The Lottery and the Poor

| Sat Sep. 13, 2008 1:28 PM EDT

THE LOTTERY AND THE POOR....Poor people spend a much larger chunk of their income on lottery tickets than rich people. Why? Because they're dumb and don't realize the odds are bad? Because they're desperate and therefore more willing to take a chance on a big payback? Because they're too poor to afford better forms of entertainment?

Maybe. But apparently the mere feeling of being poor, as opposed to any objective result of actually being poor, is also enough to get people buy lottery tickets. George Loewenstein, a neuroeconomist at Carnegie Mellon University, performed a study of low-income riders at a Greyhound bus station in Pittsburgh. Each person was given $5 to participate in a survey, and then told they could take some or all of the money in lottery tickets. But not everyone was given exactly the same survey:

We randomly assigned subjects to either feel relatively poor or relatively rich by having them complete demographic questions 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 up from there, ensuring that most respondents would be in the lowest income tier. 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 tier. The group made to feel poor purchased twice as many lottery tickets (an average of 1.27) than those made to feel relatively wealthier (0.67 tickets, on average).

What this means is that lottery marketers — i.e., state governments — have a big incentive to make people feel poor because this helps them sell more tickets. Do you think they succeed? Do the lottery ads in your state make you feel poor? Is this a problem?

Via Mark Thoma, who doesn't think the state should have any role in lotteries at all aside from regulating private operators.

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