Gambling Economy: a New Challenge

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Gambling and economics are even more closely related to every level of economic activity than you might think. If you start to gamble not knowing how to manage your bankroll wisely, your personal finances will soon be in decline, or even in a crisis. But this cuts both ways: if you gamble skillfully and know how to manage your finances properly, you may experience some significant personal economic growth or even a real boom! And given the multitude of gamblers worldwide, we may rightfully assume gambling has already become a global economic factor!

One of the Major Shifts in the World’s Economy

Indeed, in 2018, one conservative estimate is that the CAGR (Cumulative Aggregate Gross Revenue) of the gambling market crossed the threshold of $400 billion and kept on growing about 4% annually — faster and steadier than the global economy in general. The $500 billion threshold is closing in and will be crossed in 2022-2023, if not earlier. It is comparable to the GDP of, say, Belgium (#24 in the world’s GDP list).

The demand for online gambling services is growing even faster nowadays, as it is driven by the intensive development of mobile applications, an increase in ownership of smartphones, the exponential development of mobile gaming apps, and a constant influx of new players. We are witnessing some superb growth rates in the gambling industry; especially in the online sector, and this is already leading to some serious changes in the global economy!

Economic & Non-Economic Factors to Fuel Gambling Industry

You may hear about the increase in the per capita income or a growing number of two-income households as two of the key growth factors for gambling worldwide. And it is certainly obvious that new gamblers are generally recruited from those who can afford a proper bankroll. But, again, gambling shows outperforming growth rates, and the demand for the related services substantially outstrips the offer. Because of this, we need to understand why so many people are starting to gamble nowadays; and of course, what kind of global changes might be resulting from it!

This agenda takes us back to the standard behavioral problems of economic science. It goes without saying that the behavior of economic agents and their groups is the immediate driving force of economic changes. But the whole problem is that economics as science cannot produce a comprehensive and satisfactory study explaining and forecasting such economic actions!

‘Homo Economicus’

The scientists have come up with the concept of ‘homo economicus’ — an ideal model for study the preferences, as well as the actions, of atomized economic agents within relatively simple supply-demand, price-quality and need-satisfaction dilemmas; and this model does indeed work well within this range! However, the actions of economic agents (let’s call them people, actually!) are, in fact, extremely complicated; as they are influenced by so many factors that it might well be that there is no science on earth that can reasonably claim the ability to comprehensively deal with this particular subject matter!

For example, such concepts as greed and altruism, hope and despair, trust and non-confidence can play a crucial economic role making ‘homo economicus’ act in a particular way to come to economically-viable decisions. But these duals are essentially non-economic by nature, and this may be the answer to the question of why people gamble.

The Game of Chance

The key notion of gambling is the concept of chance, an idea which pretty much applies to everything in life — just because we do not know the future, and therefore we have to handle probabilities and uncertainties practically all the time!

Everything we do is a game of chance! Take university studies: we pursue them without even knowing whether we are going to get a job afterwards! We can try hard to get a job, despite not knowing whether or not we will be fired, or whether the boss will turn out to be an idiot. Marriage, friendship, bringing up kids, plans for life, or just a plan for tonight — in a way, here we see different kinds of games of chance; with all kinds of different values of variance, bets and stakes.

And playing any of these games, we may do our best to minimize the risks and to improve our chances (oh here we go again, chances!) as we really do hope to get whatever it is we really want. But since the variance is here, and the bets are being constantly made, while the stakes are also being raised as well; and these are all indications that we are talking about  some kind of gambling (not to mention here such gambling-like and risk-taking economic activities as trading equity futures, taking loans, making investments, mergers, and acquisitions etc!)

Thus, the behavioristic question on why some people are prone to gambling may have a simple answer: because they play the game of chance constantly, non-stop, which is actually the way they live! But nowadays, the variance is getting larger, people have to bet higher to raise the stakes on every single step they take; and this was not the case in the past, by the way! So, the incoming tide of new players seen in the gambling industry may well just be a reflection of one substantial fact — there is more and more gambling going on in real life!

‘Homo Aleator’

One key global change underway right now is that people have to take more risks and handle more uncertainties, and this does provide a solid basis for reflecting on ‘homo economicus’ once more; at which point, we may well conclude that ‘homo economicus’ is gradually turning into ‘homo aleator’ (‘man the gambler!’) And we do need to deal with this new phenomenon somehow, as we live in a world that is getting more and more aleatory in character.

Did Religions Give Us a Warning?

Without touching too much upon issues of faith and theology, let us focus on the idea of a warning. Many religions contain warnings insisting that people should not do several things, and not only because of the concepts of sin and afterlife punishment. Indeed, the behavior-controlling role of religion, at least insofar as the commandments have been properly understood and implemented, have certainly played a big role in the history of civilization. Religious systems and traditions have been more than capable of producing some practical pieces of advice and warnings, in order to encourage good character.

Different religion systems warn people about the indecent behavior of all sorts. However, views on what is decent and what is not have never been stable through history. And gambling is a striking example of instability. For example, traditional forms of shamanism and paganism not only approved but also encouraged the games of chance and even used them for ritual purposes; even though monotheistic religions have generally condemned gambling.

Why is gambling a sin? Here we are not going to dig any deeper into this question, but we will focus on the very idea of a warning instead! Don’t drink too much, don’t eat too much, don’t do anything too much — just because too much is too bad for you. Everyone should know the happy medium (“aurea mediocritas,” or “golden modesty”); know when enough is enough and where to draw the line, or else you will find yourself in trouble! Such a warning message is precisely what stands behind many religious commandments.

This attitude has been further developed in Islam. The general dilemma of benefit or harm, related to almost everything we do in life, holds a key place in the Islamic judgment about what is allowed and what is forbidden (“haram” and “halal.”) ‘Islam’ and ‘gambling’ are separate topics. But, based on the Quran, traditional teaching assume the following: gambling might bring a small benefit, while the harm it poses to us is much bigger! Therefore, it is “haram” (forbidden), and Islam and gambling are two things that are fully incompatible.

Consider Yourself Warned

It seems that many religious condemnations, including ones related to gambling, are based on a certain disappointment in people. People have proven themselves incapable of holding to the golden mean, and in their hubris, they have got carried away. So they end up harming themselves and others, and they forget the likely consequences of what they are doing. And so, they need a lot of warnings. Perhaps, that is where many religious condemnations, prohibitions, and harams come from.

We have been warned already; and indeed many times, at that! Gambling too much is harmful, and not knowing where to draw the line is dangerous — this idea needs no further explanation. But if, presumably, we are at the beginning of a global gambling boom, and ‘homo aleator’ is coming up to take the place of ‘homo economicus,’ it looks like there really is another global challenge about to close in on us! The question of whether modern society, institutions, national and international legislation as well as the entire world, in general, are able to answer this challenge is still an open one.