The Lottery and Reverse Redistribution

by Benjamin Studebaker

I recently read a Salon article by Natasha Lennard drawing attention to the statistical tendency for lottery tickets to be purchased in quite disproportionate numbers by the poorest in society. The article brings up several interesting statistics–households that earn $13,000 or less in the United States spend an average of 9% of their income on lottery tickets, people who feel poor buy twice as many lottery tickets as those who do not, and those earning less than $40,000 in South Carolina make up 54% of the state’s lottery players despite only constituting 28% of its total population. This brings forward to my mind the question of whether or not it is ethical to permit the poor to voluntarily give significant portions of their income to the government so that statistically negligible numbers of them might get extremely lucky and hit it rich.

The argument in favour of permitting the lottery is that to refrain from permitting it would be paternalist–it would deny people the freedom to harm themselves if they so choose by giving their income away to the state. However, anti-paternalism is only a valid argument in cases where those committing the self-harm are not harming wider society in the process. For instance, the state is permitted to be quite paternalist in preventing people from violently harming others because it violates Mill’s harm principle:

the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.

Assuming we find Mill’s harm principle persuasive, the question then is whether or not the lottery exclusively brings harm to participants. If it can be shown to bring harm to non-participants, i.e. wider society, then there is a serious ethical case for doing away with the lottery.

So let us first examine which reasons for banning the lottery are declared invalid by the harm principle:

  1. The lottery harms the individuals who purchase lottery tickets by decreasing their resources, but they are freely participating and this injury is self-inflicted.
  2. There is reason to believe that the lottery harms the individuals who win as well as those who lose, but they are freely participating and this injury is self-inflicted.

Supporters of the lottery can also point to the benefit of the state receiving a substantial amount of what is, more or less, voluntary tax revenue, with which it can pursue public goods. They might argue that the people who play the lottery are harming themselves and that their behaviour is stupid, but that the lottery amounts to a tax on stupidity for the benefit of wider society, which no doubt suffers from the stupidity of the lottery players in a variety of other areas (crime, low productivity, etc.) and which deserves compensation.

That argument is, however, dependent on a view of personal responsibility that holds that both genetic disadvantage and the absences of education, good parenting, and general good socialisation that tend to produce stupidity among the adult population are somehow the fault of the lottery players rather than produced by a combination of bad luck and bad social policy. I would argue that this view of personal responsibility is narrow-minded and excludes too much from the equation of what goes into human behaviour. That said, unless we are arguing against the harm principle, it is still necessary to come up with a broader social harm generated either directly or indirectly through the self-harm committed by the lottery players, be they responsible for their behaviour or not.

I can nonetheless see possible examples of harm that playing the lottery does to those who are not themselves playing and consequently do not have a free choice even under the strictest interpretation of personal responsibility:

  1. Harm to the children of those who play the lottery, as their parents will be left with fewer resources to use for their benefit in terms of education and wider socialisation, and consequently a propagation through the generations of more poverty and similar factors that correlate with future lottery playing, contributing to a cycle of poverty.
  2. Economic damage as a result of reverse redistribution which reduces economic demand in the long-term.

The harming the children argument may be morally and ethically quite persuasive, but we should keep in mind what it would entail to accept the notion that, universally and in all cases, when parents engage in behaviours that harm the children, the state has should put a stop to it. At present the state only prevents the most extreme kinds of harm (child abuse, malnutrition, not arranging for the child’s education, other forms of neglect). It does not intervene in misuses of parental funds that should go to the child (it does not prevent the parents from spending large sums of money on alcohol, from taking superfluous vacations, throwing expensive parties, etc. ). The reason the state does not engage in policing these behaviours is in part that doing so is a logistical nightmare and selective prohibition is extremely difficult to enforce. In addition, there remains some level of social commitment to the right of the parent to parent as the parent sees fit to an admittedly rather arbitrary point. While it is certainly much easier to get rid of the lottery than it would be to prevent parents from wasting money on products bought from the private sector, the ethical equivalence between the two in terms of the effect on the child means that the argument leads to far greater state intrusions into parenting. While there are arguments for that, I would like to make a case for abolishing the lottery that is not reliant on large-scale state interference with the family.

Here is where reverse redistribution comes in. In most political senses of the term, redistribution involves the confiscation by the state of the wealth of the rich through taxes in order to augment the resources available to the poor such that the poor might become more productive, more educated, and enjoy a higher standard of living. All of these things entail spending the money and, as a result, welfare spending has a benevolent effect on economic demand, boosting consumption by those with the lowest incomes. In the case of the lottery, the work of redistribution is undone, because the lottery entails the wilful donation on the part of the poor a portion of their income to the state for the purposes of one of two things:

  1. Expenditure by the state (in part to welfare programmes that flow back to the poor, but also to services that do not significantly improve the lot of the poor and are more about protecting property–the police and fire departments, for example).
  2. The creation of lottery winners.

A portion of the money comes back to the poor communities through welfare spending, but chunks of it are lost to state services that are not for the benefit of the poor. On top of that, some of the money is used to create rich people out of poor people by proclaiming lottery winners. These new rich people have not demonstrated any talent or aptitude making them deserving for their winnings, and consequently the money is usually spent, invested, or saved rather poorly–much less effectively than it would have done either in the hands of the state or in the hands of the poor, who would spend it immediately on needed things. The net outcome is almost certainly that the poor put more money into the lottery than they get back, and that undermines the efficiency of the state’s welfare spending and of the positive impacts of the state’s welfare spending via demand boosts and improved future productive performance of the poor via welfare and education spending. It is on this ground, that the lottery countervails the state’s own policies and objectives and harms our economy and the progress of the social goal of promoting an educated, productive population for the benefit of all citizens, that it should be done away with.