David R. Henderson  

John Goodman on the Lottery

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I was waiting for others to take up John Goodman's June 12 challenge, but I think I've waited long enough. Goodman mentioned Neil Wanless, who won a $200+-million jackpot in a lottery. Statists, both economists and non-economists, often argue against free-market outcomes on the basis of a certain amount of luck that creates sometimes-enormous differences in wealth and/or income. A lottery is all luck. Shouldn't the statists, Goodman asks, then be even more critical of lotteries? And yet lottery winners seem to get, if anything, positive press and certainly not negative press. How come?

I added my answer on his blog. I've thought of one other. Could it be that many of the statist critics see choice as the key issue? One of the lines I've heard from many of them is, "You don't get to choose your parents." The idea is that parents, through genes and nurture, affect outcomes for the kids. That's a lottery that we're in that we can't choose. Is that the key difference? The problem is that if that's the key difference, then statists should be against other lotteries that we're forced into. They don't seem to be. I posted on one recently, the one involving lawsuits for some kinds of torts. If anything, statists have been the ones pushing for such forced lotteries.

What say you, gentle readers?


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COMMENTS (20 to date)
Thomas Schminke writes:

Versus a CEO's salary and benefits I would think a leftist might claim that the businessman came to his gains by a means morally worse than random ... that he/she cheated others in some way to get the money. That the mere act of earning money in big business, any amount, is worse than lottery winnings, any amount.
Psychologically, at least among the poor, I can see an identification with the lottery ticket buyer by the poor person, one not shared with corporate executive. Gains by someone from "the other" group are just not filtered the same way.

Inheritance of wealth is a harder instance to think about for me. I would suspect that the knee-jerk reaction is based on the same in and out group associations and the paradigm of the inheritance being a silver spoon case.

Mark writes:

Why is there any presumption whatsoever that statists are rational?

wesley writes:

For those who think there's a fixed income pie, any large piece to a single individual is unsettling. But if the money comes out of thin air, then no big deal. Lotteries are so abstractly lucky and so misunderstood, maybe, that it's easy to think that money won in a lottery isn't being taken from anyone else. (Maybe one reason for this is that if there's no lottery winner nobody thinks that someone else is getting that money, but if some rich guy doesn't take his profit one year many people think someone else will justly get it.)

david writes:

@Mark

Why is there any presumption whatsoever that statists are rational?

Given that statists clearly outnumber non-statists, going "ya'll irrational, I'm not going to engage with what you claim" is just going to be met with "Okay, fine. We'll just shut you out of the political process totally".

The luxury of not talking to people you think are wrong only exists if those people have to listen to you anyway. Unfortunately, reality happens to work the other way.

Dion writes:

@david
Given sheep clearly outnumber people in my country. Should I become a sheep?

Rob Ives writes:

Statists like lotteries for two reasons:

1. Most importantly, because they have reserved a gambling monopoly and they get the benefit of the existence of the huge lotteries.

2. Because there is no correlation between effort or ability and reward. Therefore lottery winnings are "fair".

david writes:

@Dion

Sadly, a refusal to consider your opponents as worth talking to doesn't make them go "oh sorry, we'll stop writing new legislation until you come back to the table".

You don't have to become a sheep, but if your sheep have the vote, be prepared to do a lot of talking to disinterested ruminants, or don't be surprised if your income is suddenly used to subsidize grass.

Dion writes:

@david
My point was that democracy is like two wolves and a sheep deciding what is for dinner.
It seems to me that you are a wolf, but for the last four years you were a sheep.

Brad Warbiany writes:

You're leaving out one piece.

The lottery is a tax program. They don't pay out 100% of lottery revenue (minus administration). The state takes a cut to fund other programs.

So you want to know why statist trumpet lottery winners? Because if nobody played, they wouldn't get as much tax revenue!

Nick Rowe writes:

A similar example: a student has just gotten a good grade on an exam. What does he say to his friends, who got lower grades?

1. "I got a good better grade than you because I'm smarter and studied harder"
or
2. "I got lucky with the questions"

It's easier to admit that someone is luckier than you than that they are better than you.

Dan Weber writes:

Shouldn't the statists, Goodman asks, then be even more critical of lotteries?

I don't know if "progressives" is being held as synonymous with "statists," but I know a lot of liberals (and conservatives) who hate the lottery. It's a scam that mostly hits the poor, and the odds are much worse than you would get from a bookie.

The only good thing I can say about a lottery is that it is a voluntary tax. And I still hate it.

Dezakin writes:

Where the hell do you guys get the idea that most statists like lotteries?

This is an absurd strawman.

Boonton writes:

If luck was always good then there would be nothing to get upset about. If there were only gambling winners but never losers who would get upset?

But the press does get upset about bad luck. We feel bad for the bride whose husband was struck by lightening the day after the wedding or the person with the rare disease.

RL writes:

Statist don't mind lottery winners because they can imagine themselves as lottery winners. They know how to buy a lottery ticket.

Statists oppose CEOs because they can't imagine themselves as CEOs. They know they don't know how to run successful companies.

Rob writes:

I roughly agree with wesley's answer: Most progressives think in terms of a fixed income pie. If someone earns a lot of money, it must be because they took it from poor people, either by force or by tricking them. On the other hand, if you get money from the lottery, its easy to see you didn't take it by force.

Marcus writes:

A key difference between libertarians vs. progressives is the relative weights we place on liberty vs. equality.

It is easy to see that everyone has an equal chance of winning the lottery which appeals to their sense of equality.

Not everyone has an equal chance of becoming CEO of a major corporation.

Notice also that in the lottery, money exchanges hands but no wealth is created. The pie doesn't change size as a result of lottery transactions. It's a zero sum game.

Where as the market is a positive sum game. But if you're mentality is that the pie is fixed, then the CEO must have obtained his position through immoral means.

If the lottery worked the way they perceive the market to work, some people would receive more chances to win for their $1 than others.

Boonton writes:

Statists, both economists and non-economists, often argue against free-market outcomes on the basis of a certain amount of luck that creates sometimes-enormous differences in wealth and/or income. A lottery is all luck. Shouldn't the statists, Goodman asks, then be even more critical of lotteries? And yet lottery winners seem to get, if anything, positive press and certainly not negative press. How come?

After thinking about this for a while I think the key to the answer is the downside. How would the press feel about the lottery if it had fantastic losers as well as winners? Suppose in addition to 1 out of 100,000 winning big, 1 out of 100,000 gets murdered by serial killer? 1 out of 10,000 gets raped. 1 out of 100 gets 100 points knocked off their credit score. If, like real life, the lottery matched its wins with equal losses I think its press would get a lot more negative.

Of course the lottery does have a downside. It feeds addictive behavior. People who wouldn't have fallen prey to a gambling addiction where lotteries and other gambling was illegal and hard to find in respectable society are addicted now. But most people don't perceive this as a function of luck but personal decision making...even though luck in the form of genetics may have something to do with it.

Rog writes:

Many individuals proclaim to hate income inequality and feel that those at the top of the economic ladder could only have gotten there through either luck or lack of ethics. So yes, you would expect them to feel wealth through pure luck is terribly unfair. The reason for the disparity is that they don’t really believe what they proclaim. Every professor of this view has an explanation for why his salary is so much more than the wages of the cleaning staff but feels there is no acceptable reason why a huge company’s CEO would be paid more than he. These people don’t mind that someone receives a large amount of funds due to pure luck but they do resent terribly that another person’s work would be valued so much more than their own. I’ve also noticed that most proponents of this view inevitably feel that commercial endeavors are crass and beneath them. I forget where this quote originates but it’s quite true that ‘ The surest sign of a second stringer is that they begrudge someone else success’.

Boonton writes:

Rog,

I see you got the Atlas Shrugged POV down pretty good. Next you should consider the idea of a straw man.

I have never meet a serious person who believed a CEO should not make no more than the cleaning staff. I think most who take a critical view of this issue have a line of reasoning that goes along these lines:

"We've seen CEO pay go from $1M a year to $50M a year, have CEO's gotten 50 times better than they were ten, twenty, thirty or more years ago?"

For most the answer is "I don't think so".

Consider a true test of objective worth; Superstars. I think your sterotypical left wing 'success begrudger' does not get very upset over the fantastic wealth of say Stephen King, various movie stars, or singers. Oddly, these people are often attacked endlessly by supposedly free market types for their left-wing views. But the success these people have is unquestionable. They make a lot of money because they get people to shell out $5, $10, $20 or more by the millions for the products they produce. There's little in the way of protectionism, gov't subsidies, or limits on competition that can help them achieve their success.

Yet your straw man who cares little about Madonna's success but is highly skeptical of the CEO of Citibank's compensation is 'begruding success'.

David writes:

Statists really aren't opposed to luck. They are opposed to the fruits of ability, discipline and risk-taking, i.e., they are opposed to rewards to merit. The reason, of course, is that the meritorious don't need the statists.

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