Las Vegas Real Estate and Policy Risk

Tyler Cowen says “I should not have told my Las Vegas cabbie (while he was driving) that the real estate market there will not recover for another twenty years.”

This reminds me of a conversation I had with a friend last week about how Las Vegas investments seem extraordinarily exposed to policy risk. What happens if casinos become much more widely legal than they are today? And not just in out-of-the-way Indian reservations, but in major cities? After all, Vegas became Vegas precisely because that’s not a good location for a city so getting into the sin trade seemed like a good way to build it up. But that comparative advantage could be taken away at any time. With California’s budget in shambles, someone in the legislature must be thinking that legalizing and taxing casinos would bring in money.