Lottery Racket
UPI is reporting that the lottery in New Jersey is still selling $1,000,000 scratch-off lottery tickets even though all the top prizes have already been claimed and the highest remaining prize is worth only $10,000. To be clear, people are buying scratch-off tickets with the expectation that they could win $1,000,000 (foolish anyway goes without saying) when in reality the most they can win is $10,000. Before it was run by the state, it was illegal to work the numbers so.
The “numbers racket” has been a problem in poor communities throughout Europe and the United States for hundreds of years. Although there are a number of variations within the game, the constants are these: mostly poor people pay a small amount of money to select three or more numbers, then hope those numbers are chosen as winners at the end of a certain period of time. The winning numbers traditionally received 60% of the pot–sometimes more, sometimes a little less.
There were two parts of the racket which made it a racket, rather than just a game. First, the betting parlors capitalized on the vulnerability and desperation of the poor. People could participate for a nickel or dime. Sometimes bookies even extended credit. And those most incapable of affording the game were substantially the only ones interested in playing, based on the unreasonable hope of a payout. So it ends up (although as a matter fact it started out that way too) being a means for those with substantial money to harvest what little money the poor do have without producing anything of substance in return. It is the opposite of ethical capitalism.
Second, betting parlors had a notorious habit of fixing the numbers to their own advantage. For one thing, instead of choosing the numbers randomly, as a drawing at the end of a day was supposed to do, they would manipulate the selection to ensure a minimal or even no payout. This problem finally became so substantial that people quit playing until many numbers racketeers agreed to use the last three digits of some public government reports each day as their winning numbers. For another example, payouts were often exaggerated either as percentages or hard numbers. People thought they were going to win more than they really could.
The numbers racket is still illegal–well, that is, except for many state governments. The lottery run by many states to buttress their income is a numbers racket. Scratch off games are simply a new variation on a very old theme.
So why should a free market advocate care? Shouldn’t people be able to waste their money if they want, then learn from reality how to manage better?
Here is the problem: there is really no question that the numbers racket is immoral. Whether the abuses of the second problem described above happen or not (and they do still happen, even as this story from UPI indicates), the first problem is always the case–the poor are victimized in the process and no productivity results from the racket–that is, nothing is put into the economy as a result of it. So there is incredible hypocrisy in the state running a lottery. Either the racket’s immorality is substantial enough to justify it being illegal and the state should not run one, or the racket is banal enough to allow into the free market and the state should not prevent others from running it. The former of the choices is closer to the truth. But when did the truth ever keep those in bureaucratic power from doing what they refuse to allow for anyone else!
Tags: Gambling
