For decades, Australia has been disreputably recognized the problem gambling capitol of the world. The popularity of pokies is far superior to that of any other nation. Researchers now theorize that an “actuarially fair poker machine”—that is, one with no house edge—could solve Australia’s struggle with gambling addiction.
The idea has been proposed by a pair of researchers; Dr. David Rowel of the University of Queensland Centre for Clinical Research and Asia-Pacific Centre for Neuromodulation, and Professor Dorte Gyrd-Hansen of the Department of Business and Economics and Centre for Health Economic Research (COHERE).
Dr. Rowel and Professor Gyrd-Hansen co-authored a hypothetical paper, “Could a Pigouvian Subsidy Mitigate Poker Machine Externalities, in Australia?” Their research indicates that, if pokies possessed a 100% payout percentage, meaning that over time, for every $100 that is wagered, $100 will be paid out, problem gamblers would not exist; at least not in such abundance.
At present, the average return to player (RTP) on Australian poker machines is about 90%. Thus, for every $100 wagered, $90 is paid out in winnings, the other $10 collected by the operator as losses. The losses are generally used to fund sports clubs and other respected community projects, which is seen as a positive for society, but the social harm that comes with it cannot be overlooked.
In 2010, the Productive Commission reported that Australians lose approximately $12 billion to the pokies each year, and that about 40% ($4.8 billion) of that is attributed to problem gamblers, who lose an average of $21,000 annually to poker machines.
The thesis by Rowel and Gyrd-Hansen “considers the economic and political feasibility of using actuarially fair poker machines, configured to lose an average of $0 per hour as an alternative and potentially more effective harm minimisation strategy.”
The idea of Australian pubs and clubs overflowing with RTP 100% pokies certainly seems ridiculous. At a glance, one would have to question whether a higher chance of winning would simply cause more people to gamble more often, thereby proliferating the existence of gambling addiction. According to these researchers, the answer is no.
“One may rightly ask whether an actuarially fair poker machine would ultimately help the problem gambler,” they said. “Gambling with an actuarially fair machine would not guarantee zero loss for every gambler. Winners and losers would still exist,” Rowel and Gyrd-Hansen explained. “Given a random stopping decision, the central limit theorem states that gambling returns would be normally distributed, around a mean of zero.”
The difference comes by way of time/cost ratio.
The researchers explained that, “In principle, gambling with an actuarially fair machine will require on average an infinite number of bets to lose an initial stake. If the RTP were 90% it would take on average 210,000, single line, $1 bets to lose $21,000. At three seconds per bet – in other words, the average Australian machine – this would require 175 hours of continual gambling.
“Time costs increase exponentially as RTP approaches 100%. All other things being equal, increasing the RTP to 95% would double the time costs. An increase to 99% implies a 10-fold increase and to 99.5% a 20-fold increase in time, and so on.”
Ultimately, Rowel and Gyrd-Hansen are theorizing that problem gambling would be subjugated by sheer fatigue. A gambler who spent 10 hours per week playing the pokies would have to increase their time to 168 hours per week to produce a notably positive or negative result. They believe that replacing “the income constraint with a time constraint” would eliminate the high losses of problem gamblers.
Implementing RTP 100% Pokies for Problem Gamblers
Rowel and Gyrd-Hansen said their harm minimization theory would contain three key elements, starting with voluntary participation. As such, problem gamblers would be more inclined to seek out pokies with RTP 100%, while the casual gambler still may prefer their usual destination.
They believe the cost for setting up such a program would be much lower than the currently proposed pre-commitment program, wherein every poker machine would be required to undergo a software update, followed by continual database monitoring.
Last but not least, players would not be subject to identifying themselves as gambling addicts; a notable deterrent with the voluntary pre-commitment system Australia is testing at the moment.