Theories of economic land use suggest that disamenities, including air and noise pollution, access to transit systems, and physical characteristics, can affect market values. If extended to discuss crime, this type of model should indicate that the level of crime in a neighborhood will affect the town's reputation and subsequently lower prices offered by potential buyers of real estate. The Atlantic City case study was chosen because it illustrated changes in crime level exerted by an external effect, i.e., the legalization of gambling. Potential sources of crime included the gamblers, new residents, and an existing pool of local criminals. To measure the impact of gambling, 64 localities of 1,000 people or more in the three adjacent counties were studied; (Unclear how the following sentence fits in with previous text) a system of 3 interrelated equation, composed of 15 variables and 960 observations. The results demonstrate that the introduction of casinos not only caused a major increase in crime rates, but reversed the value-distance gradient, making properties near Atlantic City more valuable than before. All crimes except larceny had a depressing effect on real estate values. However, the frequency of crime occurrence as attributed to casino gambling diminished with distance from the city and so did its depressing effect on property values. 3 figures and 12 notes