Casinos, Indians and Beer
All sorts of goods and services have bad effects on people around those that use them. Economists call these effects “negative externalities.” Some of these products (say, heroin) are believed to have such large negative externalities that we just make the product illegal. Others, like alcohol, we make legal but regulate and tax heavily. The tax has two good effects. One, it lowers overall consumption of the product in question (by raising its price) and thus lowers the overall negative effects on others, and two, it raises revenues for the state, allowing them to lower taxes on things we actually want to encourage, like earning income. There is nothing inherently illogical about believing casino gambling is more like heroin than alcohol and thus the proper policy is to simply ban it.
However, we don’t really have that choice. Distributed throughout Minnesota are little pockets of sovereign Indian territory where the state can neither outlaw nor tax casino gambling, and thus there now exist enormously profitable casinos. These enormous profits are due directly to the fact that the state of Minnesota outlaws casino gambling on those portions of Minnesota for which it has jurisdiction to do so (everywhere but the Indian lands). It is exactly what would happen if alcohol were illegal everywhere but on Indian lands. The tribes would just rake in money.
If the negative externalities of casino gambling were felt only within a few miles of each casino, the current situation wouldn’t be so bad for the state. The tribes would be reaping the benefits of these huge profits, but also paying the costs in terms of the negative externalities. But this simply isn’t so. Whatever negative externalities there are (the effects of gambling addictions and so forth) are felt far and wide. So in the current situation, the state feels all the bad effects of casinos, but leaves all the profits to the tribes. It’s pretty near a worst case scenario.
We must take as given that whether we like it or not, and whether we allow non-Indian land casinos, most Minnesotans will live within a short drive of a casino. We simply can’t stop this. By selling licenses to open casinos on non-Indian land, the state can at least recapture the monopoly profits of the tribes with little increase in overall gambling and the ensuing negative effects. Doing otherwise simply leaves the tribes with millions (billions?) of unearned monopoly rents.