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Are Lotteries Moral?

Are Lotteries Moral?

It is well known that gambling is an addiction. Lotteries included.
A Christmas themed Finnish scratch game “Ässä Extra”.

The state makes money on each and every lottery. With the rules being 100% transparent. People are literally willing to bring money to the state, being fully aware that, statistically, each lottery ticket is a money-loser in the long run.

Moreover, governments don’t like competition, and lotteries are strictly regulated. A noble billionaire who’d want to host a zero-sum, or even a positive-sum lottery would be prosecuted promptly, because it is well understood that people, at scale, are too easily fooled.

Now, from a pure economics perspective, if you are immune to lotteries, you would want more of them.

In a “perfect” world, not only do lotteries replace taxes, but they also “fund” the UBI. Because if enough people are willing to put down a non-negligible portion of their income / savings into lotteries every day / month / year, why not use this resource that is evidently available for free?

This, of course, does not happen. For a mixture of factors. Risk-benefit analysis would certainly be one of them, as we don’t know how much more social unrest could we expect, should a greater percentage of people than today end up starving because they’ve over-gambled.

A stronger factor, at least to me, is a moral one. As we recognize gambling addiction as a mental disorder, it’s immoral to take advantage of the people who are unfortunate enough to have it. Thus, as a member of civilized society, it is my duty to help shield mere mortals from this temptation. After all, won’t I want to live in a society that would protect me or my loved one? In the case we become unfortunate enough to be affected by this disorder?

I hope the above makes sense so far. Here’s a twist: the airlines offering “trip protection” services.

It is well known from Kahneman and Tversky that people are risk-averse.

Furthermore, it is well known they overestimate risk. It is well known they can be moved by the fear of losing. As well as by the fear of appearing less intelligent than they would like to.

Moreover, it is also well known that airlines (and the travel industry overall) make a lion’s share of their money from these trip protection “services”.

The very same logic as above applies. I can make an argument that trip protection is exactly this: a negative-sum lottery for the customer. On average, one is better off never taking trip protection, and losing the full amount should the trip not happen. As an independent economic actor, I personally would prefer it if airlines would lower the prices of tickets and make up for their losses via more expensive trip protection services. As a society, we are better off not allowing this bad behavior.

Morally, where’s the catch? Why are we, as a society, accepting these, clearly draconian, means of extracting money from ourselves?

Of course, as an American, I know the answer well. And the answer is “because this is how big business makes big money”. And, of course, airlines are not the worst offenders; bank overdraft fees are far, far worse. They are being talked about. But not much seems to be changing in this regard.

Still, I found it weirdly funny that we, as a society, would generally not endorse the idea of increasing the number of state-owned lotteries ~10x for the purposes of raising more funds for public goods, however, are seemingly content with travel businesses asking us to spend another dozen or so bucks every single time we want to book a trip.

Written by Dima Korolev

Are lotteries moral?

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