How Lotteries Are Bad For Players, Winners, AndВ States
The highest Powerball jackpot in history, $590.5 million, is waiting to be claimed by the winner in the small town of Zephyrhills, Florida. While the lucky winner may feel a sense of exhilaration, there can be huge down sides of the lottery for those who play, those who win, and the state governments that rely on the revenues.
With odds stacked sky high against actually winning a jackpot, lottery players lose an average of 47 cents on the dollar for each ticket. With such low payouts, tickets act as an implicit tax of 38 percent.
Yet poor people are far more likely to buy tickets than their wealthier counterparts. They spend a larger percentage of their income on the lottery, and many studies of state lotteries have found that low-income Americans account for most of the sales and that sales are highest in the poorest areas. One study found that a reason for this is that “lotteries set off a vicious cycle that not only exploits low-income individuals’ desires to escape poverty but also directly prevents them from improving upon their financial situations.” The loss in income of buying tickets that provide no reward is harder to bear on a slim budget.
Those who win may not be much better off, however. The National Endowment for Financial Education estimates that as much as 70 percent of those who land sudden windfalls lose the money within several years. Lottery winnings have led some to drugs, bankruptcy, and family fractures.
The revenues from lottery tickets act as a regressive tax because states use them to fund many public services, such as education. Lotteries netted 11 states more revenue than their corporate income tax in in 2009. But states don’t fare well either in the long run. While states that have lotteries increased per-capita spending on education at first, after some time they ended up decreasing overall spending, while states without them increased investment. One study found that “nonlottery states spend, on average, 10 percent more of their budgets on education than lottery states.” In fact, lottery revenues may not end up increasing funds and could actually increase budget imbalances. There are only so many tickets that a state’s population can buy, making it a short or medium term fix but not a long term source of revenue.
The chances of winning the Powerball jackpot were very low at just 1 in 175.2 million. One person has likely won it and will now face the challenges of managing a huge influx of new money. The rest of the residents and the state’s revenues are not likely to fare as well.How Lotteries Are Bad For Players, Winners, AndВ States The highest Powerball jackpot in history, $590.5 million, is waiting to be claimed by the winner in the small town of Zephyrhills, Florida.
Not Just a Fairness Problem: Lotteries Warp Our Minds
He comes for your soul.
By now we all know the argument that lotteries actually hurt the poor. Actually, they hurt us all.
As Fox News relishes, “Barack Obama slammed the Illinois lottery” as a State Senator, warning that it “targeted ‘lower income’ people who spent money they ‘don’t necessarily have[.]'” But as Henry Blodget points out at Business Insider, there’s more afoot than a ‘fairness problem’.
Even though Americans making $13,000 or less drop a sigh-inducing 9% of their income on lottery tickets each year, according to a study reported by PBS, the adverse psychological impact of lotteries may be more significant than these lost wages. Rather than simply being stupid, poor gamblers (yes, lotteries are gambling) more likely jump at “any chance at radically improving their circumstances,” on the theory that any chance is “probably better than having no chance.”
Yet there are any number of longshot decisions and behaviors that could result in a better shot at greater prosperity than buying a lottery ticket. The twisted genius of lottery tickets is that, per purchase, their non-financial opportunity costs are so low. Is there really a better way to spend that thirty seconds of time it takes to purchase a tiny shot at a huge payday? Yet the cumulative psychological cost of buying and hoping, again and again, instead of allocating that focus, discipline, and persistence of aim in other ways, is probably far greater than we’ve given credit for.
Importantly, this isn’t an effect that’s restricted to the poor. Blodget asks provocatively whether government has “discovered a magical way to tax people — one in which even anti-tax crusaders voluntarily choose to pay huge taxes in exchange for a minuscule chance of making a killing?” Even more provocatively, we can ask whether, with lotteries, government has stumbled upon a way of dramatically increasing its power more in a psychological than a monetary way.
After all, the most striking feature of lotteries, especially the multi-million-dollar events, is that they conflate fate and the state. One needn’t obsess over Shirley Jackson’s notorious, dystopian tale about a particularly malevolent lottery to fear the subtle yet profound effect on society of ritually mixing up the fickleness of fortune and the arbitrary agency of government. Religion often holds out the promise of transformative moments that can lead to spiritual salvation — in exchange for a lifetime of living in adherence to a disciplinary creed. Through lotteries, government holds out the promise of worldly salvation in exchange for an action that might be a whim and might be a long-held habit. As Joshua Mitchell has observed:
However noble may be the cause toward which the revenues are directed, [lotteries] foster an indigence of soul that must be overcome if democratic liberty is to thrive. In the service of revenue, they undermine the very idea of an extended temporal horizon — without which rational action becomes wholly inconceivable.
This insight leads in striking directions. Religion helps foster long-term thinking, thereby at least potentially strengthening rationality; secular rationalism, aligned with liberty and against statism, itself finds strong reason to oppose government lotteries; and individuals not implacably opposed to ‘a role for government’ in helping Americans succeed will agree with Mitchell that “long-term goals ought to be established by government in order to develop and fortify” habitual long-term thinking: “Profoundly more important than their ‘costs and benefits’ are the effect [government-established long-term goals] have on the temporal horizon of the democratic soul [or psyche].”
For Mitchell, what really matters is “the invisible and fragile capital” on which rational action, and thus economic power, is predicated.
Though lotteries reveal a path toward psychological servility more quietly powerful than anything reflected in a CBO report, they also suggest that people like us in a democratic time will need stronger and stronger secular aids in long-term thinking, and that some of them may have to come from government. Those of us who fear our inability to limit the temptation of psychological reliance on government to this kind of function will have to do a better job of demonstrating how the private sector can inculcate long-term thinking on truly public scale. Of course, to achieve that, the private sector requires a certain sort of culture, deeply religious or not. And so long as lotteries continue to flourish, that culture will eventually fade further out of reach than that $640 million jackpot. He comes for your soul. By now we all know the argument that lotteries actually hurt the poor. Actually, they hurt us all. As Fox News relishes, "Barack Obama slammed the Illinois lottery" as a State Senator, warning that it "targeted ‘lower income’ people who spent money they ‘don’t necessarily have’" […] ]]>