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You can find the current article at its original source at https://www.theguardian.com/commentisfree/2018/nov/08/gambling-industry-philip-hammond-fixed-odds-betting-terminals
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| Version 1 | Version 2 |
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| Listening to the gambling industry is terrible economics | Listening to the gambling industry is terrible economics |
| (about 2 months later) | |
| Philip Hammond makes an unlikely defender of the gambling industry. The chancellor is a frugal man who rather relishes his nickname of Spreadsheet Phil. He is certainly not a politician you would ever find pumping £100 a time into a fixed-odds betting terminal (FOBT) at a high street bookies. | Philip Hammond makes an unlikely defender of the gambling industry. The chancellor is a frugal man who rather relishes his nickname of Spreadsheet Phil. He is certainly not a politician you would ever find pumping £100 a time into a fixed-odds betting terminal (FOBT) at a high street bookies. |
| Yet, giving evidence before the Treasury select committee this week, Hammond said it was right for the government to delay a cut in the maximum stake on FOBTs until October next year – a decision that led to the resignation of the sports minister, Tracey Crouch. | Yet, giving evidence before the Treasury select committee this week, Hammond said it was right for the government to delay a cut in the maximum stake on FOBTs until October next year – a decision that led to the resignation of the sports minister, Tracey Crouch. |
| The chancellor said he had no love for what he called “these terrible things” but used a standard economist’s explanation for giving the industry longer to prepare for the change: the risk to jobs. | The chancellor said he had no love for what he called “these terrible things” but used a standard economist’s explanation for giving the industry longer to prepare for the change: the risk to jobs. |
| End the scourge of fixed-odds betting terminals | Dr Alan Smith | End the scourge of fixed-odds betting terminals | Dr Alan Smith |
| In truth, the economics of limiting the maximum stake on FOBTs to £2 are less clearcut than that. It is far from obvious – in strict economic terms – why there should be higher unemployment as a result of tougher regulation of FOBTs. That would only be the case if punters decided to put any money no longer spent on the machines into the bank. If, as is far more likely, they were to spend more on food, clothes, or other forms of gambling, overall demand in the economy is unchanged and any job losses in high street betting shops will be offset by job gains elsewhere. | In truth, the economics of limiting the maximum stake on FOBTs to £2 are less clearcut than that. It is far from obvious – in strict economic terms – why there should be higher unemployment as a result of tougher regulation of FOBTs. That would only be the case if punters decided to put any money no longer spent on the machines into the bank. If, as is far more likely, they were to spend more on food, clothes, or other forms of gambling, overall demand in the economy is unchanged and any job losses in high street betting shops will be offset by job gains elsewhere. |
| Gambling is a simple but socially wasteful business where the amount of money made by the industry varies according to the losses made by the punters. And when it becomes addictive – as it often does – there are higher healthcare, welfare and criminal justice bills to be paid. The government will never eradicate problem gambling but it can take steps to minimise it. What’s more, there is an entire branch of economics that explains why it should. | Gambling is a simple but socially wasteful business where the amount of money made by the industry varies according to the losses made by the punters. And when it becomes addictive – as it often does – there are higher healthcare, welfare and criminal justice bills to be paid. The government will never eradicate problem gambling but it can take steps to minimise it. What’s more, there is an entire branch of economics that explains why it should. |
| Nudge economics was once all the rage in Whitehall. The idea that you could secure big changes in behaviour with relatively small interventions appealed so much to David Cameron that he set up a nudge unit inside the Cabinet Office. | Nudge economics was once all the rage in Whitehall. The idea that you could secure big changes in behaviour with relatively small interventions appealed so much to David Cameron that he set up a nudge unit inside the Cabinet Office. |
| There are plenty of examples of how people can be gently persuaded to do the right thing. Children tend to eat more healthily if salad bars are moved to more prominent locations in school canteens. Individuals are more likely to become organ donors if the option to sign up is included when they apply for a passport or driving licence. Young workers will save more for their retirement if they have to decide to opt out of company pension schemes rather than opt in. | There are plenty of examples of how people can be gently persuaded to do the right thing. Children tend to eat more healthily if salad bars are moved to more prominent locations in school canteens. Individuals are more likely to become organ donors if the option to sign up is included when they apply for a passport or driving licence. Young workers will save more for their retirement if they have to decide to opt out of company pension schemes rather than opt in. |
| But governments do not have a monopoly on nudging. It didn’t take the private sector long to work out that it could use the same arsenal of subliminal signals to affect the behaviour of customers. And, as Richard Thaler, the economist who popularised nudging, has shown, not always in a good way. | But governments do not have a monopoly on nudging. It didn’t take the private sector long to work out that it could use the same arsenal of subliminal signals to affect the behaviour of customers. And, as Richard Thaler, the economist who popularised nudging, has shown, not always in a good way. |
| As Thaler has documented, there are nudges that encourage you to pay for travel insurance when you don’t really need it. There are nudges to persuade you to sign up for trial offers for magazines, which lead to automatic enrolment schemes that are often hard to cancel. | As Thaler has documented, there are nudges that encourage you to pay for travel insurance when you don’t really need it. There are nudges to persuade you to sign up for trial offers for magazines, which lead to automatic enrolment schemes that are often hard to cancel. |
| But when it comes to the dark side of nudging, the gambling industry is in a class of its own. Indeed, as anybody who has been to Las Vegas knows, it was nudging well before Thaler wrote his bestselling book. Casinos are designed to keep the punter betting for as long as possible, so the exits are hard to find. There is never any natural night, so gamblers lose all sense of time. | But when it comes to the dark side of nudging, the gambling industry is in a class of its own. Indeed, as anybody who has been to Las Vegas knows, it was nudging well before Thaler wrote his bestselling book. Casinos are designed to keep the punter betting for as long as possible, so the exits are hard to find. There is never any natural night, so gamblers lose all sense of time. |
| Over the years the gambling industry has become more sophisticated. The ubiquitous betting ads that accompany live football matches are examples of what Philip Newall of Warwick University calls dark nudging, which is where online bookies edge their customers towards complex and specific bets that are hard to win. The bookmaker might, for example, offer seemingly attractive odds on Liverpool beating Fulham at Anfield on Sunday, with both teams scoring and Mo Salah to get the first goal. The problem for the punter is that the odds are not as attractive as they look. Newall found that the profit margin on specific scores – Liverpool to win 2-1, say – was 23.2%. Profit margins for simple gambles – such as a Liverpool win – were much lower, at 5.7%, which is why punters are nudged away from them. | Over the years the gambling industry has become more sophisticated. The ubiquitous betting ads that accompany live football matches are examples of what Philip Newall of Warwick University calls dark nudging, which is where online bookies edge their customers towards complex and specific bets that are hard to win. The bookmaker might, for example, offer seemingly attractive odds on Liverpool beating Fulham at Anfield on Sunday, with both teams scoring and Mo Salah to get the first goal. The problem for the punter is that the odds are not as attractive as they look. Newall found that the profit margin on specific scores – Liverpool to win 2-1, say – was 23.2%. Profit margins for simple gambles – such as a Liverpool win – were much lower, at 5.7%, which is why punters are nudged away from them. |
| William Hill warns gambling crackdown will hit full-year profits | William Hill warns gambling crackdown will hit full-year profits |
| Modern electronic gambling machines, such as FOBTs, are a prime example of dark nudging in practice. In the old days, fruit machines were slow and simple. Punters had to feed in their money, pull a lever and wait to see which of a limited number of outcomes came up. FOBTs are quite different beasts. People can put in large denominations of cash; touch screens take the physical effort out of playing and the machines are often designed to persuade players that they have had a “partial win” (better known as a loss). Dark nudging has made it possible for punters to lose large sums of money quickly, which is why FOBTs are known as the “crack cocaine of gambling”. | Modern electronic gambling machines, such as FOBTs, are a prime example of dark nudging in practice. In the old days, fruit machines were slow and simple. Punters had to feed in their money, pull a lever and wait to see which of a limited number of outcomes came up. FOBTs are quite different beasts. People can put in large denominations of cash; touch screens take the physical effort out of playing and the machines are often designed to persuade players that they have had a “partial win” (better known as a loss). Dark nudging has made it possible for punters to lose large sums of money quickly, which is why FOBTs are known as the “crack cocaine of gambling”. |
| The industry should not be surprised that the government has decided to nudge back. The £2 maximum stake limit is designed to stop compulsive gamblers from harming themselves and their families. On hearing from Hammond this week, Nicky Morgan, the chair of the Treasury select committee, rightly pointed out that the Treasury’s delay in imposing the limit meant the chancellor had prioritised preserving jobs in the gambling industry over the addictions of those who suffer from FOBTs. That’s not just a mixed message, it is the wrong one. | The industry should not be surprised that the government has decided to nudge back. The £2 maximum stake limit is designed to stop compulsive gamblers from harming themselves and their families. On hearing from Hammond this week, Nicky Morgan, the chair of the Treasury select committee, rightly pointed out that the Treasury’s delay in imposing the limit meant the chancellor had prioritised preserving jobs in the gambling industry over the addictions of those who suffer from FOBTs. That’s not just a mixed message, it is the wrong one. |
| • Larry Elliott is the Guardian’s economics editor | • Larry Elliott is the Guardian’s economics editor |
| Fixed-odds betting terminals | Fixed-odds betting terminals |
| Opinion | Opinion |
| Gambling | Gambling |
| Philip Hammond | Philip Hammond |
| comment | comment |
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