Krutz’s research changing the dialogue on casino economics

Jonathan Krutz, professor emeritus for the Department of Marketing and alum of the School of Public Service, has become a globally recognized expert on the economic impact of casinos. In the last year, reporters from The New York Times, The Washington Post, The Guardian (UK), The Daily Mail (UK), The American Prospect and AARP have all reached out to get his perspective.

Why are casinos - and Krutz's research - suddenly a hot topic? As New York works through a multi-year process to introduce casinos, and online sports betting gains massive popularity, questions regarding economic impacts and social costs are surfacing. Krutz's PhD dissertation, "Do Casinos Create Economic Development?: A 15-Year National Analysis of Local Retail Sales and Employment Growth," has become a go-to reference for reporters and researchers alike.

"There's not a lot of credible research on the economic impacts of casinos," Krutz said. "My dissertation has been downloaded over 3,000 times around the world. It has been super cool to get calls from reporters. It's good to be involved in the conversation in a meaningful way."

The story behind the slot machines

Krutz completed his PhD through Boise State's School of Public Service in public policy and administration in 2022. But his interest in casinos and their economic impact began years earlier.

In 1995, as an economics instructor in Nebraska, Krutz was always looking for ways to incorporate real-world happenings into his courses. He attended a public hearing at a horse track considering slot machines to learn more about the pros, cons and economic issues that gambling can bring to a community. But he was surprised that during two hours of testimony, all the commentary was positive.

"No one was opposed. One older guy spoke and said he wasn't for or against it, but warned that the community had better start funding gambling counselors, like him," Krutz said. "At the time, gambling was not just illegal, it was unconstitutional in Nebraska. I thought, 'I teach economics and no one gave one word on potential economic problems around gambling.' I wondered why that was the case."

This began Krutz's pursuit of the economic story behind the industry. Krutz quickly discovered that most available information consisted of enthusiastic promises from casino companies. Working with colleagues in 2004, he examined retail data from Iowa - one of the first states to legalize casinos - and found that while economies grew steadily elsewhere, growth flattened in every city where a casino opened.

"Our research found that casinos were having a not-positive impact on the economy for local businesses," he said. "I wasn't that interested in gambling itself, but I was interested in honesty. A fair public policy discussion has rarely happened in any casino or gambling expansion campaign. I wanted to do a study on a national scale."

National research findings

Through Boise State's public policy and administration PhD program, Krutz did just that. He expanded his research to a national scale, creating a comprehensive dataset to compare casino and non-casino communities. Despite industry claims of job creation and prosperity, he found no net increase in retail sales, and discovered that job growth actually slowed in communities where casinos were established.

"I found that money that would normally go into local businesses started going into casinos. So any net gain for a casino is a net loss for the community," Krutz said. "Outside of Las Vegas, casinos don't bring in outside wealth. They cannibalize the local business community by taking money that people would have spent elsewhere."

Beyond retail and employment impacts, Krutz cites the social collateral damage of gambling.

"The most comprehensive analysis to date finds that the social costs of casinos, including crime and law enforcement, outweigh the benefits by a ratio of 2.8 to one," he said. "New research has found 12% of property crime attributable to the presence of casinos. The most critical concern to me, though, are studies that show as little as 4% of gambling revenue comes from so-called responsible gamblers, while up to 90% of revenue comes from the small percent of gamblers who meet criteria for addiction. Our society is not made better by for-profit companies partnering with governments to exploit addiction."

Advocacy for reform

Looking toward the future, Krutz noted that the marriage of technology and gambling has heightened the risks. With online sports betting and the recent surge of prediction markets, the slot machine is now a smartphone, leading to a reality where 10% of college students are reportedly betting with their student loan money and teenagers are inundated with gambling advertisements.

To address these concerns, Krutz joined the national board of the Stop Predatory Gambling Foundation in 2007. He currently serves as the board president for the Boston-based organization, advocating for state and national gambling reform. For Krutz, the mission is about restoring honesty to public policy.

"Gambling depends on an exception to the fundamental rule of economics: the idea that people act in their own self-interest," Krutz said. "That exception is addiction. It has become blindingly obvious that the profitability of gambling operators depends on exploiting the addictive tendencies of a small group of people. Many people are now standing up, calling it out and being honest about it. I'm glad to see my research making a difference in that effort and grateful to Boise State for making it possible."

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