Gambling involves risking something of value on an activity that is primarily a matter of chance in the hope of winning a prize. It has existed in virtually every society since prerecorded history, and it is a component of many local customs and rites of passage. Nevertheless, it has also been identified as a problem for some people. Pathological gambling is a recognized mental disorder, and its symptoms include secretive behavior, hiding money, spending to win back lost funds, and criminal activity. Researchers are working to understand the psychology of compulsive gambling, and the Diagnostic and Statistical Manual of Mental Disorders, which informs psychologists, currently recognizes 10 warning signs of pathological gambling.

Gambling is a global activity that contributes to the economies of countries around the world. It provides employment for a number of individuals, and it can also be an important source of revenue for municipalities. In addition, it can provide a social outlet for those who are otherwise unable to participate in other activities. The benefits of gambling, however, cannot be fully realized if people are not aware of the risks involved.

It is estimated that 2.5 million U.S adults (1%) meet the diagnostic criteria for a gambling disorder in any given year, while an additional 5-8 million (2-4%) have mild or moderate problems. Despite these concerns, the majority of gamblers play responsibly and find it an enjoyable diversion.

While gambling does bring some positive economic effects, these gains are usually offset by the negative impacts on individuals and communities. A fundamental question is how much of the gain in per capita income is due to gambling, and how much is attributable to other factors.

Some studies attempt to answer this question by comparing the per capita income of a community before and after gambling is introduced. This approach is flawed in several ways. First, it is impossible to identify the exact causes of any change; for example, an increase in per capita income might simply be a result of general economic growth.

Another flaw in these types of studies is the tendency to use a single measure of impact, which is not necessarily indicative of a community’s overall situation. It is important to take into account a variety of factors, including real costs and economic transfers, tangible and intangible effects, direct and indirect effects, and present and future values (i.e., discounting).

Some of the most important costs associated with gambling are related to its effect on bankruptcy rates. Published news accounts, bankruptcy attorney opinions, and judicial records are the primary sources of information about this phenomenon; however, these reports tend to be anecdotal and region-specific. A more robust study would attempt to quantify the economic cost of gambling by examining expenditure substitution effects, direct and indirect effects, real and transfer costs, and gains and losses (Gramlich 1990:229). An upcoming study will address these issues and attempt to construct a model that is more reliable than the existing anecdotal evidence.