EconoMeter: Does the lottery have any economic benefit?

Norm Miller, University of San Diego

Norm Miller

Answer: NO

Lotteries have the same economic effect as a volunteer tax on the poor. I have a friend who would say “lotteries are a tax on those who are bad at math.” No, I did not play. I might consider playing when the value of the pot is at least $176 million dollars after tax with a lump sum pay out, but the lines were too long for me to consider buying a ticket this past week. A small portion of the proceeds go to schools and this is good, but the net economic benefit is minor and those who can ill afford to buy are the ones who do.

Lynn Reaser, Point Loma Nazarene University

Lynn Reaser


Lotteries involve essentially a transfer of income from one set of individuals to others (the winners) and the government. The money that is spent on the lottery subtracts from funds that might have otherwise gone to other venues (including restaurants, movies, stores and casinos) or even savings. The winner might spend a significant share of the payout on “big ticket” items, including a car, house or vacation. There will thus be winners and losers in terms of both individuals and businesses, but no net gain. Perhaps the only economic benefit is a brief euphoria and diversion for many Americans. The downside is a sense that there is an economic “free lunch.”

Dan Seiver, San Diego State University

Dan Seiver

Answer: NO

Lotteries are a terrible way to raise revenues for two reasons. First, they encourage gambling and addiction to gambling; and second, they are a regressive tax that falls most heavily on the poor. Academic research on these two topics is substantial and convincing. (I am not anti-gambling. I enjoy the occasional poker game among friends, and have also willingly participated in NCAA office pools.) But most Americans who buy lottery tickets are woefully ignorant of the terrible odds of winning, and suffer from a myriad of decision errors and biases. So the state extracts "voluntary" funds from the unwitting and innumerate, some of whom can least afford it. (No, he did not buy a lottery ticket.)


