
Lotteries: America's $70B Shame - ctingom
http://www.theatlantic.com/business/archive/2015/05/lotteries-americas-70-billion-shame/392870/?single_page=true&utm_content=buffer1dd2c&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
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bbarn
My father once won $100,000 from a scratch off ticket. It was a $20.00 scratch
off ticket. I gave him crap for years over it because between playing Keno,
and buying other scratch offs, he's probably spent close to that trying to
recreate the effect.

The thing is, he's very serious about his lottery. He enters every losing
ticket into a second chance registration on Maryland's lottery site. (This was
how I got him to start using the internet, actually) He won a few times and
knows what he's losing. He's not bad at math. He's not rich either, he lives
off of a very small military pension and has a job filling vending machines on
a route.

I've pressed him again and again about how stupid the lottery is. I've pointed
out the math, the bad odds, the addictive design of the games.. you name it.
His answer remains the same. A shrug and "It's fun." I have since realized
after spending afternoons with him at the places he likes to play, that it's
his own odd social network. He knows all the employees, the other regulars. He
complains about politics to the other players. He sweet talks the old ladies
behind the counter. It's his excuse to leave the house. He keeps making his
mortgage payments, keeps making his wife dinner every night, and takes care of
his mother. If he wants to blow his fun-money on lottery at this point, I've
just quit arguing with him and I go play with him when I visit. Losing 40
bucks to spend the afternoon with my old man is a bargain, in my eyes.

~~~
smt88
I'm not surprised that there are anecdotes of people who play in a (mostly)
harmless way. One question I have is whether there might be another way for
your dad to have an equally fulfilling amount of fun without losing as much
money. It would depend on the individual, obviously.

The problem with lotteries is that many of the players aren't like your dad.
There are some serious ethical questions that arise when you think of
lotteries are guaranteed to lose the vast majority of players a substantial
amount of money:

1) If the state didn't run the lottery, who would? Would that money get
funneled into public works if the state didn't run the lottery?

2) Is it ethical to market the lottery in order to create new players?

3) When the lottery is marketed (as it heavily is in many states), is it
targeting vulnerable groups, like the poor?

4) Is playing the lottery an expression of hopelessness for some people? They
know that their $5 is never going to multiply to $10 (the way it might for a
wealthier person), so it's easier to risk that $5 for a chance to win $5
million.

~~~
ryandrake
> 4) Is playing the lottery an expression of hopelessness for some people?
> They know that their $5 is never going to multiply to $10 (the way it might
> for a wealthier person), so it's easier to risk that $5 for a chance to win
> $5 million.

I think this is key. Turning $5 into $10 is impossible. Turning $5MM into
$10MM is inevitable. The Lottery is a band-aid to treat the symptom
(hopelessness). Address the root cause, which is the lack of opportunity for
economic mobility.

~~~
differentView
>Turning $5MM into $10MM is inevitable.

What do you mean?

~~~
ryandrake
If you have only $5 in your pocket as this month's disposable income, there is
no investment vehicle for turning that into $10. Besides putting it in a bank
where it will lose value due to inflation, gambling may be the only non-zero
investment opportunity available to you.

On the other hand, if you have $5MM in your pocket, there are tons of
investment opportunities for you to choose from, from treasury bills to angel
investing, limited only by your appetite for risk. You have an entire
financial services industry that exists for the sole purpose of helping you
turn that $5MM into $10MM.

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rm_-rf_slash
"When you play the lottery, sometimes you win and sometimes you lose. But it's
better than using drugs or alcohol because when you use drugs or alcohol, you
always lose" \- "American Movie"

People who don't play the lottery are always so quick to dismiss it. They
disregard how accessible it is - you don't need a next-gen console or flat-
screen tv, just cash - as they disregard how independently fun it is - you
could be sitting alone in a dark room with nothing but a lottery ticket in
your hand and be perfectly satisfied with fantasies of winning. It's like
discussing guns with people who will never use them.

Let's not get too carried away by sensationalism and look at this from a
bird's-eye view: lotteries are great sources of revenue (better than state
corporate income taxes? Holy cow!), they are low-health-risk (someone may need
treatment for gambling addiction but it never hurts their lungs or livers),
and they are easy to scale up and down.

If the regressive-tax-on-the-poor argument is too convincing for you to
resist, then here's a solution: register lottery purchases so you can only buy
$X in lottery tickets based on your $Y income. Just don't come crying to me
when the state comes for your income and property taxes to make up the
difference...

~~~
liber8
_" you could be sitting alone in a dark room with nothing but a lottery ticket
in your hand and be perfectly satisfied with fantasies of winning"_

This is one of the biggest reasons I dislike the lottery, from a societal
perspective: it satisfies people who would otherwise have an incentive to go
out and create their own success. You can see this anytime the jackpots get
big enough that non-players buy tickets. There is a noticeable drop in
productivity as people sit back and fantasize about winning $1 billion or
more. Instead of actually doing something that would improve their lives,
they're happy sitting in the dark and fantasizing. If that's a one-day a year
occurrence, fine. But its clearly not a one-day occurrence to the regular
players, and I think it negatively impacts their lives far beyond the actual
cost of the tickets.

~~~
ryandrake
You act as though everyone has the opportunity "to go out and create their own
success," which is less and less true the poorer you are.

~~~
liber8
Let's assume you're right, and that many poor people have no opportunity to
better their situation. That doesn't change the fact that some people
absolutely do have the opportunity to better their situation, but choose not
to because their desire for a better future is satisfied by the fantasy of
winning the lottery. The lottery acts as a drain in these cases, not only on
the individuals who continue to stagnate, but to the rest of us who would
benefit from those individuals contributions.

I'll also note that I fundamentally disagree with your statement. Everyone has
an opportunity to create their own success. Obviously not everyone has the
same kinds of opportunities or the same number of opportunities. Those of us
with enough time to comment on Hacker News probably have dozens of
opportunities PER DAY to create our own success, whereas a poor black kid from
Baltimore may only have one, and it may require him to wake up at 4am to go to
work or stay up till midnight to educate himself. But those opportunities
still exist, even if you're poor.

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xixi77
Really, people should pause before calling behavior that does not conform to
their model or their own preferences "irrational".

The typical argument goes like "Expected monetary payoff is negative,
therefore buying a lottery ticket an irrational decision" \-- but this
ignores, for example, the possibility of winning a life-changing prize, that
would provide enjoyment far above and beyond what e.g. investing money spent
on lottery would, and there is no reason why this possibility cannot
compensate for the expected loss. Technically speaking, claims of
irrationality implicitly rely on assumption of concavity of preferences, but
there are good reasons to think that it's not always correct.

~~~
ryandrake
Isn't the "Expected monetary payoff" of starting a company negative?

~~~
welterde
It's not purely chance how well a company will do.

And if you just consider the statistics I wouldn't have thought that the
fraction of companies failing is that extreme for it to be negative in the
expectation value (especially if you group it into different categories,
etc.). Economically it sounds counter-intuitive to me as well.

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exolymph
This issue boils down to the proper function of government: ensure people's
freedom to act as they wish (barring negative impact on others), or enforce
the "healthiest" behavior?

Yes, buying lottery tickets for any reason other than entertainment is
irrational. But does that mean it shouldn't be allowed? People are _choosing_
to spend their money like this.

Personally, I prefer a government that lets people do stupid things -- e.g.
buying a lottery ticket with the expectation of winning -- to a government
that paternalistically enforces middle-class norms.

~~~
wrong_variable
> "Personally, I prefer a government that lets people do stupid things"

What an ignorant statement to make. Are you okay with people making "stupid
decisions" like smoking in public places ?

Are you okay with people making "stupid decisions" like driving drunk ?

Are you okay with people making "stupid decisions" like shooting up a school ?

Society works when we look out for each other - and not let people do whatever
they think is "right".

~~~
crazy1van
I think his caveat of "barring negative impact on others" pretty much covers
these cases.

~~~
wrong_variable
> "barring negative impact on others"

You think taking what little money poor people have from them via allowing
them to spend it on lottery does not have social consequences ?

~~~
frogpelt
Different methods of governing can basically all boil down to a simple balance
scale:

On one side you have the rights of the individual and on the other side you
have the rights of the community.

Some people tend to lean the scale toward individual rights and others toward
community rights.

Smaller government tends to handle the balance by staying out of the way until
it's necessary that they step in. Bigger government tends to handle the
balance by marking clear (or blurry) lines and moving them when necessary.

~~~
exolymph
This is exactly what I was trying to say. Well put.

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ideonexus
I would never think of playing the lottery or engaging in any other form of
gambling because I understand the odds are always in favor of the house. I
understand that I'm going to lose money. What a terrible irony that we fund
public education with a lottery that relies on participation by those who
don't understand basic math?

But I see this as part of a larger trend of preying on the poor. Watching far-
right media, I see poor people being told to invest heavily in gold, reverse
mortgages, guns, and raging them up into sending all their money to political
organizations whose sole purpose is to take money from the angry. And there
are plenty of examples on the left as well (people investing in college
degrees for the sake of college degrees without any idea if their field of
study is a good investment or not). I don't know how we break these cycles and
inspire low-income American citizens to temper their emotions and rationally
invest in their futures.

~~~
walshemj
That depends if the prize is large enough then the pot odds are such it does
make sense to bet on the lottery.

~~~
nmrm2
1\. This basically never happens.

2\. Don't compare to letting the money sit under a matress. Insteaad, compare
with other investments.

Buying a lottery ticket doesn't make sense when measured purely in terms of
profit, even when the expected profit is non-negative.

~~~
cauterized
Then neither does buying a movie ticket make sense. Of course it doesn't make
sense if you frame it as an investment. But people don't necessarily buy
lottery tickets expecting to win and more than you or I sit down at a slot
machine expecting to walk away with more money than we arrived with. They buy
them as entertainment or a reason to hope or dream for a few days.

~~~
nmrm2
walshemj's comment was clearly referring to cases where the expected profit of
a lottery ticket is positive ("pot odds are such it does make sense to bet on
the lottery"). I'm working from walshemj's assumptions about how risk and
benefit should be measured, which is in terms of monetary value.

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maerF0x0
A lottery is a better investment than other crap the poor often buy. Crack,
TVs, xboxes, alcohol all have a EROI of 0. A lottery at least is >0 . Better
would be if we sold partials of VT(I) in the store at lottery ticket prices.
$2 for a near 0 chance at 1B, or $2 for a near 100% chance at $4 given enough
time.

~~~
kdamken
This is a sad truth that's a lot less flashy of a headline, so it's not
surprising it's not covered. You're unlikely to see an article with the title:
"People who buy stupid shit they don't need and can't afford shocked to find
they are still broke".

Much easier to blame the lottery. Yes, poorer people like to buy lottery
tickets. They want a chance to rise up and be rich, and there's really no
other way most of them can ever do that.

~~~
maerF0x0
> They want a chance to rise up and be rich, and there's really no other way
> most of them can ever do that.

Then maybe lottery tickets are actually smart.

------
savanaly
>According to the North American Association of State and Provincial
Lotteries, lotteries took in $70.1 billion in sales in the 2014 fiscal year.
That’s more than Americans in all 50 states spent on sports tickets, books,
video games, movie tickets, and recorded music sales.

One should be careful when making this sort of comparison-- at least from the
standpoint of the overall economy. The cost of "producing the lottery" is more
or less fixed relative to its revenue, i.e. its marginal cost is free, but
it's not necessarily free for the other good they're comparing it to. For
consumers to increase the number of movie tickets they buy or books they buy,
more theaters have to be built or books have to be printed. The cost of
producing the extra consumption goods is relevant, precisely because there is
nearly zero cost of producing the consumer good that is a lotto ticket.

In other words, money is changing hands (mainly from the poor people's hands
into the government's and from there who knows), but resources are not being
consumed like they would be if we were constructing new movie theaters all
over town. That particular aspect of the lottery is actually praiseworthy and
might be missed by a simple comparison of consumer spending on it vs "all
these other forms of entertainment combined".

~~~
rm_-rf_slash
As I said elsewhere, it takes nothing more than a printer with ink and paper.
No terminals, no coin-collectors, nothing else. We shouldn't antagonize a
ruthlessly efficient method of revenue because people make bad decisions.

Whether it's killing a man or providing jobs to miners, the dynamite doesn't
care.

------
sremani
For me lotteries is one of the reason, I have grown skeptical of State.

1\. They Lie, Lie about funding schools and lottery is the only way to do it.

2\. Lie about the Prize money, the advertisements of lottery are untruthful
and a private entity would be charged with fraud.

3\. The practice of gaming the game, i.e. they try to make lotteries popular
and sink a lot of money for advertising, they claim 50% goes for prizes but of
the remaining 50% a lot goes to advertising than going to schools.

4\. Taxing the winning, splitting the wins. Even if you win, you will be
short-charged depending on the number of winners.

5\. Exclude non-State entities from having their own lotteries, State
monopoly.

6\. Corporate tax cuts are pretty much common in states that aggressively
promote lottery, lotto and video poker.

Even if it is entertainment, which it is not, Government should not be in it.
I am not against lotteries, they need to competitive and have should have a
level transparency, that is currently lacking since the law makers are the law
breakers.

~~~
eric_h
> Even if it is entertainment, which it is not

Just because you don't find it entertaining does not mean it's not
entertainment.

I'm not necessarily disagreeing with your other points, but gambling of all
types is most certainly an entertainment product, regardless of its tendency
to create addiction, etc.

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aznpwnzor
I don't see it as preying on the poor. I see it as a hobby / investment of the
poor due to thousands of other factors that already prey on the poor.

Imagine you have 0 chance of having any savings and barely staying ahead on
your mortgage. The breakdown is this:

upper class: easy access to what you want and need middle class: easy access
to what you need lower class: difficult access to what you need

If you are never going to have disposable income and forever be barely a
paycheck ahead, what investments are available to you? You raise your child as
well as you can for the school district and streets you live on, at best they
go to a low-tier state school -> more debt. You can't retrain for a job
because you are half a paycheck away from needing to take a second job.

In this situation, the outcomes are this: don't play lottery -> 100% stay poor
play lottery -> 99.99999% stay poor

what do you choose?

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MichaelBurge
The poor do a lot of dumb things: They don't track their money, they rack up
credit card debt, they don't plan to minimize taxes, they depend on payday
loans and check cashing services, they drink and smoke and do drugs, they
constantly overdraft their bank accounts, they spend too much on
entertainment, etc. The middle class are better with this, mainly because they
have more money and so are less likely to be fined for non-payment.

I know some family approaching 60 who are still paying off the house, 2 cars,
and an RV. If that wasn't bad enough, they play the lottery every week because
"somebody has to win".

I still think we should abolish social security, but after seeing countless
examples of people racking up debt buying stuff they don't need and then
depending on it in old age to avoid starving, it's almost enough to make me
think it has some merit.

I feel like that entire line of thought with government-enforced retirement
accounts leads to increasing taxes on the poor since they can't be trusted to
responsibly spend it. Which actually might be what a lottery is.

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pklausler
Lotteries are a self-assessed tax on poor critical thinking skills.

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Smaug123
Duplicate from two days ago:
[http://www.theatlantic.com/business/archive/2015/05/lotterie...](http://www.theatlantic.com/business/archive/2015/05/lotteries-
americas-70-billion-shame/392870/)

~~~
jessaustin
ITYM:
[https://news.ycombinator.com/item?id=11365501](https://news.ycombinator.com/item?id=11365501)

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thenadamgoes
Wow. What's going on in North and South Dakota that there's such a big divide?

~~~
gozur88
In oil country the wages are really good and there isn't much to do.

~~~
jessaustin
That doesn't explain the _difference_ between North and South Dakota.

~~~
gozur88
Aren't there a lot fewer oil workers in North Dakota?

~~~
jessaustin
Currently, with the price as low as it is, I don't know. While the "boom" was
on, there were actually more in North Dakota.

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diogenescynic
The government runs lotteries because otherwise criminal organizations would.
Now if only the US government would apply this same 'harm reduction' strategy
to other 'crimes' like marijuana use.

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transfire
Lotteries are really a great wait for the state to collect taxes.
Unfortunately the way the are currently handled results in too much
profiteering/skimming/corruption.

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mandarlimaye
We should abolish income tax and introduce mandatory lottery

~~~
rm_-rf_slash
When I'm done laughing I'm going to take this suggestion to my college's
economics and federal policy faculty...

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Houstonymous
I'm pretty sure we let the government run the lotteries here in the US because
it's a lot better than when the gangs would run them. It's much the same
argument for drug legalization, really... if people are going to be stupid,
and you know they're going to be stupid, at least help them be smart about
being stupid.

~~~
sanxiyn
We should also cut tax on lottery tickets. It would reduce economic
inequality.

[http://econlog.econlib.org/archives/2015/05/low_hanging_fru....](http://econlog.econlib.org/archives/2015/05/low_hanging_fru.html)

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maerF0x0
@OP put May 2015 in the title.

