The lottery is a tax, an inefficient, regressive, and exploitative tax
metrocosm.com
metrocosm.com
I thought the article was going to be yet another claim that "a tax on people who are bad a math", I was pleasingly surprised that it focused on the tax created by the state monopoly, not on the fact that lotteries have negative EV.
The main counter I would offer to the article is that it isn't clear that there would be much of a "social" benefit in opening the lottery to competition. With the variance so high, and the players paying little attention to the odds, it's likely that the result would simply be a tiny amount of people earning about 35% more when they hit large prizes, and the rest spending the same amount of money on lottery.
When you buy liquor, you pay the market price (call it $10) plus an excise tax that the government adds on (let's say $2).
Imagine the government nationalizes the liquor business. The buy up every liquor company, and continue operating them the same way as before ($10 price + $2 tax). I think anyone would agree that this $2 would still be considered a tax.
Now let's say the government gets rid of the $2 tax, but bumps the price of liquor up to $12. The tax is still there, it's just implicit now.
I live in Toronto, no need to imagine :(
You can absolutely avoid paying them by not drinking, and millions of people indeed do just that, but the fact that a tax is easily avoidable does not make it any less of a tax.
https://en.wikipedia.org/wiki/Externality
Gas taxes are perhaps the clearest example of this where you can directly compare revenue with costs.
I think that the major difference comes from the magnitude of the power.
You are describing two possible measures: reducing somebodies mobility and destroying financial situation.
State can in both situations be a lot of more effective and therefore offer better competition against the mafia.
If a State wants to reduce somebodies mobility, it will arrest this person. In many cases this can be extended to eternity.
A state can be also more efficient in the second case - instead of burning down the house, state can just confiscate it.
I'm usually the first guy ranting about excessive state power. I won't be hard to convince. Convince me.
The Mafia didn't force people to play their numbers games. They didn't need to. There were more than enough willing and voluntary participants.
There's also the simple well established precedent of vice taxes.
The comparison to casino games in the article is particularly unhelpful, since the reason why most casino games have low house edges is nothing to do with competition and everything to do with being designed to encourage bigger and more frequent bets by deluding the gambler into believing their small wins are cancelling out their small losses. A roulette player loses 5.3% per spin, not per week, and since bets are sequential and games fairly rapid, a weekly session at a casino don't even have to be unusually long for expected losses to approach 35-55% of the amount bet; the same proportion of principal the participant could otherwise have expected to lose on buying tickets for that week's lottery. But because of the structure of the returns, people tend to bet more in casinos, and they can spend all day every day there if they want to. Bookmakers for horse racing are actually in a more competitive market than casinos in most areas but have much bigger house edges, because races can only happen so fast.
Lotteries are at the other end of the scale, marketing the dream of a weekly opportunity to achieve massive lifestyle changes to people whose decision to play isn't at all affected by whether they can remember ever winning anything from it, and probably have no idea of the expected return from the game they play
And allowing people three different privately-run massive dream jackpots to pursue is probably going to encourage them to buy more tickets. This means that even if margins do come down as a result of competition - despite participants' indifference to expected return and marketers' active avoidance of the subject - a lottery player tempted to buy a ticket in each of three competing weekly lotteries is almost certainly worse off than they would have been had there just been a single lottery in town (and they been happy to settle for a single ticket per week). It seems certain that new entrants pushing similar products will increase rather than decrease the amount wasted on lotteries; demand for lottery tickets simply isn't elastic enough with respect to expected return[1] for the alternate scenario of them succeeding by cannibalising the state lottery's business with juicy jackpots to make sense.
[1]if it was elastic with respect to expected return, demand would be negative!
I do see one potential for a lottery that could diminish lottery spending. A lottery that you pay for only once in your life, and that automatically enters you for a daily drawing every day, for the rest of your life. The odds of winning would be adjusted accordingly, but people would still get the thrill everyday that today, maybe, they could win.
However, last time I bought one the woman next to me bought $80 worth of mega millions tickets. To be blunt at the cost of sounding unkind, she looked like she was a lower class individual. I truly felt bad for her (for reasons I won't elaborate on for conciseness) and I thought about all the people spending a decent sum of cash on something that is analogous to flushing money down the toilet.
I think the lottery does much more harm than good to society as a whole and should be done away with. The people who get into spending loads of money on these tickets are ones who are - generally speaking - uneducated and in a position where they don't have much going for them. Instead of being proactive and trying to improve their lives (easier said than done though, i know), they get caught up in this dream that destiny will save them from a life of difficulty. Obviously those susceptible to addiction are most affected and taken advantage of here, as mentioned by some other comments. It's not really a "tax on the stupid" because these people are more of a cost to society by wasting money and putting themselves in harder positions.
Not to mention the people who DO win the lottery don't often find themselves living the peachy life they would expect.
But I do think that the government should reinvest all profits in education (not necessarily gambling related), gambling therapy, etc...
Just because someone dreams of working with kids, or being a vet doesn't mean they have the natural skills needed to do so, or that the training they receive is appropriate for the task. Too much of this is driven by emotions over statistics and policies backed by those emotionally/politically driven ties.
The U.S. already spends more per student than most other countries do, and we're behind many of them. This isn't a money problem it's a political one. From the publishing companies to churches, the teacher's unions and everyone opposed and in between. There is far too much politics in and out of the classroom. Kids need to learn that life isn't fair, not everyone wins, and that sometimes you will lose. That doesn't mean you give up and stop trying.
If the government runs lotteries, it should only if they have ascertained that a total ban would send lottery players into the arms of organized crime, and government should only run those lotteries with the health of these addicts in mind, and not with any kind of profit motive.
Advertising should be of the form: "If you absolutely have to play a lottery, here's how to do it, but be aware that you will lose money and very likely not win anything", and certainly not of the form: "This could be your ticket out of this mess!"
Fully 1/3 of lottery winners eventually declare bankruptcy. Not only that they have a x20 chance of being a homicide victim, and 120x of homicide by a family member. Basically all of your relationships are likely to be destroyed by greed, and you will die alone and unhappy.
https://www.reddit.com/r/AskReddit/comments/24vo34/whats_the...
In fact, a decent accountant will show you most taxes are voluntary...
That's probably not a very controversial thing to tax, though.
The drug has been vilified, for good reason in many cases, but is used as a sedative to the poor who don't have access to good doctors in too many communities.
(I really don't want to debate this. I know when I had panic attacks 2-3 drinks would stop them. I have yet to meet a doctor who won't admit privately that moderate, specific controlled use of alcohol is beneficial to for certain psychiatric disorders. Doctors don't bring it up because it's just not worth worth it. They are afraid of lawsuits because alcohol use carries so many risks, like the real risk of the patient becoming an alcoholic.
(Just keeping it real Homies. If you are currently suffering from an anxiety disorder(including some symptoms of PTSD, and the doctor is just offering a heterocyclic drug(like Prozac), or a drug that really does nothing, like Buspirone. Light, specific use of alcohol will help with some symptoms. Don't abuse the drug. Don't start drinking every day, or drinking socially. You only drink to alleviate specific symptomology. You need to save those liver cells because you use alcohol differently from the rest of the population. In other words; don't become a alcoholic? I'll get a lot of heat from this post, but it's meant for individuals who are suffering, and this advice only goes to individuals who have some self-control? If you didn't have self-control before the illness, and life was just a big party, don't follow this advice. Specific use of alcohol to control your symptomology will just result in your disorder getting worse, and yes--you will end up homeless, or worse. I am not a doctor.)
The problems with alcohol are (a) it just treats the symptom and doesn’t help fix whatever underlying issue is causing the stress, (b) it’s easy to take a far larger dose than necessary, far more often than necessary leading to abuse, and (c) acute effects of a large dose and chronic effects of frequent use are both highly destructive.
If you don't like that, you're welcome to protest and vote for candidates that provide hope for change. That's the system and it's here to protect all of us.
The only way one can misunderstand this distinction is to believe government is involved in anything by default.
"The lottery is not a tax. The inflated price of lottery tickets is."
If you want to play a lottery, you have to play the state's lottery, and the article makes the case that a very high tax is levied for that privilege.
So sure, we can hope that some day that people who desire higher variance can conveniently play non-profit lotteries which won't "cost" them anything in expected value terms. And perhaps separating the nuance between "losing money by playing the lottery" and "being taxed for playing the lottery" is a step on that path. Although I think it's likely that privacy technology solves this problem before the cathedral does.
But this doesn't change GP's implying that not buying alcohol or cigarettes is equivalent to not paying the taxes on what you have bought. I suppose this nitpick is so divisive because people either view playing the lottery as equivalent to paying a tax due to that long held adage and that most every transaction is simply giving money directly to the government, or as the act of playing the lottery with an inbuilt tax as the article has led them to. But IMHO if you want to highlight the nuance of the latter, you'd be better off pointing out how people that run/play private lotteries are thrown in jail rather than equating tangible vices with purely throwing money away.
The IRS is the most feared government department in the US. I would say people fear it even more than they do the NSA.
Much like many other comments on this article, that seem to have been written in a painful rush to demonstrate just how damn rational the comment author is.
The headline is neither wrong nor sensationalised, and the article is nuanced and cogent.
Furthermore, I think everyone has a right to his or her own opinion.
Honestly, this is the biggest case against the lottery, of all the things listed in the article.
I can't remember the last time I saw an ad for the lottery on TV, let alone something as ridiculous as the one from Illinois they show in the article. I wonder how much of the problem would be fixed by fixing this, rather than doing away with state lotteries altogether?
> if state governments are going to continue offering lotteries, they need to be regulated at the federal level and with the same standards as private businesses.
Some states actually have privatized their lotteries. Illinois is one of them, though they're changing that back now.
Ironically, the main "problems" that Illinois and New Jersey have reported with this approach are decreased revenue and sales[0] (ie, the exact things this article is trying to accomplish in the first place). So it seems that privatizing the lottery systems would be another approach.
[0] http://www.phillymag.com/news/2015/04/06/chris-christie-lott...
Here in Germany (and Europe I think) they have to be super honest about it. The ads actually do say the chances are something in the ballpark of 1 in 100 million. Smallprint of course. I believe they still make lots of cash.
A few lines down OP says:
> For example, in Ohio’s marketing plans for its SuperLotto game, it stated that advertisements should coincide with the receipt of “Government benefits, payroll and Social Security payments.”
This is what freaks me out the most.
Those lotteries are not privatized in the sense of opening it up to competition.
> Those lotteries are not privatized in the sense of opening it up to competition.
Privatization typically refers to the management, not to competition. For example, we say that electricity is privatized in NYC because it is managed by a (highly regulated) publicly traded company, even though there is no competition[0].
[0] There is now competition for the supply (though not delivery) via ESCOs, but that is a very recent move.
If you believe in the free market, you can only have one of two logically consistent positions on any and all forms of gambling -- either (1) open up the market to any business that can prove it's adequately capitalized and the odds of the games are as represented (e.g. in card games, the deck is standard and not stacked; in lotteries, the winning tickets are randomly mixed in, not given out to shill redeemers in exchange for kickbacks), or (2) ban all for-profit gambling operations.
And given the immaturity of the state of economics relative to other disciplines, I don't see why anyone should just have blanket faith in the free market. The "freeness" of a market is but one variable in what is possibly a million-factor model, a model that possibly won't ever be developed in our lifetime.
Yes, it's regressive on the poor as these people overwhelming play the lottery. But so are alcohol and cigarette taxes. The point of those taxes is to raise revenue from undesirable activities as they both have inelastic demand curves and need to be curbed if possible for the good of society.
Perhaps a useful improvement woudo be to cap the number of lottery tickets a person can buy.
Certainly it makes me depressed to see how much selling lottery tickets dominates retailing in small stores. That means a lot of money is being raked in.
A 'sin tax' really only operates at the margin and are -clearly- not effective at stopping people with a dependence on the 'sin'. At most it encourages under-consumption with people who only have a mild tendency to use that product.
>The government should get out of the lottery-for-profit business
>Allow private businesses to offer lotteries and compete with each other
I'm sure banning government lotteries and replacing them with private ones would be great for society. I mean what could go wrong?
A lottery is just gambling. We already have frameworks for regulating private gambling. Vegas is fine. The world hasn't ended.
So tell me. What would go wrong if lotteries were privatized and regulated to a similar degree as Las Vegas?
Interestingly, the job of advertising state lotteries should walk a fine line between drawing would-be private gamblers to safer state circumstances and inducing people who wouldn't normally gamble to take it up. And it sounds like some of those ads have stepped over the line.
So the most salient part of this article deals with advertising lotteries.
The part about turning the lottery over to private businesses I don't find compelling. After all, the role of private business is to make profit and often does so by gravitating laws in their favor. I don't think businesses would compete to see who can make the most benevolent advertising.
http://www.cnbc.com/2015/08/31/illinois-lottery-winners-rece...
https://www.lotterypost.com/news/72481
Market-rate gambling with a 2-10% cut to the house would be impractical to undercut in this fashion.
I don't care how normal odds of winning are calculated. The above is a shell game in which the only certain losers (from a financial standpoint) are the players.
That is what a typical lottery system boils down to, in essence. It may be possible to justify them for the social causes they promote but they clearly take advantage of the players and particularly those who do not focus on the obviously horrible odds against them when they play in such a stacked game.
This may or may not be a "tax" in the technical sense but it sure is a case of the government rationalizing a system by which it (in my view) takes advantage of its citizens in the name of advancing its social agenda on other fronts.
My grandmother plays the lottery every week and she enjoys it. She is not stupid or addicted, just someone who enjoys the feeling that she might win something.
Do we really need to have a moral panic over something that is quite normal and ordinary? I'm sure there are people who buy too many lottery tickets or are irresponsible with their money. I'm equally sure that privatizing or driving the lottery underground will not solve their problems.
"It’s not a tax on the stupid. It’s a tax on addicts, and their families."
That, I think, is the most fair categorization. But you already see such taxes (for example, in the inflated medical insurance premiums for smokers). So it's not particularly different from existing "addiction premiums".
Here's one that's decentralized and provably fair: https://etherpot.github.io/
Really? The following text is coped from them message at the top of the link you provided.
TLDR: block.blockhash() only works for the previous 256 blocks, so EtherPot is broken.
Something strange happened with EtherPot after it launched. There were 3 subpots the first round, but somehow a single player was being reported as the winner of all 3. This single account only had 8% of the tickets, so winning all 3 subpots was pretty unlikely.
However, that game is not totally fair. There's a house edge and of course fees to pay the Ethereum network (the miners).
And stepping back, I think Ethereum overall slightly missed the mark. I like the idea of Turing complete programs verified in a blockchain. But I don't think there should be any cost if you're able to run your own node. Further, it's impossible to know the cost of a Turing complete program (halting problem) which is further compounded by the relatively confusing fee chart (variable based on market demand) and currency unit names.
Also when you win $1m in bitcoin, cashing it out is probably a bit of a challenge, and you probably need to pay tax on the winnings.
Education is (or should be) one of the major duties of the state. When this is more and more committed to charity, than we are about to loose one of the main pillars of modern society. Already, education of the masses is getting weaker and weaker in many countries, so that the better of people send their children to private schools ... and that is a growing trend.
But of course, when taxes have to go down and down (this is a political manifesto today in some countries), schools and people will loose.
Why? Because there's no rational basis for entering a lottery. It relies entirely on magical thinking. You are effectively polling for the existence of a personal luck deity. There is no need to use a complicated, expensive system for this.
A single $1 ticket, purchased annually, will suffice (this is available in Australia).
In the infinitesimal chance that the magical thinkers are correct, this single purchase will be sufficient for your personal luck deity to respond with the appropriate riches.
I can't find the video now.
i can get gambling on a lot of things like sports, rare events or whether your mate can do x in y seconds... this has some element of fun. lotteries though, they distil gambling to its purest form - numbers...
its like injecting nicotine instead of smoking cigarettes.
They're halfway there already with "vaping". Tobacco requires a lot of land and labor to grow and process; "vapor juice" can be made by third-rate chemistry labs in China for half the cost.
Eventually they'll do away with lottery tickets too, and instead the clerk will just tell you that you lost. Which is reminiscent of https://www.youtube.com/watch?v=xe5rZFCiLsA.
at the risk of being cliché this made me laugh out loud (lol).
hmm. that kind of invalidates the point. XD
1. Avoid associating your new lottery to the low-status images of "making it big" and "lifting out of property". Instead sell them on the image that they are so much more moral for "giving back" and "doing their share".
2. Instead of cold cash, make the prizes be aspirational things that mark them as high-status. Houses, cars, overseas vacations, etc. Make the prizes classy, let the prospect indulge in the fantasy that they too are part of the elite.
3. Make the tickets both scarce and expensive. This way, the ticket itself is a high status marker. Bonus points if you present the image on how much better the chance to win is compared with regular lottery (never mind that both quantities are negligible from a practical point of view). This way they can congratulate themselves on how much more smart than the hoi-polloi they are, on top of being nicer and more benevolent too.
To do so, just discount the tickets for poor people and raise the price for rich people.
It enables those 5% of ticket buyers who are buying 54% of all tickets to experience a false sense of economic security or maybe possibility. In terms of intellectual toxicity, the lottery (and gambling) is right up there with religion.
In my opinion, it is a manifest moral failing on the part of state governments, regardless of the fiscal details. If only -- if only -- there was another source of hope besides the accumulation of more consumer goods.
"Similar too, is the correct reasoning, in regard to the burning of the negro at St. Louis. He had forfeited his life, by the perpetration of an outrageous murder, upon one of the most worthy and respectable citizens of the city; and had not he died as he did, he must have died by the sentence of the law, in a very short time afterwards. As to him alone, it was as well the way it was, as it could otherwise have been.--But the example in either case, was fearful.--When men take it in their heads to day, to hang gamblers, or burn murderers, they should recollect, that, in the confusion usually attending such transactions, they will be as likely to hang or burn some one who is neither a gambler nor a murderer as one who is; and that, acting upon the example they set, the mob of to-morrow, may, and probably will, hang or burn some of them by the very same mistake."
There is clearly demand for people shooting themselves in the foot, so the focus should be on providing it in a way that is not exploitative.
Obviously if you win, you win big, but overall, I tend to strongly agree with him. It is a tax on those who don't think about probability, except for the people who gamed the system and won: https://slice.mit.edu/2012/08/14/winning-the-lottery/
Gaming it is pure genius.
If the government taxes a particular non-monopoly service, no one is forced to buy the service, but the tax is still recognized as a tax.
Mandating a monopoly on a class of service, which monopoly then extracts monopoly rents -- especially where the state receives the rents, or a share thereof -- is pretty hard to meaningfully distinguish from taxing the class of service. Sure, no one is compelled to purchase the service, but a tax on alcohol or tobacco doesn't stop being a tax because no one is forced to purchase alcohol or tobacco.