Economic Sociology “Lotto’s a taxation. On all fools in the nation. But heaven be praised. It’s so easily raised.” This satirical poem, written in 1932, is still pretty close to the truth. Since the 1960’s, state lotteries have become a popular means for governments to raise taxes. A crooked system, according to some. Since the poor tend to buy the most tickets, but can least afford to play, state lotteries facilitate and increase social inequality.
Neuroeconomist George Loewenstein studied the decision making process leading up to a lottery ticket purchase. He set up an experiment where people were asked to participate in a (for the experiment insignificant) survey in exchange for $5.“We randomly assigned subjects to feel either relatively poor or relatively rich by having them complete demographic questions that included an item on annual income,” Loewenstein explains. “The group made to feel poor was asked to provide its income on a scale that began at ‘less than $100,000’ and went up from there, ensuring that most respondents would be in the lowest income tier. The group made to feel subjectively wealthier was asked to report income on a scale that began with ‘less than $10,000’ and increased in $10,000 increments, leading most respondents to be in a middle tier.” After filling out the form and receiving their $5, all participants were given the opportunity to purchase one or more lottery tickets. The result: the ‘poor’ group purchased twice as many lottery tickets than those made to feel relatively wealthier. A regrettable conclusion, says Loewenstein: “The find-
ing that when you make people feel poor they play more, is especially sad since playing the lottery is on average a massively losing proposition. The propensity of low income individuals to play the lottery has the perverse effect of exacerbating their poverty. Although there are no easy solutions to the problem, one obvious one would be to cease marketing and advertising that targets the poor. It probably makes sense for the state to sell lottery tickets,
because otherwise they will be sold by organized crime. However, does it really make sense for the state to be inducing, through advertising, poor people to play who wouldn’t play in the absence of such inducement?” In 2009, German sociologists Jens Beckert and Mark Lutter drew the same conclusion from their study. On the basis of a telephone survey, they examined the distribution effects state lotteries have on Germany’s social structure. The researchers found that less educated people with a modest income spend relatively more money on the lottery. “The fact is that social inequal-
ity is reinforced by the distribution of lottery revenues,” notes Beckert. “In Bavaria, lottery revenues are fed into the national budget, but in other states the revenues are intended for special uses. For example, certain recreational sports’ facilities are funded with lottery money. These sports are often practiced by the middle and upper class. So the lower class pays for it, but does not benefit from it.”