I'm not a big fan of lotteries. If you're a sensible sort, you understand that the odds of winning big money are so extremely remote that it's not worth buying lottery tickets, unless you're just buying one or two now and then, mostly for entertainment value. But not everyone thinks that way, which is frustrating to me -- especially when a disproportionate percentage of poor people spend a lot of money on lottery tickets.
Permit me to share some such thoughts I recently ran across online. They're from an article titled, "A Critique of Lottery Critics," which is from a 1997 speech by Dr. Edward J. Stanek, president of the North American Association of State and Provincial Lotteries. Below are his words in italics and mine in regular type.
The cornerstone of the lottery business is honesty.
Wow. I don't seem to recall seeing any ads for lotteries that said anything like, "Buy a ticket, even though you're more likely to be hit by lightning than to win."
Big jackpot games are equalizers. Those who were not fortunate in the drawing of genes and inheritance can venture a chance equal to everyone else to benefit financially. ... There are those zealots who want to deprive others of a chance to prosper -- because they think they know what's best for others. Despite the pretense, they don't.
Hmm ... Dr. Stanek is already making my head hurt. Sure, everyone has an equal shot at winning a jackpot. But the odds are so remote (146 million to one for the Powerball jackpot) that most players are guaranteed a loss. And who can least afford to lose money? The poor.
For a lottery to take "advantage" of the poor would imply that the poor have a "disadvantage." Obviously they have less money, which means that lotteries can benefit them more relative to helping those of greater means. The only way that the poor can be at a disadvantage is if they don't have the same mental capacity to make $1 decisions as those who are wealthier ...
The poor are at a disadvantage because they have more to lose. If your net worth is $800 in the bank and you buy $100 worth of lottery tickets, you've just put 13% of your nest egg at extreme risk. If you're worth $100,000 (your car, your 401(k), your bank account, etc.) and you spend $100 on lottery tickets, you've only risked 0.1% of your net worth.
Should we spend money to take a chance? Think carefully about insurance companies. They sell chances.
No, they sell protection. Whether or not you'll end up faced with an event for which you'll need the protection (a car accident, a house fire, a disability) is indeed a chance. But if you buy insurance, you have it, and you're protected against some loss. (Learn about insurance.)
I trust you're not a major lottery-ticket purchaser. You're too financially smart for that. But I bet (pun intended) that you could be even smarter about your money. I know I could. So permit me to invite you to test-drive, for free, our personal finance newsletter, Motley Fool GreenLight. It's packed with terrific ideas and guidance and is written by some of our smartest and wittiest writers and analysts. Our aim is for it to more than pay for itself, as it helps you spend, save, and invest more effectively.
The last word
North America lotteries provide funding for education, economic development, natural resource protection, elder care programs, and more. They have contributed over $100 billion in annual wagering, lotteries directly or indirectly provide over 250,000 jobs. Over 240,000 retailers sell lottery products in North America. Last year they were paid over $3 billion in commissions.
It's true that lotteries are big business (sadly, in my opinion). So rather than gamble your money away, if you're interested in gaming, try investing in firms involved in various forms of gambling. International Game Technology
Since it may seem like I've been beating up Dr. Stanek, let me give him the last words:
Lotteries raise money for good causes. They don't target the poor. They have no more influence on the work ethic than inheritance, interest payments, and capital gains. Their fundraising is fairer and more American than taxation.