Lottery Money - No Free Lunch
by David Bertelsen
Economists say that there is no such thing as a "free" lunch - that it is impossible to get something for nothing - or that everything comes at a cost.
But when you listen to certain politicians and proponents today, you'd think that they had managed to solve this restrictive economic axiom once and for all. There is a free lunch, and it is called state-run gambling.
Throughout the world, state-run lotteries are providing substantial sums of money for "worthy" projects. Museums, sculptures, libraries, historic buildings are benefiting from the largest injection of funding in many decades. This trend is worldwide - government-run gambling has flourished from Missouri to the United Kingdom, from New Zealand to Spain over the last decade. And national lotteries were even been proposed by Ayn Rand herself as a way to fund the essential functions of government - the police, the armed forces and the courts.
Those in favour argue that lotteries are a fantastic way to provide funding for projects which would otherwise face the increasing constraints of fiscal tightness. In the UK, for example, 28% of lottery revenues are left after paying out prizes and costs to be used for whatever the NationaL Lottery Commission sees fit. It has now (2004) paid out more than £15 billion to “good causes”. This sum dwarfs traditional government spending or private philanthropy. And, its proponents claim, the money is received in a "voluntary" manner - unlike normal taxes, gamblers "choose" to put their money towards these projects, by deciding to test their luck in state-run lotteries.
Those against national lotteries usually focus on the supposed “social costs” of gambling. It is impossible to deny that investing too much of one's income in slot machines can lead to broken homes, alcoholism, hungry children and all manner of suffering both to gamblers and those around them. But this does not mean that government should ban gambling, or control it even. Individuals have the right to lead their lives as they see fit, provided they don't harm the rights of others to do likewise. If this means throwing money away on lotteries that return as little as 50% of their revenues as prizes, so be it. Stupidity is an inalienable right and universal problem that even legislation can't cure.
But that is not the point of this article - what I seek to debunk is the claim that state-run lottery money is somehow a "free lunch".
To consider this, we must examine what the situation would be in an economy in which government involvement was excluded. There would be a profileration of competing companies offering gambling services of all kinds. Some would offer the best odds, others the biggest prizes, and some would differentiate themselves by touting the share of revenues they distribute to "good causes". The net effect, however, is that the free market would reduce costs and profit, and improve substantially the returns to gamblers. A case in point is Las Vegas where there is minimal government involvement in gambling, a relatively free market, and where the proportion of revenues returned as prizes rarely drops below 97%.
The difference between the proportion returned to gamblers in a free market and that of today's government-enforced monopolies has a name, even if its a name you won't hear politicians calling it. It's called TAX. Its a tax on gamblers, and should be known for what it is. If individuals were receiving a higher proportion of revenues in prizes, they would be paying less tax, and would have more money to spend on other items.
What's more, this tax is the sort that even the most tax-hungry leftie should be up in arms about. First, numerous surveys show that low-income earners spend a substantially higher proportion of their earnings on gambling than those on high incomes. In many cases, they even spend more ABSOLUTELY. So the gambling tax is an extremely regressive one.
Second, let's look at where revenues of this gambling tax are spent. On education for poor neighborhoods? Helping the homeless? NOT LIKELY! The money is spent on "worthy" causes - and for those of you who haven't clicked on to it yet, "worthy" causes are the types of things that the rich, elite and self-appointed culturally-aware believe the poor SHOULD be interested in. Such as public art museums, ballet, libraries, and sports stadiums, all of which are in reality disproportianately patronised by ... guess who? ... the wealthy!
The only just solution is to privatise all government involvement in gambling and let the free market rip. As history has shown, when government does not spend on "good causes", and lowers taxes accordingly, private benevolence has usually more than filled the gap. For proof, we only need to look at the enormous provision of museums, libraries and other "public" amenities in New York by the "robber barons" of the "capitalist" late 19th century U.S.A. There is no reason to believe that a general reduction in taxes and regulation today would not lead to a similar flourishing of truly voluntary benevolence.
State lotteries are not a "free" lunch. Somebody may be getting a free meal, but others are paying for it. State lotteries are a tax on gambling, and to a large extent, a tax on the poor. They must end.
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