Very Short List notes that “America’s lotto kiosks are currently reporting heretofore unheard-of earnings,” despite the average rate of return—53%—being less than slot machines. Researchers at Carnegie Mellon recently completed a study in which they primed people to feel relatively poor, then offered them a chance to buy lottery tickets, and the results suggest that the poorer you feel, the more likely you’ll waste your money on a lottery.
From the Carnegie Mellon article:
The researchers influenced participants’ perceptions of their relative wealth — or lack thereof — by having them complete a survey on their opinions of the city of Pittsburgh that included an item on annual income. The group made to feel poor was asked to provide its income on a scale that began at “less than $100,000″ and went upward from there in $100,000 increments, ensuring that most respondents would be in the lowest income category. 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 or upper tier.
Participants, who were recruited at Pittsburgh’s Greyhound Bus terminal, were paid $5 for completing the survey and given the opportunity to buy as many as five scratch-off lottery tickets. The experimental group purchased an average of 1.27 lottery tickets, compared with 0.67 tickets bought by the members of the control group.
A second experiment reported in the paper found that indirectly reminding participants that, while different income groups face unequal outcomes in education, jobs and housing, everyone has equal chances of winning the lottery induced an increase in the number of lottery tickets purchased. The group given this reminder purchased 1.31 tickets, compared with 0.54 for the group not given such a reminder.
In the study, the researchers note that lotteries set off a vicious cycle that not only exploits low-income individuals’ desires to escape poverty but also directly prevents them from improving upon their financial situations. They recommend that state lottery administrators explore strategies that balance the economic burdens faced by low-income households with the need to maintain important funding streams for state governments.
Here’s an idea, although the fact that we came up with it in 30 seconds probably means it’s a terrible one: just mail a free lottery ticket to every household below the poverty line once a month.