Methodological issues in the social cost of gambling studies

The appropriate way to classify and measure the "social costs" of gambling is a very important, unresolved methodological issue that has been addressed by Collins and Lapsley (2000); Thompson, Gazel, and Rickman (1999); and Walker and Barnett (1999), among others. What should be included and excluded from social cost studies continues to be a controversial issue, as illustrated in the literature and recent conferences. This paper is an attempt to explain the "economics" conception of social costs in accessible language. By using a simple economic model and everyday examples, it shows that the economics methodology is better than the other methodologies currently available. There are four specific goals of the paper: (1) Discuss the importance of the social cost methodological debate and the state of research in the area; (2) Explain the Walker-Barnett definition of social cost in the context of a simple production possibilities frontier and indifference curve model; (3) Use simple illustrative examples to show why many of the alleged social costs should not be classified as such; and (4) Suggest a new method for analyzing the social costs and effects attributable to pathological gambling.