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Shumita Basu, Narrating: This is "In Conversation" from Apple News. I'm Shumita Basu. Today, what the lottery reveals about the state of the American Dream.
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Unidentified Speaker 1: This is the largest Powerball jackpot so far this year.
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Unidentified Speaker 2: The Mega Millions jackpot is now the Mega Billion!
Unidentified Speaker 3: There it is!
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Unidentified Speaker 4: The new jackpot is now, wait for it, estimated to be $1.3 billion. Yeah, I said billion.
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Unidentified Speaker 5: Well, I just bought my Mega Millions ticket a few seconds ago inside the gas station, and let me tell you, lottery fever is contagious inside there.
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Unidentified Speaker 6: Wow! [LAUGHS]
Unidentified Speaker 7: Congratulations, whoever you are. We'll find out soon enough, right?
Unidentified Speaker 6: Yes. Oh, my goodness. Check those tickets. Check those numbers. We have a lot of winners, right? [VOICE TRAILS OFF]
Unidentified Speaker 7: Wow.
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Basu, Narrating: What would you do if you won the lottery? Just this week, the Powerball topped 2 billion dollars. It's the biggest jackpot in world history. A winning ticket was sold at a convenience store in Southern California, and as of Friday, no one's claimed the prize. But it's kind of fun to imagine what you would do if that winning ticket was yours. ?Maybe pay off your debts, quit your job, buy a beach house?
Now, as I'm sure you know, the probability of winning the lottery is very, very, extremely low. Your odds are about one in 292 million for the Powerball, and if you're playing the Mega Millions, your chances are even worse.
Jonathan Cohen: Your odds of winning the Mega Millions are roughly the same as if you took an ant, put it onto four football fields, and stabbed the field with a needle. That's roughly the equivalent odds of hitting the Mega Millions.
Basu, Narrating: That's Jonathan D. Cohen. He's a historian and the author of the book "For a Dollar and a Dream: State Lotteries in Modern America."
Now, despite the long odds, lotteries are incredibly popular in the United States.
Cohen: Americans spend more money on lottery tickets than on coffee, on cigarettes and on smartphones. And as recently as 2014, more than they spent on books, sports tickets, video games, music and movie tickets combined.
Basu, Narrating: And Jon says that's because the lottery is so much more than just entertainment. It's a ticket out, a way to escape the trap of income inequality. On the one hand, it's an absurd thing to bet on. But on the other hand, for a lotta people, it's their best bet.
Lotteries are run by state governments, have been for decades. And Jon argues they represent so many ways that government fails people.
Cohen: It is not inevitable that we get $91.4 billion in lottery sales every year. That is only the product of an economy that is not working for enough people and that is not providing enough people the chance through the traditional economy, through their work, through entrepreneurship, to get ahead.
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Basu, Narrating: I started by asking Jon to give us a snapshot. Who plays the lottery, and how often are they playing?
Cohen: Roughly 50% of Americans, on average, play the lottery at least once a year. And that's gonna be, especially because of weeks like this, when there are huge Powerball or Mega Millions jackpots, people like your barista or anyone else who doesn't normally play is: Alright, I'll buy a ticket. And just for reference, you know, my mom bought a ticket this week, and she's not a typical lottery player. But once you get down into who plays it frequently, so we have one in eight who play at least once a week, now we're talking about a group that is disproportionately lower income, disproportionately non-White and disproportionately lower educated or less educated. This is, just for specific reference on the income, it's typically not the very, very poor who are playing, but sort of one quintile up or one step up from that; folks who have the disposable income to spend on lottery tickets, but maybe don't see opportunities elsewhere to get ahead. And that's why they've sort of turned to hope and turned to chance as their best way instead.
Basu: Right. So, I'm gonna ask you to explain more about the mechanics a little bit later on, but maybe you can just give a brief explainer now. Where does the money go when you buy a lottery ticket?
Cohen: So, it varies state by state, so I'll just give some sort of general averages. Roughly 60% is gonna go to prizes. Around 20 to 30% is gonna go to whatever cause the state has designated as the beneficiary for the lottery. And then around 10% for the lottery administration. And that includes all advertising costs. And then 5 to 6% is gonna go to the retailers that sell tickets and cash tickets; they get a little incentive on top of it. So, all that to say, you know, a lot smaller percentage of the pie goes to states than they would like you to believe.
Basu: Yeah, and tell us more about that small slice that the state takes and designates toward some kind of programs. What are those like? What are those about, and who dictates where that money goes?
Cohen: So, it depends on the state, and it's typically included when a state enacts a lottery. It is sort of predetermined what the lottery will benefit. So, there are lots of different uses. There are some sort of unique cases. Pennsylvania uses its lottery for elder care, Massachusetts shares its lottery money with the 351 cities and towns and sort of gives it directly into municipal budgets; in the South, lotteries fund a lot of merit scholarships to incentivize students to go to in-state colleges and universities. And then, in states like New York, it might feed into sort of the general education budget. The problem there, and this has happened in New York, in Virginia, in Florida, and in Illinois, California and a few other states, is that for every lottery dollar that goes into the education fund, $1 of standard appropriation comes out. So, it doesn't actually add anything to the education fund, it supplants money that was already designated for education, rather than supplement the money that was already supposed to go there.
Basu: So, I wanna talk much more about what's happening today with lottery systems, but I think what would be helpful to do right now is ask you to unpack some history. I think that a lot of people maybe don't realize how lotteries have traditionally been used by governments [LAUGHS] over time. Maybe you can give just a very brief synopsis of our relationship to lotteries.
Cohen: Yeah, I'm a historian, so I'll do my best to keep it brief.
Basu: [LAUGHS] I realize that's a really hard question to ask you.
Cohen: Yeah. [LAUGHS] So, lotteries have a very long history, as you alluded to, as sort of means of public finance, going back sort of in their modern incarnation, as far as I can tell, to 15th century Belgium where they're used to sort of fund civic projects. That remains the case in England in the 16th century. And then, in the 17th century, lotteries are used to fund British exploration of the new world and the settlement at Jamestown and other parts of North America. And in North America, in British colonies, it is extremely hard to collect large amounts of capital and large amounts of cash when your banking centers are, you know, six weeks away by boat. And the easiest way to sort of collect cash for large construction projects are things like lotteries. Another major use was if someone wants to sell an estate, but there's no buyer with enough cash on hand to buy it, they might have a lottery instead. And assuming they raise enough money in the lottery that's the equivalent of the sale, the sale can go through. So, basically as a substitute means for capital accumulation in the 18th and 19th centuries, especially in a country that, you know, had just fought a war to resist taxation. But government needs to raise money somehow to build bridges and build churches and build roads, and these colonists often had nowhere else to turn other than this idea of a lottery.
Basu, Narrating: By the 1890s, lotteries had been made illegal in every state, mostly because of concerns about fraud, mismanagement, and the impact on people with low incomes. Lotteries still existed, but they moved underground. Then, the 1960s brought about what Jon calls "a new era of legal lotteries." And the reason this happened is because many states during this time were running into a money problem.
Cohen: In the post-World War II period, sort of states in general are dealing with a fiscal crunch where voters don't want new taxes, but they also don't want service cuts. And legislators are in a bind, and they don't know where they're gonna get money from. And the answer often is just: Let's try gambling. Let's try lotteries.
Basu, Narrating: New Hampshire, which has no sales or income tax, was the first to offer a state lottery, in 1964.
Cohen: And then, there's a couple factors that sort of explain the spread from there. One that stands out is sort of this neighboring state phenomenon, where once New Hampshire legalizes a lottery and people from Massachusetts or Vermont are going into New Hampshire, then folks in those states reason that their state might as well have a lottery of their own, if everyone is already playing the lottery but the money's going to a different state.
Basu: So interesting. So, tell me a little bit more about what happened '60s, '70s, '80s, '90s; sort of how different states and different state governments started to think about the lottery and maybe even shift their expectations around the lotteries.
Cohen: So, in the 1960s and 1970s, lotteries are seen as a panacea for entire state budgets. There are all these quotes in my chapter on this period, it's about New Jersey, all these quotes of people saying, "Oh, we'll never have to pay any taxes ever again because we're gonna have the lottery and it's gonna make so much money and it's gonna be awesome," and that "the general fund is gonna be flush with cash because we're gonna have all this lottery money." So, that is a lot more illusion than reality. And those ideas quickly fade away, but not quickly enough. You know, 14 states passed lotteries between 1963 and 1977. And then they return in the 1980s, and I won't get too far into the details here, but in part driven by the work of one lottery ticket company, Scientific Games, that sort of restarts the spread of state lotteries, particularly in Western states. But on the promise that is morphed somewhat. It's not the lottery's gonna fund the entire state budget, it's the lottery's gonna fund a specific popular program. You know, in Colorado it's public parks, in California it's education. And the company's claim is a vote for the lottery is not a vote for gambling, it's a vote for education, or it's a vote for public parks and…
Basu: [LAUGHS] Oh, interesting. Interesting marketing tactic.
Cohen: Yeah. And it works. First of all, you know, all these states pass lotteries. But you see, as you alluded to, the expectations have shifted from the entire state budget. Okay, now, we're just gonna focus on one specific popular program, and we're gonna make that program synonymous with the lottery.
Basu: Yeah. So, tell me a little bit more about how it worked out once these were focused on more single-budget-line-item things like education or public parks. How did they meet expectations there?
Cohen: So, from a pure dollars perspective, they actually do meet expectations, where there are projections of the lottery will make X million dollars a year, and in many cases it actually does. The problem is they create a whole set of issues for legislators who now confront these voters who believe, incorrectly, but they believe that, oh, the education budget is swimming in lottery dollars. Why do we need to keep raising our taxes? We just passed a lottery that was supposed to take care of the problem. And it just doesn't. So, it creates these big problems for legislators who now want to raise taxes because, oh, education still needs help, but all these voters are like, "We don't need that, we have the lottery. That's what it's supposed to be for." And they're resistant to sort of the standard bread and butter ways that government needs to be paid for to work.
Basu: I also just wanna talk a little bit about how much lotteries changed over time in terms of just how big they became. Can you tell us a bit about how that has changed over the decades?
Cohen: Yeah. I mean, the first drawing in the New Hampshire sweepstakes, it was called, in 1964, was a couple different drawings, a couple different winners of $600,000 each. By early 1970s, they start adding $1 million jackpots, and those are sort of a big deal. They're only ever paid out over 20-year increments. You're never… It's not like you get a million dollar check right on the spot. And then in 1978, first Massachusetts and then New York introduced Lotto, again, this sort of roll-over jackpot game that we now recognize, like Mega Millions and Powerball, where the prizes can theoretically increase forever if nobody wins, and they get bigger and bigger and bigger and really wet player's appetite for wealth.
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Basu, Narrating: Now, as Jon mentioned earlier, the people who play the lottery most often are disproportionally lower income, non-white and less educated.
Cohen: The data indicates that every single lottery game is regressive, meaning they take more money from people who are poorer relative to those who are richer.
Basu, Narrating: So, a lot of the revenue that states get from lotteries comes from people who don't have much money themselves.
Cohen: And, in some states, they are the people who least benefit from the state programs that are funded by lotteries. Particularly, I'm thinking of states in the South that use lottery money for merit scholarships that have been shown in many, many studies to disproportionately benefit richer, whiter students, whereas it's poorer non-white players who are playing into the lottery in the first place and funding those scholarships.
Basu, Narrating: On top of all of that, since lotteries are run by state governments, they are the ones running ads, encouraging people to gamble their money in this way. Which can feel like an ethically murky thing for your government to be doing, especially when that advertising is targeted.
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Cohen: The advertising question points to what I think is sort of a vicious cycle for lottery players, where state lottery commissions assume that poor people will be more interested in the lottery, to put it kindly. So, they advertise sort of heavily at targeting those communities. Then those communities play more lottery, then the state lottery commission sees sales data indicates where the lottery players live, so they advertise more in those communities. So there's more sales, so there's more advertising, etcetera. So the regressivity, I think, is not a natural byproduct of: Oh, people with lower income are too stupid to know that they're never gonna win the lottery and that they shouldn't gamble. A lot of it is sort of intentional cultivation from the state and from state lottery commissions of getting these people to gamble and getting these people to participate. And then a lot of it, again, is also a byproduct of the fact many of these people do not see hope elsewhere in the economy. And that even if they have a steady job, even if they are sort of financially stable and they're doing okay, but they don't have a chance through their work or through, you know, a side hustle to change their life in a meaningful way.
Basu: I'm so curious, what kind of guardrails or oversight is in place right now for lotteries, particularly the way that they are marketed?
Cohen: Yeah, so there are very few guardrails on lottery commissions. And this is in part because over the course of the 1970s, Congress decided it was gonna get out of the way, and they removed a bunch of sort of stumbling blocks that had been limiting the lottery industry about things like advertising and about things like interstate transportation of advertising and of lottery tickets. I think the most glaring sort of lack of guideline that stands out is that because lotteries are state agencies, they are exempt from Federal Trade Commission truth and advertising law. Which creates a whole host of problems and a whole host of opportunities for states to engage in these sort of misleading advertising practices that have really just become common and really have been common since lotteries emerged decades ago.
Basu: Right, right. I should say that you write very critically about how promoting lotteries is really at odds with what you see as government responsibilities.
Cohen: Yeah. I mean, I think, just fundamentally, the role of state government should be to promote the common good. You can define that however you want, but I do not see how the operation of a lottery commission comports with the mission of a state to promote the common good. To take an easy example, states profit from cigarette taxes. So, technically, it's in state's short-term best interest for more people to buy more cigarettes because states make money off of those cigarettes. But you would never, ever see a state promoting cigarettes and advertising them, so that they could get the tax revenue. But that's exactly what we have with state lottery tickets, where states have entire agencies and officials whose job it is to increase lottery sales and to entice people to gamble. The operation of the lottery commissions by states seems totally at odds with what we would expect would be the purposes of government in modern society.
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Basu, Narrating: Jon says, when it comes down to it, the lottery's popularity represents something much bigger about what it means to succeed today in America and the dream of getting rich quick. Jon spoke with lots of regulars about why they play, for his book. One of them is Leo McCord, who's 70 years old.
Cohen: He lives in Chicago, and he's lived in Chicago all of his life, and basically since 1974, when the Illinois lottery tickets went on sale, he's been playing. And he's been playing, by his own admission, sort of a bit more than he should.
Basu, Narrating: Leo's mother was a civil rights activist. And in the 1980s, she led a protest against the Illinois lottery over what she saw as predatory advertising practices in Black and low-income Chicago communities. Leo was part of a brief boycott back then, but he ultimately went back to buying tickets. He even won a $100,000 prize one time. But he told Jon, on the whole, he's lost more than he's won. And yet, he keeps playing and dreaming of a truly life-changing jackpot.
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Cohen: Yeah, I think for Leo and for players like him, it truly is a form of entertainment, and it is a form of entertainment that is hard to imagine for people who don't play the lottery regularly. And is hard to imagine specifically because people like Leo and other lottery players get a lot of value out of even losing tickets. And the chance that tickets provide to dream and to imagine and to hope for a few days, for a few hours, after you buy a ticket, before the drawing comes out, that's what people play for and that's the experience people are buying. And he, Leo, explicitly sort of equates it to: Some people spend money on alcohol, some people buy movie tickets. I just buy lottery tickets, and that's sort of my pastime. Though I think he would be the first to acknowledge sort of the implicit hopes for not just entertainment, but for social mobility and for upward mobility and for a new life that are inherent in every purchase of a lottery ticket.
Basu: Yeah. I mean, I appreciate the way that you do this in your book. You point out that there's often a lot of value judgements made about people who play the lottery, as if they are people who don't understand how probability works, as if it is just unrealistic and ultimately foolish. What is it that draws people to it, and why do you not see it as a foolish enterprise?
Cohen: I would say, I think we miss so much of why the lottery is important to people, why they're so willing to participate. And I would say, most simply, gambling is popular. Gambling has always been popular in some form, in the United States especially. But there's more going on here than just people wanting to gamble. The will to gamble alone does not create a $91.4 billion industry. There's more going on here, and specifically, there's data indicating that as unemployment rates go up, as poverty rates go up, lottery plight increases while other forms of gambling participation decline.
Basu: Yeah, I was so surprised by this in your book. You write about how this happened actually during the pandemic, right? At first, lottery sales took a slight dip, but then they started climbing back up again in the early days.
Cohen: Right. And again, this is sort of evidence I see of the fact that these people who play the lottery regularly, they are gambling, but they are not playing just to gamble. They are playing to participate in something bigger. They are playing for their shot at the American Dream. They are playing because it's about hope. This is not just a game, even if they are deriving entertainment and value from the tickets. But it really is about something bigger, and it is about the chance at a new life.
Basu: So, who do we see speaking out in support of lotteries and who do we see speaking out opposing them? I guess, I just wanna hear more of the argument for supporting and opposing.
Cohen: Well, the argument supporting lotteries is pretty simple; it's: They make money for states. Again, we can put a question of how much they make for states, and put how efficiently they raise it, and how much that money looks relative to sort of state's overall budgets; but that's sort of the simple argument. The supporters we see who have been in favor in the past, I would say the two biggest ones are very self-interested. Companies like Scientific Games that prints lottery tickets, that sort of has an incentive for more states to enact lottery so that there's a bigger market for tickets. This was also true in states like Virginia where 7/11 helped sponsor the referendum to get the lottery passed so that they could make that 5 to 6% sales commission on every lottery ticket sold throughout the state in perpetuity. I don't wanna underplay how popular lotteries also are just among voters, some of whom want the chance to play lotteries, some of whom think gambling is an acceptable way for government to raise revenue. Those are some of the stakeholders who I see as having been in support of the lottery in the past.
Basu: And what about opposition?
Cohen: So, opposition has actually looked very, very similar in basically every state for five plus decades. The largest opposition has been concentrated among conservative evangelical protestants. There is no prohibition against gambling in the Bible, just to be clear about that. But these groups and churches have opposed the lottery sort of for social reasons: that the lottery has an adverse effect on the poor, that lottery inculcates negative values that undermines the work ethic, that it sort of degrades what we wanna teach children, and certainly we shouldn't be funding education for children with gambling money. And again, this has been an argument that we heard first in New Hampshire in 1963 and that we heard most recently in Mississippi in 2018, when that state became the 45th to enact a lottery. So, it's a really common refrain that's been sort of championed for five plus decades.
Basu: You know, one thing that I am kind of surprised by, I feel like I haven't seen many more liberal, progressive politicians kind of take up this issue, take aim at lotteries as being this problematic and regressive form of collecting money from a citizenry.
Cohen: It's a glaring social justice issue that people who are concerned about social justice seem to ignore. I think there are sort of two possible interpretations. One is more charitable; one is less charitable. The charitable interpretation is that they sort of just don't think about it, that it's sort of out of sight, out of mind, for political leaders. The less charitable interpretation is that they need the money too. That they, especially for the long-time accusation about, you know, "tax and spend" liberals, that they need any tax-free money that they can get and that they've sort of resigned themselves to accepting lottery money and gambling money for the state. So, it's a really a curious case, something that I wish was sort of on higher importance, and something that I wish wasn't just an issue for conservative Protestants but was an issue for anyone who's concerned about the fate of the poor and sort of the state of the American Dream.
Basu: In your book, you reach this conclusion that, really, lotteries should just not exist in 21st-century America. But that doesn't seem like it's gonna happen anytime soon. So, given that, what are some regulations or reforms that you would like to see?
Cohen: No state has got rid of its lottery since the 19th century. So, I don't think that that is gonna happen anytime soon. But there are a lot of levers and a lot of options for regulation to make lotteries better. And by "better," I don't mean to increase sales and to make the games more fun and sexy. I mean to make the games better reflect the common good and help government better serve the people in the ways that it should. So, some of the regulations on lotteries that I think would be helpful would include things like closing the FTC loophole that exempts lotteries from truth and advertising restrictions, stopping the expansion of lottery sales over the internet, which is what some states are trying to do or have already done. I think lotteries could adopt prize caps so that maybe we set a cap, so it's $500 million and the prize won't get any bigger than that, to sort of stop these lottery frenzies. I think the cost of scratch tickets could be limited. In Texas, you can buy a scratch ticket that's $50. I think, you know, we could limit it to states can't sell scratch tickets more than $20, for example. And then there could be other regulations, not just on the truth in advertising, but just other regulations when it comes to advertising in general. How much states can advertise, what percentage of their budget they can spend on advertising, the tone of that advertising coverage. There are a lot of creative ways that states could experiment with trying to regulate how lotteries work, some of which have been tried before, some of which have not and might create a much fairer gambling landscape in the United States today.
Basu: Jon, I was kind of tickled that all of this has not stopped you from buying lottery tickets from time to time. [LAUGHS] Can you say a little bit about your thinking?
Cohen: It's slowed me down. Even at my peak, I was never a heavy lottery player. But I'm, as I say in the book, I'm certainly not immune from these sort of wishful daydreams and fantasies that come when you buy a ticket for a big Powerball or Mega Millions jackpot. And I think that says a lot about human nature and a lot about how these games are structured and the ways that they're designed in a perfect way to get you to dream and to get you to imagine; that even if you've spent seven years writing a book about the lottery, you just can't help yourself, or at least I can't.
Basu: [CHUCKLES]
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Basu, Narrating: Jonathan D. Cohen's book, "For a Dollar and a Dream," is out now on Apple Books. You can find a link on our show notes page.
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