econscius

Why Applaud “Reverse Robin Hood”, Regressive Lotto?

In Inequality, Top 1% on March 30, 2012 at 11:34 pm

Sorry, you didn’t win! 

At the risk of sounding curmudgeonly, may I ask why large Lotto prizes are covered breathlessly in the media?  Why are so few of the people who generally complain about what they call “Reverse Robin Hood” wealth transfers so quiet about PowerBall?

Today, the media has been focused on the $640 million MegaMillions payout.  Why?

A new “1%”er will be minted.

Tens of millions of Americans, many poor, working class and struggling, will have used some of their meagre excess money to purchase losing tickets.

Wealth will be more concentrated.

Please do not get me wrong.  It is every adult’s personal choice whether or not to play Lotto.  For many, a $5 or $10 purchase is not a major financial imposition.  I suspect many do it for the psychological thrill of what they would do with the money if they win the jackpot. 

Full disclosure:  I have never played any form of Lottery in my life.  Perhaps I am no fun.  🙂  Perhaps I am too mathematical and analytical; I cannot overlook the fact it is a sucker’s bet. 

Illinois Lottery.svg

Interestingly, many studies have found scientific evidence the poor are the most likely to play Lotto. [1] [2] [3]  A study by the University of Georgia found, “respondents with more education, especially a post-graduate degree, were least likely to have purchased a lottery ticket in the past year.”  [3]

Just for fun, I ran the numbers on what a hypothetical poor lottery player is foregoing.  If a person plays $10 per week for 30 years, they give up $15,600.  That is more than many low-income people even save for retirement.  When you add the impact of compounding, assuming an annual return of 6%, the amount that would have been saved is a sizable $41,100.  If those $10/week were used to pay down debt, most loans are above 6%.  Six percent also is a reasonable long-term stock market return. 

Yes, I understand people playing lotteries for fun.  I question, though, why the media needs to hype large jackpots.  I am surprised the Occupy crowd is so silent about the “Reverse Robin Hood” effect of lotteries.  I also recommend anyone who is struggling financially, please use the $5 or $10 or $20 to pay a little extra against credit cards or car loans, rather than squander it on making someone else worth a half billion dollars overnight.

Then you wouldn’t be bothered tossing your losing ticket out.

If you enjoy lotteries, why?  Do you also save?  Please comment below.

[1] http://old.post-gazette.com/pg/08207/899406-298.stm

[2] http://arkansasnews.com/2009/07/26/sc-studies-show-poor-blacks-most-likely-to-play-lottery-often/

[3] http://www.cviog.uga.edu/free-downloads/70.pdf

Pictures from Wikipedia Commons.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: