State run lotteries are the subject of much debate. For some states, the lottery system provides an important source of government revenue. These monies can be funneled into all sorts of activities, including helping to finance public education. Some people, however, worry that lotteries are little more than a "tax" on financial stupidity. In a similar vein, some view it as a sort of regressive taxation in the sense that lottery tickets are usually sold to lower-income households, meaning that most of the revenue raised to finance government operations comes from low-income households instead of from wealthy households as is traditional with, say, an income tax. Others say it is not a tax at all, as people voluntarily choose to purchase the lottery tickets.
Regardless of your interpretation of the above, it is clear that lotteries, like casinos, only make money when there's a house-advantage, which means that the expected value of every lottery ticket is actually negative. To put this another way, it's true that you can't win the lottery if you don't play, but it's also true that for every winner, there were thousands if not millions of losers. While the media shows us the person who won, say, $2 million, they do not show us the millions of people who lost say $5 per ticket.
Join Dr. Hebert as we discuss the economics of lotteries. Are they something that should be implemented or are they something that should be banned?
Alabama Lottery Links
- The Economics of Lotteries: A Survey of the Literature
- The Economics of the Lottery
- Out of Luck: A Documentary (free if you have Amazon Prime, which you should all get!)