia because of huge public acceptance. Legalized gambling has brought some amount of economic benefits in some communities. The economic and social cost of gambling include traffic congestion, environmental effects, rise in crime and also demand for public infrastructures like police, roads and schools.
The highest rate of gambling in the world comes from Australia. It has become a serious health issue with at least 160,000 of the Australians experience problems as a result of gambling. Australians are known to have spent around $20 billion every year on some kinds of gambling. Most of them which is poured on the 200,000 poker machines of the country (Dobes, Argyrous & Leung, 2016). They have been termed as the biggest gamblers in the world. The social cost of gambling in Australia is around $4.7 billion a year. Companies like Coles and Woolworths in Australia are the largest owners of poker machines and together they own around 15,000 machines. The licences for the gaming machine in New South Wales are charged around $320,000 in case of a group of three licences. The poker machines in the clubs, casinos and pubs of Queensland provides a return rate of 90%. However, pokies had been the largest revenue generator in Australia. The gambling taxes are also the one of the largest revenue sources for the governments. The basic slot machine is charged around more than $25,000 (Greaker & Midttomme, 2014). However, the bigger and the advanced machines can be charged more than ten times. In the year 2016 the government earned revenue of 7.7% from taxes in gambling. In some places, though gambling is mostly considered as a recreational activity or hobby.
Most of the people refer problem gambling as an addiction. It also hampers the relationship with the families. Occasional use of gambling is therefore, considered to be safe instead of over consumption. There is a lot of problem with Problem gambling in the whole world. Playing pokies and casinos can also be a very expensive form of entertainment. Negative externality takes place when the consumption of a good will impact the other user. Gambling therefore has a negative externality in a way that it affects the family relationships, increase the rate of crime and bankruptcy. In case of a negative externality, the social cost is more than the private cost (Livingstone, 2017). The term problem gambling is used for consuming too much of the gambling products. Negative externality of consuming gambling products will lead to increase in social disorder. When there is a presence of market externality, it will also result to market failure. However, gambling can also be viewed as societal menace, a good tool for growth and also a good source for government revenue. Gambling can be said to have a negative externality in Australia as it will have a spill over effect on the third parties. Gambling can also have a negative externality in consumption because the marginal private benefit is more than marginal social benefit (Walker & Sobel, 2016). It is also an addictive good which also means that the demand for gambling is inelastic.
Critical analysis
Negative externality
(Source: Walker & Sobel, 2016)
Gambling is one of the very famous and popular activity in Australia where people around five million plays in poker machine in every year. The problem gambling has been the major issue in Australia.
Pigouvian tax- This type of tax is used to correct the inefficient outcomes which also brings out negative externalities. As negative externalities does not allow the economy of the market from reaching equilibrium which can be corrected by levying the Pigouvian tax. The internet based gambling has a strong potential of market failure which leads to increase in the social cost like decrease in revenue, increased crime and bankruptcy (Gainsbury et al., 2015). Therefore, a pigouvian tax is charged by the government which is the difference between social marginal cost and private marginal cost. The tax will increase the operational cost and will eliminate welfare loss. The pattern of the taxes in Australia aims particularly to reduce the spending on gambling and penalise the harmful forms of gambling. Taxes can also give rise to externalities. The negative externalities also leads to market failure like for example asymmetric information.
Pigouvian tax
(Source: Fleischer, 2015)
Quotas on poker machines- When the government imposes trade restrictions that will limit the number of goods that a country can import, it is known as quota. A quota on the poker machines will reduce gambling. Implying quota will restrict the quantities of poker machines sold which will also reduce the rate of gambling. The pokies from Tasmanian clubs and pubs are also removed. The quota imposed by the Australian government will regulate the gambling rate (Greaker & Midttomme, 2014). Restricting the quantity of poker machines sold will reduce the rate of gambling of the people in Australia. As a result of this consumption, domestic productions and imports will be highly affected. Therefore, quotas acts as a trade barrier in the economy. As it will restrict the movement of the goods in foreign companies. Quotas will benefit producers and also on the other hand restrict the choices of the consumers.
Quotas on poker machine
(Source: De Borger & Glazer, 2017)
Non price policy- This type of pricing policy is mostly effective in the oligopolistic and monopolistic market. It also includes promotional expenditures like advertising, sales promotion and marketing cost. The Victorian Responsible Gambling Foundation’s Prevention Partnership Program focuses on reducing the gambling effects in Australia. Gambling companies should be allowed to display about the health warnings about the harmful effects of betting (Gainsbury et al., 2015). When there will be live sports events, a ban should be imposed on the gambling ads. Educational based gambling prevention program are very important aspects in order to prevent problematic behaviour in adulthoods. The disorder of gambling will affect the family and the social level (Livingstone,2017). Several gambling prevention programs have been developed in order to address the negative sides of gambling. Media education focuses on educating the students about the fallacies of gambling, the features of gambling and the signs about the pathological gambling. However, there had been very less significant effects on the lifetime gamblers.
Pigouvian tax
Pigouvian tax discourages the behaviour which causes negative externalities. It also raises revenue for those who are affected by the externality. It also creates more efficiency in the economy (Dobes, Argyrous & Leung, 2016). However, pigouvian tax can also be regressive in a way that it impose a heavy burden on the poor compared to those of rich people. Therefore, when pigouvian tax is imposed on the poker machines it will highly affect the poor people. As Pigouvian tax are the flat tax therefore it highly affects the income of poor people. Although quotas can be profitable there are also many negative effects on the consumption as well as production. Imposing quotas may also reduce the quality of the product. Quotas also result in reduction of supply which can lead to increase in price for the consumer.
Conclusion
It has been seen that the gamblers have distance themselves from the friends and family. Government has also gained revenue from the different the tax structure. More than half of the population are engage in different types of gambling. Australians are the highest gamblers in the world. Gambling has also resulted in public health issue. Therefore, in order to conclude it can be said that gambling in Australia have lot of negative and positive effects.
Reference
Browne, M., Greer, N., Rawat, V., & Rockloff, M. (2017). A population-level metric for gambling-related harm. International Gambling Studies, 17(2), 163-175.
De Borger, B., & Glazer, A. (2017). Support and opposition to a Pigovian tax: Road pricing with reference-dependent preferences. Journal of Urban Economics, 99, 31-47.
Dobes, L., Argyrous, G., & Leung, J. (2016). Social cost-benefit analysis in Australia and New Zealand. The state of current practice and what needs to be done. ANU Press.
Fleischer, V. (2015). Curb your enthusiasm for Pigovian taxes. Vand. L. Rev., 68, 1673.
Gainsbury, S. M., Russell, A., Blaszczynski, A., & Hing, N. (2015). The interaction between gambling activities and modes of access: a comparison of Internet-only, land-based only, and mixed-mode gamblers. Addictive Behaviors, 41, 34-40.
Gainsbury, S. M., Russell, A., Hing, N., Wood, R., Lubman, D. I., & Blaszczynski, A. (2014). The prevalence and determinants of problem gambling in Australia: Assessing the impact of interactive gambling and new technologies. Psychology of Addictive Behaviors, 28(3), 769.
Gainsbury, S., King, D., Delfabbro, P., Hing, N., Russell, A., Blaszczynski, A., & Derevensky, J. (2015). The use of social media in gambling. Gambling Research Australia.
Greaker, M., & Midttomme, K. (2014). Optimal Environmental Policy with Network Effects: Will Pigovian Taxation Lead to Excess Inertia?.
Livingstone, C. (2017). How electronic gambling machines work. AGRC Discussion Paper 8). Melbourne: Australian Gambling Research Centre, Australian Institute of Family Studies.
Walker, D. M., & Sobel, R. S. (2016). Social and economic impacts of gambling. Current Addiction Reports, 3(3), 293-298.
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