February 5, 2011

THE LEFT'S FAVORITE REGRESSIVE TAX:

The Psychology Of Lotteries (Jonah Lehrer, February 3, 2011, Wired)

As I note in my recent Wired article on the statistician Mohan Srivastava, state lotteries have become a deeply regressive tax. On average, households that make less than $12,400 a year spend 5 percent of their income on lotteries.

Of course, this makes no rational sense: People without lots of money should be the least willing to squander their hard-earned cash on games of chance. (Lotteries have such terrible odds that they make slot machines look good.) However, a 2008 paper by a team of Carnegie-Mellon behavioral economists – Emily Haisley, Romel Mostafa and George Loewenstein – helps explain why poor people are so much more likely to buy tickets. The problem, it turns out, is feeling poor:

In two experiments conducted with low-income participants, we examine how implicit comparisons with other income classes increase low-income individuals’ desire to play the lottery. In Experiment 1, participants were more likely to purchase lottery tickets when they were primed to perceive that their own income was low relative to an implicit standard. In Experiment 2, participants purchased more tickets when they considered situations in which rich people or poor people receive advantages, implicitly highlighting the fact that everyone has an equal chance of winning the lottery.

The study neatly illuminates the positive feedback loop of government-run lotteries. The games naturally appeal to poor people, which causes them to spend disproportionate amounts of their income on lotteries, which helps keep them poor, which keeps them buying tickets.

Enhanced by Zemanta
Posted by Orrin Judd at February 5, 2011 9:51 AM
blog comments powered by Disqus
« WHILE THE TEMPTATION IS TO SAY "WHAT GOES AROUND COMES AROUND"...: | Main | THE BASE TAKES OVER FROM THE BELTWAY: »