The Psychology and Economics of Gambling

Many people, as the basic principles of economics would tell us, would naturally tend to diminish, if not totally eliminate, risks in their life in general. This principle pervades down to every socio-economic activities one can enumerate, and that are directly related to the achievement of primary goods such as wealth, health, etc...This explains the prevalence and of insurance and pre-need industries.

In line with the aforementioned premise, it is somewhat anomalous to find a significant number of people highly involved in gambling. Gambling as defined in some books is the act of wagering money, or anything with value, with the intention of earning more in a short range of time given the uncertainty of results. This definition shows that a number of people actually prefer urgency than uncertainty. Does this debunk an age old principle that has been proven for centuries? Highly improbable, but why is it then so prevalent?

In many countries, people are hooked into a variety of gambling activities. There are casinos and back room card games to gamble away your money. There is government sponsored lotto, and the ever applicable betting in almost all of socio-economic activities, whether it be sports, horse racing, dog racing, and more.

Why? This is the question.

Of course there is no easy answer for such matters that involve a significant volume of people. One could argue that each individual involved in gambling is unique and has their own unique reasons. But are we not all in agreement that gamblers gamble to increase the material good that they currently have? So the reason must be the same for all. So why then do people get addicted to gambling?

The most rational explanation is that gambling gives you a false sense of security. Case in point, lets say a certain John Dough bets 1 dollar and wins, his money has been doubled in a short span of time. This makes John feel more secure as his particular action of betting was reinforced immediately. This gives him the idea that the act of gambling he made was merited immediately and hence the act is good, otherwise stated, promotes his well being. Therefore disregarding any ideas of risk and minute probabilities. Hence, he gambles as frequently as he can.

In conclusion, gambling gives people a quick remedy for urgent predicaments, therefore giving them a false sense of security. The key to not falling for this fallacy is to always be aware of your own finances and not fall into this very susceptible trap.