The dark side of the lottery

Many Tufts students may have opened their e-bill and wished the lottery ticket in their pocket would win them a few hundred thousand dollars; however, digging into the origins of the lottery and the aftermath for the rare few who actually win often exposes the dark underbelly of an institution that falsely promises a shot at the American Dream.

The first official public lottery documented in Europe was held under the rule of Augustus Caesar in order to fund public works projects. After that, the lottery and raffle phenomena spread across Europe and were used to address issues ranging from infrastructure to poverty. When English settlers traversed the Atlantic in the early 17th century, the lottery traveled with them.

The 13 colonies relied heavily on public lotteries to build the New England streets, wharves and foundations of cities; Harvard used lotteries to construct university buildings in the 18th century.

Because of the lottery’s community-oriented origins and present day-advertisement, many lottery players rationalize their habit by taking comfort in the fact that their contributions are being used to fund public causes, primarily public schools; however, this selling point is often misleading.

In California, where the recent record-breaking $2.4 billion Powerball winning ticket was purchased, the funding is distributed among public schools with a disproportionate amount of money going towards those in wealthier districts, on top of many residents of such areas not spending money on lottery tickets. This means that these wealthier areas benefit from the lottery even though they tend to not personally spend as much money on it. States like Virginia, Maryland and Texas use lottery profits to fund existing school budgets rather than creating new programs, like grants and scholarships, that could potentially improve the quality of public education.

Massachusetts has seen the net profit from the state lottery improve steadily over the last 10 years with the proceeds going towards the favorable model of unregulated local aid. By allowing individual municipalities to allocate funds towards their own goals and projects, the Massachusetts State Lottery evades the bureaucratic costs associated with the distribution of funds and makes purchasing a ticket at the campus convenience store more ethically sound; however, after purchasing a ticket, your chances of winning are slim while the chances of the ticket improving your life are even slimmer.

Although the commonly heard expression “money can’t buy happiness” is debatable, some lottery winners do not even improve their financial condition. Managing large sums of money is difficult, and throwing people into the deep end and expecting them to be able to swim is unreasonable. Understandably, lottery winners are less likely to continue working after winning, leaving them to rely on their unmerited fortunes.

According to a 2014 study published by the National Bureau of Economic Research, the top 1% of Americans by wealth saved roughly 38% of their income in 2010–12. In a 2001 study published in the American Economic Review, surveyed lottery winners saved just 16% of their prize.

This poor financial planning is demonstrated by the fact that approximately one-third of lottery winners eventually end up in bankruptcy. Research has shown that lottery winners who come into significant sums of money do not escape bankruptcy altogether; their winnings only postpone it. This result is consistent with the classic adage, “give a man a fish, and you feed him for a day; teach a man to fish and you feed him for a lifetime.

As it seems, giving lottery winners a very big fish does not help when their pond goes dry, and they ultimately remain hungry. The lottery may appear for many as a tantalizing way to get rich quickly, yet the best way to long-term financial success is still wise financial planning and decision making.

Although, according to a 2016 Gallup poll, 53% of individuals with a college degree reported purchasing a lottery ticket recently, it is important for college students to understand the opportunities available to them in the realm of personal finance skills. For example, classes such as “Developing Financial Literacy” are available to Tufts students at the Derby Entrepreneurship Center along with resources provided through the FIRST Center. In college, many students have their first encounter with managing their own finances, and though this may seem daunting, these resources are far better options than the lottery.

Even though the principle behind directing lottery profits towards state budgets benefits public projects in general, the advertising practices are ethically questionable at best in addition to the fact that the implementation and distribution of profits are often problematic.

On an individual level, the rare lottery winners are often more harmed by what they call ‘luck.’ It may be fun to scratch off a brightly colored piece of paper every now and then, but remember the power of your dollar as a consumer and consider donating directly to the causes that matter to you rather than relying on a suspect middleman to do it for you.


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