In late February, upon hearing the news that the Powerball jackpot had reached slightly over $50 million, nearly half of our population rushed to buy a Powerball ticket and enter into a draw which would surely change the life of its winner. Following this, on the evening of the 29th of February, as the winning numbers were drawn on live TV (shortly after The Pussycat Dolls brought an episode of Ant and Dec’s Saturday Night Takeaway to an end), two individuals, each of whom had won just over $25 million, realised that their fortunes had just grown exponentially.
While the people who won the award were certainly pleased with the outcome, this entire episode laid bare an inconvenient truth about the game that nearly a million people play each week: Everyone that bought a Powerball ticket was bound to lose. Indeed, each line on a Powerball ticket has only about a one in 38 million chance of winning the jackpot.
Given this fact, it is worth considering why a particularly risky form of gambling is being run by the government? And why do people engage in a game in which they are likely to lose?
To answer this question, let’s first briefly examine the history of the game. While lotteries of some kind are described as far back as the mythologies of Ancient Greece, one of the first recorded public lotteries, of the kind relevant to our discussion, occurred in Brussels in the 1500s. During the Belgian lotteries of this time, people were given the ability to buy different types of lottery tickets, with the prize pool associated with each ticket increasing in value, along with the cost of the tickets. As would become common in the later iterations of the public lottery, all money generated from the lottery was used to fund public works projects and enhance the budget of local governments.
Similar lotteries, based on the model used in Brussels, would later arise during this period in France. Indeed, throughout the 17th and 18th centuries, lotteries were regularly conducted throughout France as a means of raising money for charitable projects. These projects included the construction of orphanages, universities and religious institutions. The French Lottery was briefly abolished following the French Revolution, and then quickly reinstated by the state as a means of curbing excessive public losses. During this period, lotteries of a kind soon appeared across much of Europe and the United States, generally following similar models to those in France and Belgium.
Within the context of New Zealand specifically, the New Zealand Lotteries Commission (Lotto NZ) – a public entity – was established in 1987 for the purposes of administering our public lottery and distributing the earnings generated from the game to community projects across the country. In this respect, Lotto NZ has been an unmitigated success, having distributed over $4.6 billion to communities across the country since its inception. Indeed, in 2019 alone, Lotto NZ reported having transferred over a quarter of a billion dollars towards grant-giving organisations, providing a clear benefit to a great many communities across the country.
After our trip through the history of lotteries, the causes of our public support for the game suddenly make perfect sense: the lottery is a highly efficient, and voluntary, means of generating revenue for public and community projects across the country.
The phenomenon of the lottery was amplified in the case of Powerball in late February, and the history of the lottery helps to explain how the event came to be. However, our second question remains unanswered; Why do millions of people continue to play a game which they are almost guaranteed to lose?
The answer to this question is a complex one, partially due to natural differences in the willingness of individuals to take risks, and partially due to the extrinsic factors which may, overtly or covertly, prod us towards making certain decisions.
In the early 1970s a pair of highly respected psychologists, named Daniel Kahneman and Amos Tversky, conducted a series of groundbreaking studies. They examined the specifically irrational decisions which people often make, like those in the game we’re in the process of examining. One of the many breakthroughs that the pair produced was the development of the concept of an availability bias; the tendency for people to weight memorable experiences as being more likely to occur than less memorable ones, regardless of the reality of the situation. When people return from work, turn on their TVs, and witness people winning extraordinary sums of money, they believe that the chance of winning the lottery is higher than it is. However, in reality, someone occasionally winning the lottery is hardly surprising; when nearly a million tickets are sold each week, and two draws each week, probability suggests that someone should win the lottery every couple of weeks. This does not change the fact that playing the game is a losing proposition; indeed, it is merely a masterful work of advertising, which uses the vast number of lottery tickets sold each week to leverage the availability bias of viewers of the draw. This may help to explain why, according to a survey conducted in the United States, 25% of the general public view the lottery as being the most effective means of building wealth.
According to the same study, a more insidious reality exists; 38% of the least wealthy participants in the survey viewed the lottery as being the most effective means of building wealth, despite the fact that money spent on the lottery is money lost. A likely explanation of this fact can be found in the factors which have been present in this very article: the airing of lottery draws on Wednesday and Saturday evenings, and the primary focus of the programming is the positive impact of winning the lottery, as opposed to the losses incurred by nearly every other player of the game.
When the Lotto is drawn halfway through the week, and then again at the end, a false hope is provided to individuals living within a society where wages have increased by a mere 1% each year, on average. Indeed, the drawing of the lottery on an early Wednesday evening, when people would be returning from work (tired and stressed while being halfway through the week), is likely to make people increasingly susceptible to the kinds of false financial hope that the game produces. This false hope further convinces New Zealanders to sink their wages in the abyss, rather than saving or investing that money for the future. A similar function is served by news organisations who continuously write articles about the winners of the lottery, with the statistical reality of the game being placed at the end of the articles, usually as a throwaway line.
When attempting to find a way to summarise my thoughts about the lottery, I found myself returning to the subheading of an article published in the New Yorker last year: “Permitting pot is one thing; promoting its use is another.” While the premise of the line is hardly relevant to our discussion at hand, the point remains; publicly organising a lottery clearly provides some benefits, but the way in which the lottery is promoted does pose clear issues regarding the incitement of the public, and particularly working-class communities, to engage in financially destructive behaviours. Indeed, insofar as the lottery produces certain benefits to the public, it could certainly be argued that those benefits are undermined by the advertising of the lottery in a way that encourages poor decision making.
As mentioned earlier, Lotto NZ does provide some benefits and shutting it down entirely may not make very much sense. Besides this, within a free society, actively barring people from gambling isn’t acceptable. People fundamentally have agency and should be able to make decisions about their own lives. However, regulating the lottery in a way that minimises the damage caused to the general public is not only sensible but vital to maintaining a healthy society.
Two simple changes that could be made are as follows: move the Lotto to a single draw and inform people of the statistical realities of the game each time it is drawn. Drawing the lottery on a Saturday evening alone, when people would be well-rested and relaxed after a break, would likely reduce the likelihood of people clinging to false hope. Aside from this, demonstrating the realities of the game each time the Lotto is drawn will enhance people’s understanding of their own action, effectively reducing the impact of people’s availability bias on their decision-making abilities.
Permitting the lottery to continue in some limited sense may reduce the money that can then be spent on vital community projects. This is undoubtedly an issue, but also one which reveals the bizarre nature of the lottery itself. As opposed to instituting progressive tax policies, such as the capital gains tax, which are present across most of the developed world; successive governments have instead chosen to institute a deeply regressive tax which is reliant on individuals making poor choices. Instead of allowing projects to go unfunded, would it not be sensible for the government to instead raise revenue in ways which do not have a vastly disproportionate impact on vulnerable members of our society? Would it not make sense to reallocate existing funds to benefit impacted communities? Or would it not make sense to simply think about alternative means of raising revenue for the state, unrelated to taxes? All of these questions are deeply important ones, which must be considered when dealing with the lottery.
As of this article’s publication, the Treasury has suggested that we may be about to enter a deeper recession than we did in 2008. Going into a situation where vulnerable communities are likely to face significant economic hardship, it is more important than it has ever been to consider the impact of millions of dollars being wasted by individuals, often on the basis of false hope, each and every week. So, maybe we should rethink the way we view the lottery. It might be better to provide a path of mobility that uplifts our society and eliminates gambling for any purpose other than entertainment. Maybe we could guarantee that every day is a lucky one.