hi everyone
how’d you like a billion dollars how’d
you like to pay me two dollars to get
that billion dollars that sounds like a
pretty good deal what if I told you the
odds of me giving you that billion
dollars was 300 million to one against
me giving you that money would you still
give me the money well this is a
decision that a couple of weeks ago a
lot of people made when they decided to
participate in the Mega Millions 1.5
billion dollar jackpot prize and a lot
of people bought tickets so this talk
isn’t so much just about the people who
buy tickets it’s also about why do
states offer lotteries in the first
place after all aren’t lotteries just
gambling and should states be involved
in the gambling business we often think
about states maybe protecting us from
certain things when when does these
problem when these decisions might lead
to some bad outcomes but yet we see 44
states and we see countries around the
world where government’s offer lotteries
for their for their residents so why do
they do this well that’s what this talk
is about today those states that provide
those lotteries as well as the people
who buy those tickets so I’m gonna start
with the United States that’s actually
what this talk is primarily about are
lotteries in the United States and the
United States we have a long experience
with states offering lotteries back in
the 1800s many states offered lotteries
but by the end of the 1800s the US
government actually banned lotteries or
effectively banned them with some
legislation so we started seeing
lotteries being offered again in the
1960s and you can see up here on this
table that in the 1960s we have new
hampshire in new york that started
offering lotteries and then in the 1970s
the early 1970s was the first wave of
additional states adding them in the
East Coast and some Midwest states like
Ohio Michigan Illinois and then in the
late 1980
States started spreading west and south
offering lottery products so today there
are 45 states Mississippi just added a
lottery this year or will be selling
lottery tickets soon 45 states that
offer lotteries so let’s talk about the
five that don’t so three reasons that
states don’t 10.4 lotteries first of all
for religious reasons which include
Alabama and Utah we think about Nevada
who likes to protect their industry and
casino industry and then we take about
two states that don’t really have much
competitive pressure in other words
states right next to them where their
residents might want to buy and lottery
tickets from and these two states are
Alaska and Hawaii so those are the five
states that don’t well what about the
states that do why do they start
offering lotteries well the reason for
that is fairly simple they need the
money there’s a lot of fiscal pressure
on states today to try to come up with
more revenues and taxes are hard to pass
people don’t like new taxes and so
lotteries are a way to try to gain new
revenues so how much revenue do
lotteries tend to gain for States well I
want to talk about one state in
particular and since we’re in Illinois
let’s talk about the state of Illinois
as you can see by this graph that
lottery ticket sales tend to support or
10r tend to be used in four different
ways a lot of the money the blue area on
this graph goes back out to pay lottery
prizes and this is a big chunk of money
this is about sixty four percent of the
money about five percent goes to paying
for the operations of the lottery six
percent goes back to stores that sell
the tickets and that leaves twenty five
percent that goes to the state so is
that a lot of money well it’s about
seven hundred million dollars so not bad
is it a lot of money though well for the
state of Illinois that’s about two
percent of their revenues in 2017 so
yeah it’s a lot of money
but it’s not enough money to replace
taxes it’s not enough money for the
state to run and it’s not good enough
money for a lot of states to do those
things but it is something right and it
does help us not necessarily have to
increase
taxes which we have to pay and lotteries
after all our choice we don’t have to
participate in waters if we don’t want
to so I want to think now about where
does this 25% go how do states spend
their lottery dollars and so in a lot so
about half the states they tend to take
that money and put it into their general
revenue which means states can do with
it what they want to do with it
in Illinois those lottery dollars are
earmarked for specific purposes and in
Illinois those purposes are either
education or spending on capital
projects like roads education in fact is
the biggest winner of lottery dollars
for states that earmark their money
education is the single biggest winner
of those dollars so is education really
a big winner well it would be for
example in Illinois it’s a seven hundred
if those seven hundred million dollars
flowed in in addition to what else they
would receive but what states tend to do
is they see that those lottery dollars
are going to be added to funding for
particular programs and then state
legislatures provide less money in terms
of other funds we call this fungibility
the idea that lottery bet dollars for
revenue for some particular programs can
be substituted so education is a winner
they are certainly getting more money
but it’s not as much money as they
otherwise would get and why do we see
education is the big beneficiary anyway
well I believe there’s two reasons for
this one lotteries are hard to pass
legislatively so when states decide they
want to have a lottery they need to have
support by the residents within states
and sometimes people are concerned about
the gambling aspects of this so they
need to convince their voters that in
fact the money’s going to go to a good
purpose like education and once the
lottery is passed they also need people
to buy tickets and guess what if I’m
gonna buy a lottery ticket I might feel
a little bit better about losing that
money if I know it’s going to go to a
good cause like education so I think
it’s twofold why we see education is
being supported a lot by these lottery
dollars now let’s think about the other
side of the market so we know that we
know I talked a little bit about states
that provide lotteries and what they do
let’s think about people who buy the
lottery tickets
so economics literature has a few
different findings on on people who buy
tickets but there’s a certain certain
things that they tend to agree on number
one people who tend to buy lottery
tickets are more likely to be male than
female they’re more likely to be
Hispanic or black they’re more likely to
be lower educated and they’re more
likely to be lower income and I want to
talk about this last one a little bit if
the lottery were attacks and we saw
lower-income households spending more of
their money relatively on the tax than
higher income households we would call
this tax regressive and we would be very
concerned about that now we do need to
keep in mind that lottery ticket
purchases are not compulsory people
don’t have to spend their money on
lottery tickets if they don’t want to
and in fact I think it makes a lot of
sense that lower-income households would
want to spend more money on lottery
tickets it makes much big difference in
their lives if they win that money then
middle income or higher income
households who rely on other forms of
income and aren’t looking for that money
to be life changing and this is also
supported in the literature by studies
that look at how and who spends money on
what types of lottery products for
example we find that scratch tickets
those instant tickets where you can find
out instantly if you’re a winner or not
that don’t pay very high prizes that
those tend to be more aggressive in
nature lower income households tend to
buy those more than higher income
households but when we look at the lot
of style games like the Mega Millions I
talked to you about like lotto Illinois
like the other big lotto games that roll
into the tens of millions hundreds and
millions of billions of dollars that
that’s what attracts higher income
households so these lotto games tend to
be more progressive in nature as opposed
to regressive and actually brings in tax
dollars if you want to call them tax
dollars from from higher income families
so what sort of challenges to do lottery
agencies and state governments face
today with their lotteries well one of
the biggest challenges that they face is
continuing to get people to buy tickets
so when states first introduced
lotteries people get excited about it
oftentimes some of these people would
have been buying lottery tickets from
states across the border and so they’re
really happy to have these lotteries now
in their states but over time we
have this characteristic called lottery
apathy where people tend to lose
interests and even with these jackpot
prizes in the hundreds of millions then
we see Mega Millions again and Powerball
reaching the billions of dollars that
people were excited about it originally
but you know you can only continue to
lose so often until you finally starts
discouraging you from buying tickets and
we call this jackpot fatigue the idea
that people do see the hi jackpots but
they just don’t respond as much as what
they used to so what are states doing to
respond to this not declining demand but
just less interest among lottery ticket
purchasers over time well they’ve done a
couple of things one of the things that
we’ve seen states do if they’ve reduced
the odds of winning the lottery which
seems really odd if people aren’t buying
lottery tickets because they’re not
winning why in the world would you
reduce the odds of winning in the first
place
well the reason is for those lot of
style games where the jackpots roll over
they roll over more if people don’t win
so they roll over to bigger and bigger
prizes and Mega Millions this is why it
rolled over into the billion dollar
range is because Mega Millions last year
reduced their odds of winning in the
hopes of attracting more ticket buyers
it was successful maybe not as
successful as they hoped but certainly
people were talking about the billion
dollar prize what else do states do well
in Illinois has been one of the more
innovative states again Illinois has had
a lottery since 1970s so they’ve had to
be tried to be innovative in trying to
keep the interest going one of the
things that ellen oy has done they were
one of the first states to have online
purchases of lottery tickets one of the
second things that Illinois has done is
they have farmed out their management of
their lottery to a private company
rather than managing it themselves
and the idea of having a private company
manage the lotto is that they will be
more innovative in the things that they
do more innovative and promoting prizes
and hopefully also be able to run the
lottery at a lower expense Illinois
certainly seems some success with their
online law on lotteries and seen sales
there it had some mixed success on their
private running of their lottery for
those of you who may have paid attention
to the news I’m gonna leave you with
this I am very interested in all of
these innovations that lotto company
are doing that states are doing to try
to innovate their loitering keep people
interested as a researcher I find this
very important I find it very
interesting what people we do in
response to this as a consumer I’m not
all that interested in buying lottery
tickets frankly I’d rather save my money
for something else but as a taxpayer I
really hope that all of you are very
interested in what states are doing so
that my taxes don’t go up thank you very
much [Applause]
how’d you like a billion dollars how’d
you like to pay me two dollars to get
that billion dollars that sounds like a
pretty good deal what if I told you the
odds of me giving you that billion
dollars was 300 million to one against
me giving you that money would you still
give me the money well this is a
decision that a couple of weeks ago a
lot of people made when they decided to
participate in the Mega Millions 1.5
billion dollar jackpot prize and a lot
of people bought tickets so this talk
isn’t so much just about the people who
buy tickets it’s also about why do
states offer lotteries in the first
place after all aren’t lotteries just
gambling and should states be involved
in the gambling business we often think
about states maybe protecting us from
certain things when when does these
problem when these decisions might lead
to some bad outcomes but yet we see 44
states and we see countries around the
world where government’s offer lotteries
for their for their residents so why do
they do this well that’s what this talk
is about today those states that provide
those lotteries as well as the people
who buy those tickets so I’m gonna start
with the United States that’s actually
what this talk is primarily about are
lotteries in the United States and the
United States we have a long experience
with states offering lotteries back in
the 1800s many states offered lotteries
but by the end of the 1800s the US
government actually banned lotteries or
effectively banned them with some
legislation so we started seeing
lotteries being offered again in the
1960s and you can see up here on this
table that in the 1960s we have new
hampshire in new york that started
offering lotteries and then in the 1970s
the early 1970s was the first wave of
additional states adding them in the
East Coast and some Midwest states like
Ohio Michigan Illinois and then in the
late 1980
States started spreading west and south
offering lottery products so today there
are 45 states Mississippi just added a
lottery this year or will be selling
lottery tickets soon 45 states that
offer lotteries so let’s talk about the
five that don’t so three reasons that
states don’t 10.4 lotteries first of all
for religious reasons which include
Alabama and Utah we think about Nevada
who likes to protect their industry and
casino industry and then we take about
two states that don’t really have much
competitive pressure in other words
states right next to them where their
residents might want to buy and lottery
tickets from and these two states are
Alaska and Hawaii so those are the five
states that don’t well what about the
states that do why do they start
offering lotteries well the reason for
that is fairly simple they need the
money there’s a lot of fiscal pressure
on states today to try to come up with
more revenues and taxes are hard to pass
people don’t like new taxes and so
lotteries are a way to try to gain new
revenues so how much revenue do
lotteries tend to gain for States well I
want to talk about one state in
particular and since we’re in Illinois
let’s talk about the state of Illinois
as you can see by this graph that
lottery ticket sales tend to support or
10r tend to be used in four different
ways a lot of the money the blue area on
this graph goes back out to pay lottery
prizes and this is a big chunk of money
this is about sixty four percent of the
money about five percent goes to paying
for the operations of the lottery six
percent goes back to stores that sell
the tickets and that leaves twenty five
percent that goes to the state so is
that a lot of money well it’s about
seven hundred million dollars so not bad
is it a lot of money though well for the
state of Illinois that’s about two
percent of their revenues in 2017 so
yeah it’s a lot of money
but it’s not enough money to replace
taxes it’s not enough money for the
state to run and it’s not good enough
money for a lot of states to do those
things but it is something right and it
does help us not necessarily have to
increase
taxes which we have to pay and lotteries
after all our choice we don’t have to
participate in waters if we don’t want
to so I want to think now about where
does this 25% go how do states spend
their lottery dollars and so in a lot so
about half the states they tend to take
that money and put it into their general
revenue which means states can do with
it what they want to do with it
in Illinois those lottery dollars are
earmarked for specific purposes and in
Illinois those purposes are either
education or spending on capital
projects like roads education in fact is
the biggest winner of lottery dollars
for states that earmark their money
education is the single biggest winner
of those dollars so is education really
a big winner well it would be for
example in Illinois it’s a seven hundred
if those seven hundred million dollars
flowed in in addition to what else they
would receive but what states tend to do
is they see that those lottery dollars
are going to be added to funding for
particular programs and then state
legislatures provide less money in terms
of other funds we call this fungibility
the idea that lottery bet dollars for
revenue for some particular programs can
be substituted so education is a winner
they are certainly getting more money
but it’s not as much money as they
otherwise would get and why do we see
education is the big beneficiary anyway
well I believe there’s two reasons for
this one lotteries are hard to pass
legislatively so when states decide they
want to have a lottery they need to have
support by the residents within states
and sometimes people are concerned about
the gambling aspects of this so they
need to convince their voters that in
fact the money’s going to go to a good
purpose like education and once the
lottery is passed they also need people
to buy tickets and guess what if I’m
gonna buy a lottery ticket I might feel
a little bit better about losing that
money if I know it’s going to go to a
good cause like education so I think
it’s twofold why we see education is
being supported a lot by these lottery
dollars now let’s think about the other
side of the market so we know that we
know I talked a little bit about states
that provide lotteries and what they do
let’s think about people who buy the
lottery tickets
so economics literature has a few
different findings on on people who buy
tickets but there’s a certain certain
things that they tend to agree on number
one people who tend to buy lottery
tickets are more likely to be male than
female they’re more likely to be
Hispanic or black they’re more likely to
be lower educated and they’re more
likely to be lower income and I want to
talk about this last one a little bit if
the lottery were attacks and we saw
lower-income households spending more of
their money relatively on the tax than
higher income households we would call
this tax regressive and we would be very
concerned about that now we do need to
keep in mind that lottery ticket
purchases are not compulsory people
don’t have to spend their money on
lottery tickets if they don’t want to
and in fact I think it makes a lot of
sense that lower-income households would
want to spend more money on lottery
tickets it makes much big difference in
their lives if they win that money then
middle income or higher income
households who rely on other forms of
income and aren’t looking for that money
to be life changing and this is also
supported in the literature by studies
that look at how and who spends money on
what types of lottery products for
example we find that scratch tickets
those instant tickets where you can find
out instantly if you’re a winner or not
that don’t pay very high prizes that
those tend to be more aggressive in
nature lower income households tend to
buy those more than higher income
households but when we look at the lot
of style games like the Mega Millions I
talked to you about like lotto Illinois
like the other big lotto games that roll
into the tens of millions hundreds and
millions of billions of dollars that
that’s what attracts higher income
households so these lotto games tend to
be more progressive in nature as opposed
to regressive and actually brings in tax
dollars if you want to call them tax
dollars from from higher income families
so what sort of challenges to do lottery
agencies and state governments face
today with their lotteries well one of
the biggest challenges that they face is
continuing to get people to buy tickets
so when states first introduced
lotteries people get excited about it
oftentimes some of these people would
have been buying lottery tickets from
states across the border and so they’re
really happy to have these lotteries now
in their states but over time we
have this characteristic called lottery
apathy where people tend to lose
interests and even with these jackpot
prizes in the hundreds of millions then
we see Mega Millions again and Powerball
reaching the billions of dollars that
people were excited about it originally
but you know you can only continue to
lose so often until you finally starts
discouraging you from buying tickets and
we call this jackpot fatigue the idea
that people do see the hi jackpots but
they just don’t respond as much as what
they used to so what are states doing to
respond to this not declining demand but
just less interest among lottery ticket
purchasers over time well they’ve done a
couple of things one of the things that
we’ve seen states do if they’ve reduced
the odds of winning the lottery which
seems really odd if people aren’t buying
lottery tickets because they’re not
winning why in the world would you
reduce the odds of winning in the first
place
well the reason is for those lot of
style games where the jackpots roll over
they roll over more if people don’t win
so they roll over to bigger and bigger
prizes and Mega Millions this is why it
rolled over into the billion dollar
range is because Mega Millions last year
reduced their odds of winning in the
hopes of attracting more ticket buyers
it was successful maybe not as
successful as they hoped but certainly
people were talking about the billion
dollar prize what else do states do well
in Illinois has been one of the more
innovative states again Illinois has had
a lottery since 1970s so they’ve had to
be tried to be innovative in trying to
keep the interest going one of the
things that ellen oy has done they were
one of the first states to have online
purchases of lottery tickets one of the
second things that Illinois has done is
they have farmed out their management of
their lottery to a private company
rather than managing it themselves
and the idea of having a private company
manage the lotto is that they will be
more innovative in the things that they
do more innovative and promoting prizes
and hopefully also be able to run the
lottery at a lower expense Illinois
certainly seems some success with their
online law on lotteries and seen sales
there it had some mixed success on their
private running of their lottery for
those of you who may have paid attention
to the news I’m gonna leave you with
this I am very interested in all of
these innovations that lotto company
are doing that states are doing to try
to innovate their loitering keep people
interested as a researcher I find this
very important I find it very
interesting what people we do in
response to this as a consumer I’m not
all that interested in buying lottery
tickets frankly I’d rather save my money
for something else but as a taxpayer I
really hope that all of you are very
interested in what states are doing so
that my taxes don’t go up thank you very
much [Applause]
Please follow and like us: