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Classification Numbers: K0, K2, H2
Key Words: Casinos, Illegal Behavior,
Externalities, Social Costs, Pigouvian Taxes
* Department of Economics, University of
Illinois, 1206 S. 6th Street, Champaign,
Illinois 61820. E-mail:
grinols@uiuc.edu
** Department of Economics, Terry College of
Business, University of Georgia, 528 Brooks
Hall, Athens,
Georgia 30602. E-mail: mustard@terry.uga.edu. We
thank workshop participants at the American
Law and Economics Association and American
Economics Association Annual Meetings and at the
Universities of Buffalo, Georgia, Illinois, and
Rochester for their helpful comments.
MEASURING INDUSTRY EXTERNALITIES:
THE CURIOUS CASE OF CASINOS AND CRIME
The theory of externalities and corrective
policy developed in the last one-third century
contains
an impressive array of tools and techniques for
improving social welfare in the presence of
spillovers.
However, progress in applications has been much
less pervasive. For example, there is ongoing
discussion
of the appropriate degree of taxation of carbon
fuels and greenhouse gases. In recent years
a campaign has grown for recovering social costs
created by industries that are believed to
generate
harmful externalities, exemplified by lawsuits
against the tobacco industry. In many other
cases the
attempt to implement rational mechanisms has
been unable to quantify the externality to be
controlled.
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