top of page

The Lottery

David Cowles

Mar 1, 2023

“The state lottery is just about the only financial vehicle that offers certain folks a realistic opportunity to materially impact their economic circumstances.”

We all love to gamble, most of us anyway; but why? If we know the rules of the games, we know that we are unlikely to walk away a winner. Unless we have a “gambling problem”, most of us gamble for the fun of it. 

When we go to Vegas, we don’t expect to come home with life-changing riches – casino rules make that a virtual impossibility. If we’re smart, we expect to come home slightly poorer than when we left. We gamble because we enjoy the games themselves. Plus, it is an undeniable thrill to “beat the house”, even if only to a modest extent and for a short period of time. Bottom line: for most of us, gambling is not a financial planning strategy.

Or is it? 60 million Americans play state lotteries every year. In states that have lotteries (44) the average adult invests more than $300/year in numbers, scratch cards and other proposition bets. While it can be fun at first to scratch a card looking for winning numbers (is this the modern version of the Gold Rush?), after a while it can get tiresome (as did panning for gold). Yet, we still do it. Why?

Simple, we do it to get rich! “Whoa, I thought you just said that you couldn’t get rich gambling.” That’s right, I did say that, and it’s true, but only in casinos! Lotteries are an entirely different kettle of fish. Here’s how they work:

In the better states/games, approximately two-thirds of the proceeds go back to the players as ‘winnings’ while the state retains the other one-third to cover costs associated with the games and to fund other public budget items, like education, transportation, or healthcare.

Most lottery bets, of course, are losers; but a fair number return a modest prize to keep players from getting discouraged. A very few bets return prizes ranging from $100,000 up to $1,000,000,000.

Vegas casinos operate on an overall margin of about 5%. State lotteries, the very best of them that is, operate on a 34% margin. So why would anyone buy a scratch ticket when they could gamble at one of the hundreds of Vegas-style casinos that are popping up all over the country? (I have at least 4 within driving distance of my home, and more are due to open soon.)

The answer, I believe, is simple: the average gambler has zero chance of becoming a millionaire at a casino; but she has a small, non-zero probability of becoming a millionaire playing the lottery. Our prototypical gambler is willing to trade a 5% margin for a 34% margin because the latter contains the possibility of a 6, or even 10, figure payout.

Many politicians and economists have noted that lower income people spend a higher percentage of their incomes on state lottery tickets than higher income folks. Of course, they do! Higher income earners are able to save money systematically; they have the option to participate in HSAs, IRAs, 401(k)s and other tax advantaged accumulation vehicles. They can even “play the market”. 

A dollar invested in the DJIA 15 years ago is worth $10 today. $1 invested in Apple on the same day is now worth $100. Beats any savings account I’ve ever had! (Of course, you have to know what to buy and when to buy it; but we enjoy thinking we can outsmart the experts…and occasionally, we do…just as we occasionally beat the house in Vegas.) Unfortunately, though, many Americans do not have ready access to equity markets.

Me? I would not describe myself as low income, but neither do I have preferred access to hot new IPOs; so yes, I buy lottery tickets every chance I get.

So here’s the fundamental question: does playing a ‘good’ state lottery (the quality varies widely from state to state) constitute a viable financial planning strategy for someone of modest means? The answer, surprisingly, is yes! The state lottery is just about the only financial vehicle that offers certain folks a realistic opportunity to materially impact their economic circumstances.

What’s the magic? A state lottery takes a little from the many but delivers a lot to a few.  Sounds like the worst form of ‘robber baron capitalism’, doesn’t it? Where’s Bernie Sanders when you need him?

But wait! The ‘few’ in this case are ‘selected’ randomly. You don’t need to be rich to win the lottery. You don’t need to have attended a posh prep school; you don’t even need an Ivy League education. Nor do you need to be born a genius…or work 60 hours a week. The lottery is a way, often virtually the only way, for many ordinary Janes and Joes to change their circumstances.

Here are questions you will not be asked by a licensed lottery agent:

  • Where did you go to school?

  • What is your race, religion, gender preference or sexual orientation?

  • Are you living in the United States legally?

  • Have you ever been convicted of a felony…or been in prison?

  • What’s your credit score?

Still not convinced! Ok then, perhaps you’ll consider a more eleemosynary argument: out of the 34% retained by the state, a small portion goes to overhead (including advertising) and a similar portion goes to the retailers who sell the tickets (that in turn helps hold down prices on milk and eggs). 

The lion’s share of a state’s lottery’s earnings goes to fund various state and local programs; education, healthcare and public works are among the favorites. Most of those public expenditures benefit people of modest means as much or more as the one-percenters.

Were it not for lottery revenues, higher taxes might be required. Those taxes could take the form of job killing taxes on corporations and high-income earners or broad based, regressive taxes on fast foods, gasoline, or sales generally. In either case, the loss of lottery revenue would impact lower income residents negatively…and disproportionately.

So a dollar invested in a good state lottery wins twice: 

  • 66% is returned to the players in heaped-up prizes.

  • Most of the remaining 34%, is used by the states to…

    • Limit taxes on income, residential property, and/or sales.

    • Improve education, transportation, and healthcare.

Understood this way, the Lottery’s overall value proposition looks pretty attractive after all. Arguably, it is the paradigmatic example of ‘doing well by doing good’. I buy a lottery ticket every week…but I never win. Bummer, but the money I lose comes back to me, and others, in the form of lower taxes and enhanced public services.

Or maybe I do win, maybe I even win big! Then money well spent, I’d say.

According to American political folklore, we ninety-nine-percenters are supposed to spend our days wringing our hands, stomping our feet, resenting the one-percent. For the most part, we don’t! More often, we take whatever steps we can to improve our economic lot; one of those steps may be the judicious purchase of state lottery tickets.

In the United States at least, people value opportunity more than they do security, but in a roundabout way (66/34), lotteries provide a measure of both.


David Cowles is the founder and editor-in-chief of Aletheia Today Magazine. He lives with his family in Massachusetts where he studies and writes about philosophy, science, theology, and scripture. He can be reached at


Return to our Spring 2023 Table of Contents

Do you like what you just read? Subscribe today and receive sneak previews of Aletheia Today Magazine articles before they're published. Plus, you'll receive our quick-read, biweekly blog,  Thoughts While Shaving.

Thanks for subscribing!

Have a comment about this ATM essay Join the conversation, and share your thoughts today..
bottom of page