Pittsburgh Planning Casino Report

I’m a bit late to this party, but following up on the Post Gazette report on the City Planning report on the casinos, I am underwhelmed. Pat Ford presented to council a recap and brief analysis of the three seperate privately and self-interestedly financed plans and impact statements for the slots license that Pittsburgh will be getting. I am quite sure that he did quite a good job at this, as I know that City Planning as an entity is a very good organization of local government, but the limitation to the analysis is that he presented the information as if it was good faith information.

I agree, Harrah’s, if their numbers are correct or at least reasonably close to correct is the best of the options from the point of view of the city for tax revenue and crime limitation. The physical isolation of Station Square minimizes the ability of low level criminality to expand into relatively distant residential neighborhoods. I just wait with baited breath to turn on the TV and see the slow speed chase up the Monogahela Incline as a purse snatcher tries to get away… but I digress.

The problem that I have with Mr. Ford’s analysis is that it is a limited analysis and trusts that the numbers provided by biased parties are going to be close enough for effective analysis. As I have blogged earlier, I have severe doubts about Harrah’s numbers.

I can’t blame Harrah or PITG or Isle of Capri for inflating their claims. The incentive structure of a winner take all monopoly makes it almost a breach of fidicuary responsibility for the officers of these three groups to not push the envelope as hard and as far as they can and then some.

This incentive structure is fairly clear and it has been obvious in advance for a very long time. The public policy incentive structure is to choose the policy that delivers the most cash at the lowest net social costs. The net social costs are probably going to be underestimtaed. There are the obvious ones, such as casinos generating their own crime according to a recent study out of the University of Georgia, and then the less quantifiable but real negative externalities. Throw in traffic and the extraordinarily probable response of West Virginia legalizing table games within three milliseconds of the first newspaper report that the lines in Wheeling are getting shorter, and the cost benefit analysis from a public policy perspective goes negative real quickly.

Policy makers need to be able to have good information to have a chance in hell of making a satisficing decision. That good information should not be coming from sources who are financially biased towards their own success at the cost of the region. This information should be coming from independent, third party sources which are financed by a party that is not going to capture location dependent revenue. That means the city, county, state, or the foundations should be stepping into the gap and provide for good information.

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