Tuesday, June 06, 2006

A Dollar and a Dream

A new study claims that state-run lotteries are a remarkably effective way of broadening the gap between rich and poor:

A study published in the current issue of Policy Studies Journal finds that state-run lotteries have a serious effect on income distributions. More than taxes and other forms of gambling, lotteries promote the growth of inequality. That is, they aid the rich in getting richer and the poor in becoming poorer.
No surprise there. What's interesting is that the study also finds that other types of gambling don't necessarily have the same effect; the problem seems to be primarily with state-run lotteries.

In my opinion, one of the biggest problems with these lotteries is that they put the government in the position of promoting public innumeracy and irrationality. New York's lottery motto - "Hey, you never know!" - is a perfect example. The fact is, your chance of winning a multimillion-dollar jackpot is so vanishingly small that you'd be better off keeping your money, and pinning your hopes on finding a winning ticket on the sidewalk.

Lottery promoters tell stories - real or imagined - about winners, because they know that presenting narratives about events makes them seem more believable (cf. the availability heuristic). In a perfect world, governments would be educating citizens about the availability heuristic, and probability theory, rather than exploiting public ignorance of them. In any case, it's not surprising that the people who are most susceptible to lottery ads would be members of the underclass.

It's interesting to consider how government lotteries are promoted, compared to gambling hells like Las Vegas. Ads inviting people to Las Vegas encourage them to think of themselves as successful, attractive high rollers who can easily afford to throw a little money around. Lottery ads, by contrast, almost always have a subtext of desperation and despair; the difference between the two approaches boils down to the difference between escapism and escape.

The notion that state-run lotteries help schools has been debunked many times. The situation in Illinois is a good example of the shell game played with lottery earnings:
The percentage of the overall state budget spent on education stayed about the same after the 1985 earmark. Instead of boosting the total money spent on schools, the state just put less tax money toward education and backfilled with the lottery money.
What I find most fascinating about this article is that it shows how the dream of "hitting the jackpot" persists even among Americans who have no interest in gambling:
"It'll relieve taxes, and I won't play the damned thing anyway, so, personally, I couldn't lose," one Alsip reader said back then. "Now how could I not support a deal like that?"
Because it's too good to be true, that's why; somewhere along the line, you're going to pay dearly for your "windfall." In California, surveys have shown that lotteries make voters unwilling to approve new funding for schools. (Why should they, when they have a lottery?) What's the cost, over time, of a dysfunctional school system? Much, much more than you "saved" by demanding that the budget be balanced by exploiting the delusional hopes of the poor and desperate.

What one must understand is that the lottery doesn't transfer wealth from the poor to the rich because it's flawed. It does it because that's what it was designed to do. And the fact that it accomplishes this redistribution of wealth by feigning sympathy with the plight of the wage slave is what makes it evil, rather than merely corrupt.


Thers said...

I buy lottery tickets but never, ever check them to see if I won.

This is probably the most eccentric thing I do. You can win bar bets in trivia contests with this information.

Anonymous said...

As I see it, lotteries cost  the schools money. Consider my state: annually our citizens spend about $1.2 billion on lottery tickets. The state gives $400 million back as prizes, and pays $200 million for advertising and administration, leaving $600 million for the schools budget.

That means the citizens are paying out $800 million from their collective pockets. (The prizes are of course not returned evenly  across the population, but never mind that.)

For that out-of-pocket expense, we end up with only 75% of it ($600 million) in school benefits. If there had simply been a straightforward TAX of $800 million, all of it would be going to the schools, and the population as a whole would be as rich or poor as it is with the lottery.

Aquaria said...

Funny how the lottery was supposed to solve all our education funding woes here in Tex-ass, but we've had two straight years of one "special session" after another to fund the damned schools. The situation was so dire that there was talk that many schools here might not open in this fall if something didn't get done.

And still, it's "Next time, it could be you!" playing on the radio all day long, with stories from "winners."

I rarely buy lottery tickets, but I'm like Theri in buying them then forgetting to see if I've won! I call it LADD--Lottery Attention Deficit Disorder. I believe it's related to my TV-ADD.