Gambling: Mapping the American Moral Landscape

1 The Importance of a Good Cause Ends and Means in State Lotteries

11 1 The Importance of a Good Cause Ends and Means in State Lotteries ♠ Charles T. Clotfelter and Philip J. Cook Lottery gambling is a problematic activity: those opposed to gambling on moral grounds object to government sponsorship of lotteries; revenues raised from them have distributional patterns similar to regressive taxes; and, like other forms of widely available commercial gambling, they create economic and personal difficulties for the small portion of the population who are problem gamblers. Nonetheless, lotteries are sponsored by forty-three U.S. states and over one hundred countries. The deal that typically has been struck in the United States is that lottery revenue will be dedicated to good public causes. This virtuous end thus serves to justify the dubious means. Almost never are state lotteries seen as a public service. The closest that proponents come to justifying lotteries in this way is the argument that people will gamble anyway, so government might as well take advantage of this predilection by making money on it. The government’s accommodation to lotteries is strikingly different from the ways that the government has dealt with other problematic activities. For example, states with monopolies over liquor distribution run that business primarily as a public service rather than as a revenue source. Furthermore, some states 12 Charles T. Clotfelter and Philip J. Cook license certain commercial gambling operations and collect revenues without any concern for applying those collections to a virtuous purpose. Other problematic activities have generally not been legalized—among them, marijuana, prostitution, and cockfighting—although states could raise money for good causes by legalizing and heavily taxing them. What are the limits when it comes to public provision of “soft-core” vices? In these cases, it is second nature in the utilitarian realm of normative economics to think about tradeoffs between the costs associated with legalizing and operating problematic activities and the benefits derived from the revenue their taxation would make possible. This realm is a natural setting for debating the classic ends-versus-means question, given that it arises with such force in the context of problematic activities. In the case of lotteries , the ends-and-means tension extends beyond the legalization question. Once a lottery is in place, the amount of revenue it generates depends largely on how it is marketed. Do the “ends” of more revenue justify aggressive or deceptive marketing efforts? Do they justify advertising that emphasizes the virtuous use of the funds (if indeed it can be honestly argued that the funds will be used in this way)? And why have the states—up to now—created lotteries as public agencies, rather than licensing one or more private providers? Would privatization ease the moral liability of the state government? This chapter seeks to address these questions with particular attention to alternative theories of the public interest and the proper role of government, with an eye toward historical precedents and current methods of lottery operation, including a close examination of the themes used in advertising campaigns. Included too is some background for viewing the operation of contemporary state lotteries, as well as an examination of how good causes influence the adoption and operation of state lotteries. Background Arising out of the ashes of nineteenth-century disrepute and universal prohibition, state lotteries reemerged in the last third of the twentieth century to become an unremarkable fixture in the architecture of American state government. State lotteries made their twentieth-century debut in 1964, when New Hampshire The Importance of a Good Cause 13 introduced its game. The number of states with lotteries grew to seven by 1973, thirty-eight by 1997, and forty-three by 2007. Public acceptance, measured by successful referenda and growing sales, has increased as well. Per capita purchases of lottery tickets grew more than fourfold in inflation-adjusted dollars between 1973 and 2006, to $184.1 Table 1.1 U.S. State Lotteries: Number and Per Capita Sales, Selected Years Year Number of state lotteries Per capita sales* (FY 2006 dollars) 1973 7 43 1987 23 157 1997 38 186 2006 43 184 Sources: Clotfelter et al., State Lotteries at the Turn of the Century, table 1; International Gaming and Wagering Business, April 2007, 27. *Per capita sales utilize the total population (all ages) of residents of states with a lottery. Sales exclude video lottery terminal games. Although remarkable for its speed, this growth is better judged when viewed in a...