One part of Canada's tax-transfer system increases inequality of wealth. That's not an unfortunate side-effect of the policy; it is deliberately designed that way. It would be very easy to design it differently so that it did not increase inequality.
The policy in question reduces the wealth of many people by a small amount, and makes a very small number of people very wealthy. Those who get wealthy as a result of this policy do so by sheer luck. Nobody argues that those who gain wealth are more morally deserving than those who lose wealth as a result of this policy.
Most government tax-transfer policies try to increase equality, even if there's a cost to doing so. We could scrap some of those tax-transfer schemes easily, and save on those costs, if we wanted to increase inequality. But this particular policy is designed to increase inequality, and has an administrative cost of doing so. By scrapping this particular policy we could increase equality at a negative cost.
The policy in question has cross-party support, at all levels of government. Some parties might want to modify this policy a little, but as far as I know none of the major parties wants to scrap it altogether. And the policy enjoys popular support as well. Anecdotal evidence suggests the poor are especially likely to support this policy.
Any outside observer who looked at this policy alone would conclude that Canadians wanted to increase inequality of wealth. And Canada is not alone.
I'm talking about lotteries. Lotteries redistribute wealth and increase inequality in a way that depends on sheer luck. Lotteries have an administrative cost, and so reduce average wealth. Sure, some part of the revenues are used to fund good things. But a simple lump sum tax on everyone could do the same funding, without increasing inequality at the same time.
A libertarian would find no paradox here. If people voluntarily join a club that increases the inequality of wealth of club members in some morally arbitrary way, the libertarian has no objection. Because it's a voluntary club. A libertarian would also not object to voluntary transfers from rich to poor that reduce inequality. As far as the pure libertarian is concerned, the only thing that matters is that it be voluntary. Whether it increases or reduces inequality is not what matters.
But very few people are libertarian.
Nearly all the rest of us say we value equality, and want the government to use its power to promote equality, providing the cost of doing so is not too great. The benefits of an extra dollar to the poor are greater than the benefits of an extra dollar to the rich. We argue only about which inequalities are morally justified, and how big the costs are of reducing inequality, and whether the costs are worth the benefits.
But when we buy lottery tickets our actions say that we want more inequality. When governments sell lottery tickets their actions say they want more inequality.
We do not begrudge the wealth of lottery winners. Even though we know they are not morally deserving of their wealth, and got it through sheer luck. Perhaps precisely because they got it through sheer luck, and so can't pretend they are more morally deserving than we are (which is what gets us really annoyed at the rich).
There's something paradoxical here. Are we really closet libertarians, despite what we say? Do we really support more inequality, despite what we say? Do we really believe the Utilitarian doctrine that says the poor benefit more from an extra dollar than the rich?
An ultra-quick Google says that one quarter of Canadians buy lottery tickets weekly. That means, at an absolute minimum, one quarter of Canadians want (have a revealed preference for) more inequality. They put themselves behind the Rawlsian Veil of Ignorance, and vote for more inequality.
None of this makes sense to me.
Worthwhile Canadian Initiative 
The lotteries increase inequality, but they also shake up the distribution, launching people from the lower ends up into higher stretches of the distribution. Income mobility may be as important to people as distribution.
This is not that much of a mystery. The first priority of the poor is not to be themselves poor. That strikes me as an impulse to equality, not inequality. The lottery is “notionally” one of the ways in which someone on the receiving end of inequality can become equal to their betters.
It’s not surprising to me that people buy lottery tickets – people like to hope and to dream, and a lottery ticket is just the price of a week of dreaming of escape. And lots of people want to press the ESC key once in a while.
Though it’s a perfect scheme, isn’t it? Sell lottery tickets, making the poor poorer and the rich richer, thereby increasing inequality and the gap between rich and poor, thus making escaping a mundane existence even more attractive, therefore selling even more lottery tickets.
We’ve talked on this blog before about how hard it is to grasp large numbers, like the odds of not winning the lottery. Anyways the odds of winning the lottery are no smaller than the odds of some other dreams coming true, e.g. scoring a hat trick during my hockey game tomorrow night.
But why as a society we’ve chosen to use this urge, as Nick says, to increase inequality – as opposed to promoting saving or other good stuff – is absolutely beyond me. (The justification that these funds are going to public services is baloney – any other way of raising funds, even the fairly regressive ones like property taxes or GST, would hurt the poor far less than lottery tickets).
The thing, Nick, I’m surprised about is that you don’t advocate a market solution – end the government monopoly on lottery purchases and advocate a more competitive market for gambling. Surely that’s the libertarian solution.
That means, at an absolute minimum, one quarter of Canadians want (have a revealed preference for) more inequality.
Well, either that, or revealed preference and perfect information and rational agents are a load of hooey. One or the other.
Nick, “That means, at an absolute minimum, one quarter of Canadians want (have a revealed preference for) more inequality. ”
No, what it means is that each person knows that the expected change in overall inequality as a result of his or her personal decision to buy a lottery ticket is, essentially, zero.
Think about it: someone is going to win even if I don’t buy a ticket. My ticket purchase makes me $5 worse off, the winners $3 better off and generates government revenue of $2. From a lifetime perspective the winners might be in the top, say, 10% of lifetime earnings. Buying a lottery ticket probably does far less to increase overall inequality than, say, buying a microsoft product that increases Bill Gates’ income, or filling up at an Irving gas station and increasing the Irving family’s income, or even spending $100 at Canadian Tire.
Not everybody on the left is a fan of lotteries. The phrase “A tax on the stupid” springs to mind.
That the NDP is not of this mind is an indication of the centrist tendencies of parties that focus on winning elections.
Dr Rowe, I believe that you are thinking much, much, much harder about this than most Canadians that buy lottery tickets. In fact, I doubt that most could be induced to give careful consideration to your discussion. As far as libertarians are concerned, I think a wide variety of opinion is possible. I, for example, would rather that government did not involve itself in this activity at all for a variety of reasons, one of them being its insistence on using it as a form of tax. Unfortunately, in a country that lacks provision for a real franchise for its citizens it seems to be inevitable that all political parties must agree to the current arrangements.
Hello, lefty here. Well, people around here call me a lefty. I don’t like lotteries. The only time I played was at the office pool and it was a dollar a week and you got some laughs and occasionally a toonie back.
Most of the time I prefer chocolate or cashews for my escape. The pleasure value of the purchase is clear and right in front of my face, until I put it in my face. 🙂 What the purchase promises, the purchase delivers immediately.
On the other hand, there is a clear case to be made that since people gamble anyway, the state may as well take the profits. Many US States like New York, Pennsylvania and New Jersey operate Numbers Games where three digits are drawn randomly to match player tickets. The game started under Mob control in poor neighbourhoods like Harlem as early as the 1870’s and flourished in the 1920’s. The New York Mafia made it a mainstay of their rackets until New York started to offer the same game legally. New York broadcasts the draw weekly and I’ve often seen in on Buffalo stations.
This is one case where the government clearly legalized and usurped an organized criminal activity simply to appropriate the profits for itself.
A side effect of lotteries is definitely a redistribution of wealth – great point. But it has been demonstrated (Morgan 2000) that you can get perfectly rational risk neutral agents who don’t care about income distribution to buy lottery tickets if the lottery is attached to the provision of a public good. The remarkable thing about this result is that it increases public welfare by increasing provision of the public good.
While I think you’ve captured an important side effect, I don’t think your conclusion about preferences is entirely correct.
Determinant is completely correct when he states.
“This is one case where the government clearly legalized and usurped an organized criminal activity simply to appropriate the profits for itself.”
Now should governments do the same for marijuana? How about prostitution? Or heroin?
I think someone smarter than I am could make a reasonable case for all 3.
I am at best indifferent to legalizing marijuana, I’ve never smoked it and never wanted to. I’m a diabetic and that just doubles the usual “don’t smoke” reasons. The same reasons apply to tobacco too.
I am against legalizing prostitution because I am unwilling to place anyone in the position of feeling that they have to resort to whoring in order to earn a living. Until we as a society are prepared to offer a true and unconditional alternative to prostitution as an economic activity, until we can guarantee that those participating are truly “volunteers” then I cannot and will not support legalization. Economics be damned. However this amounts to advocating for a Guaranteed Minimum Income so politically it’s a non-starter.
Though I do have a sneaking suspicion that many of our problems would be lessened if we legalized most drugs and simply offered treatment programs.
“I am against legalizing prostitution because I am unwilling to place anyone in the position of feeling that they have to resort to whoring in order to earn a living.”
I genuinely don’t understand your argument. As I see it, no one would become a prostitute unless the alternative were worse. Prostitution doesn’t make the situation worse; it just turns a terrible situation into a slightly less terrible one (for many people). It seems to me that the only way to solve the problem that you’re pointing out is to abolish poverty (which I would strongly support). The legality of prostitution has relatively little effect on the outcome. The only reasonable argument that I’ve ever heard against legalizing prostitution is that it would increase the number of individuals who are trafficked against their will. That would be a terrible outcome, but I don’t think it’s what you’re describing.
Addressing the original topic, I would like to say that maybe the lottery has a real utility for those who buy tickets. Maybe irrational hope is a precious commodity. That would certainly explain a lot of things about the world.
“None of this makes sense to me”
Ah, but you can do math.
A family member who buys a lottery ticket every week, and has for years, when confronted with the statement “the expected returns on lottery tickets are negative” responded: “if I don’t buy a ticket, I have zero chance of winning. But if I buy a ticket, then at least I might win, and win big”. And I’ve heard many similar justifications.
Gambling isn’t really a stupidity tax. It’s a “failed/never took undergrad probability and statistics” tax.
How about retail investment?
It strikes me that it works in similar ways.
But it appeals more to people who like to think of themselves as smart or connected; so the middle and upper classes. But it’s just chance, a few will win, most will lose. Inequality increases.
Arguably, it is a larger source of current day inequality then lotteries.
So why pick on lotteries? The easy opportunity for class condescension? Does the moral honesty in winning strike us as rather innocent, a bit jejune?
“Popular support for increased inequality?”
No. Simple answer to a simple question.
Why bother writing a post pretending there’s a connection, is what I wonder?
“An ultra-quick Google says that one quarter of Canadians buy lottery tickets weekly. That means, at an absolute minimum, one quarter of Canadians want (have a revealed preference for) more inequality.”
Actually, it means that one quarter of Canadians want to be rich and are either bad at math or value the small chance of f-you wealth higher than they value the money spent on the ticket. Will your next post earnestly wonder why so many people in the potato chip aisle have a revealed preference for having a heart attack and dying in their 50’s?
“We do not begrudge the wealth of lottery winners. Even though we know they are not morally deserving of their wealth, and got it through sheer luck. Perhaps precisely because they got it through sheer luck, and so can’t pretend they are more morally deserving than we are (which is what gets us really annoyed at the rich).”
Huh? The reason nobody begrudges the lottery winner their winnings is that it was a fair competition open to all without the playing field rigger in their favour. People get annoyed with the rich because they believe (with some justification, in my opinion) that those who are rich often got that way so by screwing over other people for most of their life (see Black, Conrad if you want a nice example) or by benefiting from a rigged game in the form of insider connections, inheritance, etc. Also, people get annoyed when rich people aren’t content to simply be rich, but instead buy newspapers and politicians in an attempt to corrupt the government into increasing their riches further at the expense of the common man (see Black, Conrad if you want a nice example).
Here’s an experiment that may help. Next time you are playing a game, try two methods for determining who goes first. In one case, highest roll goes first, in the second case, you go first because you said so.
At any rate, I’d say the view of the average Canadian is that your typical lottery winner has a stronger moral claim to their money than many if not most wealthy Canadians.
Declan: “Why bother writing a post pretending there’s a connection, is what I wonder?”
You don’t see the connection??? Let me spell it out for you.
The Rawlsian thought-experiment has been cited as one of the strongest arguments for equality. I have cited it many times myself. If you put people behind the Veil of Ignorance, they would vote for equality, unless the cost was too high. Well, guess what, at least one quarter of the population go behind the Rawlsian Veil of Ignorance every week. And they don’t vote that way, even when the cost of equality would be negative.
Stop pretending there is no connection. (Unless you have never heard of Rawls, in which case you are forgiven for missing the point.)
Frances: “The thing, Nick, I’m surprised about is that you don’t advocate a market solution – end the government monopoly on lottery purchases and advocate a more competitive market for gambling. Surely that’s the libertarian solution.”
The libertarian in me is arguing just that. And the paternalistic egalitarian in me, who believes in diminishing marginal utility, is arguing to ban the lot.
Again, I don’t have a solution to this paradox. And while I am unconvinced by the resolutions offered in comments above, they are not obviously wrong, and I don’t have anything better to offer.
Hi,
As far as I understand Rawls’ theory, people behind the Veil vote for equality out of self-interested risk-aversion, not out of altruism. Sure, there is a sense of justice involved, but that is in order to make sense of the Veil itself, not to explain people’s decisions. So, it becomes a story about risk-aversion then. If risk-aversion is mostly a function of loss aversion, then even for generally risk-averse, insurance-buying people, the potential loss from buying a lottery ticket is probably small enough to justify taking a chance on earning a large amount, and getting as well a 100% sure participation in a society playing games, just for the friggin’ hell of it. Life is short, right?
Assume Yvan is right about loss-aversion. It sounds plausible: people are willing to take a small loss when they by a lottery ticket, but insure against big losses on their house and car. But where does that leave the Rawlsian thought-experiment? Loss-aversion requires an existing level of income to make sense. What is that existing level of income in the Rawlsian Original Position?
mad: investing in risky stocks increases inequality too. But it also generally has, or may have, positive expected returns. We know for sure that investing in stocks has negative expected returns. We know for sure that people are not trading off risk for return.
Damn! Freudian slip. That should read: “We know for sure that investing in lottery tickets has negative expected returns.
Nick,
Again, as far as my understanding of Rawls go, the participants in the OP are aware of all the general facts about the society for which they are designing principles of justice. What the Veil of ignorance blinds them to is their position in that society. So you would think that a decision about lotteries would itself be a function of the income distributions that the participants are considering, including transfers and other institutional features, etc. The relevant income here would be that of the lowest-income group in such a society, but this does not preclude that it would be high enough – as would be the maximin level in a wealthy society – so to consider the cost of lottery tickets to be relatively low.
Nick, it is totally consistent to say “in a Rawlsian original position I would not want lotteries to exist” and still buy lottery tickets.
One example: big pots, if unclaimed, carry over from week to week. If don’t remember the exact dollar figure, but there is a point at which, if the carry over is large enough, the expected value of a lotto 6-49 ticket becomes positive.
Every action we take has both a manifest and latent function. You’re arguing that the latent function of lottery tickets is to increase income inequality, therefore people who buy lottery tickets support increased income inequality. That’s ignoring their manifest function, which is to, as Jim pointed out at the top, which is to increase social mobility, and give an escape.
Think about an average income person, without dental insurance, going to the dentist. That increases income inequality (if the dentist is richer than the patient). But people still go, because cavities hurt. Choosing to go to the dentist isn’t a vote for increased income inequality, it’s doing the best you can to relieve your pain given the options available to you.
Or think about a poor person who goes to a church and pays a wealthy corrupt priest for a prayer. That’s actually a very close analogy – you pray because it’s the only hope available to you, and yet this action perpetuates the inequality that gets you there in the first place.
I’d argue that lottery tickets are mostly bought for their entertainment value, not for risk-seeking.
The funny thing is that you can replicate a lottery’s risk profile in the asset markets and come out with (potentially) a positive expected return. Just buy an out-of-the-money call on a broad market index (this is very cheap). If the call option expires valueless, then you’re done. Otherwise, take the proceeds and stake them again in out-of-the-money options. Lather, rinse and repeat until you reach the desired payoff amount, then you may need an option collar in order to cap your “winnings”.
That’s not very enticing, is it. But it works, since the probability of winning the lottery grand prize is incredibly low.
“Or think about a poor person who goes to a church and pays a wealthy corrupt priest for a prayer.”
I agree that this is a good analogy. The poor person who goes to the priest exchanges money for peace of mind, and the poor person who buys lottery tickets exchanges money for entertainment. The fact that one lucky person gets to win the lottery grand prize is–to some extent–a free lunch, which is incidental to the real transaction.
Lotteries provide hope to the poor (not the rich.) They make utility more equal, and measured wealth more unequal. People may want greater equality of utility, not greater equality of wealth.
In the end, though, does it really matter if one tax (or policy) is horribly regressive? Isn’t it the bundle that matters in the end?
I’d argue that it is. Otherwise there’s no way we could ever justify cigarette taxes. If you tried to design a regressive tax it probably wouldn’t be as regressive as cigarette taxes.
Somewhat off-topic: Wired magazine had a really interesting piece on scratch lotteries in the latest issue.
http://www.wired.com/magazine/2011/01/ff_lottery/
anon: “The funny thing is that you can replicate a lottery’s risk profile in the asset markets and come out with (potentially) a positive expected return. Just buy an out-of-the-money call on a broad market index (this is very cheap). If the call option expires valueless, then you’re done. Otherwise, take the proceeds and stake them again in out-of-the-money options. Lather, rinse and repeat until you reach the desired payoff amount, then you may need an option collar in order to cap your “winnings”.”
anon (or anyone): That makes sense. But (this is more of a BTW). who is taking the other side of that trade? Could the person taking the other side of that trade be someone who shares the same beliefs but is risk-averse?
Here’s the reason I ask: it has always puzzled me that some people pay to take on risk (by buying lottery tickets) and other people have to be paid to take on risk (by owning risky assets). And it has always seemed to me there must be some sort of unexploited gains from trade there, if only some finance whiz-kid could figure out a way to convert insurance contracts into lottery tickets. You see people pay (in expected value terms) to avoid the small chance of a big loss, but will pay to have the big chance of a small loss and the small chance of a big win. Somehow there ought to be a way to slice and dice insurance policies so people who like lotteries would pay to write insurance contracts.
That’s not as clear as I wanted it to be.
In other words, risk is one person’s gold, and another person’s garbage. One wants to pay for it, and the other wants to pay him to take it away.
We call lotteries a stupidity tax because they have, on average, a negative rate of return, yet we encourage a large number of people to “follow their dreams” into occupations (like the arts or sports) where all but a vanishingly small proportion also have a negative return and where the investment is much large (several years of one’s life vs. a few bucks a week).
As mentioned above, I think we have to consider that there’s positive utility in merely participating despite failure.
(Of course, I’ve never understood the utility of buying more than 1 lottery ticket. My idle daydreams don’t become any more vivid.)
That makes sense. But (this is more of a BTW). who is taking the other side of that trade?
Well, that gets complicated. In the ideal CAPM model, call options are on the capital market line, so the trade would in fact earn compensation for market risk. However, empirically it seems that far OTM calls may earn low or even negative returns precisely because of their lottery-like quality (i.e. positive skewness), and arbitrage is hindered by high transaction costs. I imagine that things would be similar for other asset classes, such as “high yield” tranches from structured finance products.
it has always seemed to me there must be some sort of unexploited gains from trade there, if only some finance whiz-kid could figure out a way to convert insurance contracts into lottery tickets.
Meh. A lot of finance whiz kids tried to do this (more or less) by creating the aforementioned structured finance securities. The whole thing broke down in 2007, due to a number of factors. Transferable risk can often be securitized like any other asset class, but many kinds of risk are not really transferable due to hidden information.
“Sure, some part of the revenues are used to fund good things. But a simple lump sum tax on everyone could do the same funding, without increasing inequality at the same time.”
But is a lump sum tax a credible alternative? Would a party proposing such a tax ever get elected? Perhaps the real choice is to have public goods funded through a lottery or not have the public goods at all.
Yvan reminds me of the bee-stings and car-dents theory of poverty:
http://economistsview.typepad.com/economistsview/2008/03/is-poverty-caus.html
TGGP: Charles Karelis’s theory of poverty is very interesting. If the diminishing marginal disutility of “bads” (contra the usual theoretical assumptions) is what causes poverty, then marginal utility of money must be low, and increase with wealth until the “bads” are mostly exhausted. But this means that poor people should be risk lovers, and buy risky assets such as lottery tickets.
TGGP – I was just making a point about Nick’s appeal to Rawls, really. I don’t think I was arguing at all, implicitly or otherwise, for a theory of poverty. Was I?
I think Patrick is right. Most people just dont do the math. But beyond that, they don’t even believe that the laws of probability apply to them. Among other things, many people (especially those who are indigent) believe that they might be able to influence the outcome of events (even totally random ones) through prayer.
And they always bet on the home team – that’s how bookies make a living. It’s totally irrational but I think it’s true that most people think they are special. The default assumption ought to be that one is a random representative agent, but it doesn’t seem to be a natural perspective.
Nick: you can’t compare lottery tickets and risky assets. Risky assets have beta. For zero beta assets we are supposed to be indifferent to zero-expected value trades no matter what the distribution (so long as there are enough of them to diversify). But nobody should ever take a zero-beta negative expected return trade. It’s not rational (in the CAPM sense).
I did once observe a very rational friend buy a lottery ticket. Others in the office were buying and he decided that he had extremely negative utility for the state of the world in which they won and he didn’t. It struck me as a perfectly rational decision and made me wonder if office pools are a game with an inefficient equilibrium. Something like a stag hunt, maybe, where buying tickets is like everyone hunting rabbit.
Can someone explain this part to me? “Lotteries have an administrative cost, and so reduce average wealth.”
Brett: you and I toss a coin for $1. The winner is $1 richer and the looser $1 poorer. Average wealth stays the same. But if there’s a person employed to toss the coin, sell tickets, distribute the winnings, etc., who is paid out of the winnings, and who could have been employed producing other goods, average wealth falls.
But why is producing the coin flipping service not wealth generating?
Brett: both lotteries and insurance redistribute wealth, at an administrative cost. That administrative cost decreases wealth. But you can argue that the benefits of the service provided outweigh that cost, so that overall wealth increases once those benefits are included in the calculation. The point is simply that the redistribution is not free. It has a cost. And the paradox is that insurance reduces inequality, while lotteries increase inequality.
But I would prefer to say that both insurance and lotteries decrease wealth, but (depending on whether people are risk-averse or risk-loving) may increase the expected utility of wealth.
I can see that there is a cost to the people who buy the lottery and the people who win, but I don’t understand why there is a cost to society at large. (I’m not trying to make a point. I just don’t understand how to think about this.)
Brett: there’s no cost to the rest of society. (Well, some people might argue there is, but that wasn’t my point). And from a libertarian P.O.V., there’s nothing at all wrong with lotteries. The average wealth of people playing the lotteries is reduced, but if they are willing to play, they presumably value the lottery more than the drop in average wealth.
Nick – this issue strikes home for me. When I was at McGill I lived in the St Henri district of Montreal and I saw a mom and (young)daughter in the depanneur spend $20 on lottery tickets instead of the milk or whatever they were there to buy. The mom sent the daughter home to Grandmother to get more more money with the instruction “Don’t tell Grandma why.”
I am libertarian enough to not object to lotteries or gambling on football or playing poker for money. It does bother the Hell out of me that government use them to raise money. It is a terrible way to tax. Government should most decidedly not use peoples weaknesses against themselves. At some point we have to deal with ourselves as we really are not as we would like to be. People have weaknesses. That is why you need money down to buy a mortgage. That is why a corporate director can go to jail for lying. Because humans do strange and wrong things.
Governments exploiting human weakness us just plain immoral.
“They … vote for more inequality [by purchasing lottery tickets].”
I would argue that most people do not believe that there is such a thing as voting with one’s wallet, and that their purchases should not necessarily be taken as any sort of moral or political endorsement.
It’s expectation of return, isn’t it? The masses vote for redistribution in the “soak the risk/handouts for the poor” format, because they expect to receive a handout or to need it as a form of income insurance. The rich expect to have a negative returns on social insurance, i.e. they expect to always be rich. That’s the way social insurance has always been pitched to the middle classes who realize negative returns (when using comparable private investments as an opportunity cost).
Lottery tickets are not advertised as a form of redistribution, a tax on certain demographics, or a tool of [in]equality smoothing… even if the winnings create those effects. They are sold to the people who have an expectation of receiving something in return. This is almost by definition; the “you can’t win if you don’t play” analysis, combined with the voluntary participation, means only people who expect to win some day will play.
I would think a more interesting focus would be on whether support for redistribution programs increases or decreases when you tinker with the ability to predict payoffs. Both social insurance and lottery tickets have known odds of paying off; both have visible costs of participating; but only one is voluntary. What would happen if lottery odds were unpublished? If social insurance retirement benefits were undefined? What if a $1 lottery ticket was mandatory and taken out of your paycheck each week, or if social insurance was opt-in?
You may not have been arguing for a theory of poverty, but your point that people basically discount the small loss of the ticket because a win would represent real change fits with Karelis.
If your one chance to get out of hell was to buy a lottery ticket, would you take it? (Now that makes a moral issue out of it: You should not buy a lottery ticket not because the odds are against you, but because it would make almost everyone else slightly worse off. The same with any form of gambling.)
Anyway, many (some, most?) of the poor don’t perceive any other way out. Many work hard, to small gain. But… perhaps they don’t work hard enough. Perhaps all the poor should all work harder, yes, longer hours and, and study more. Yes. They should all struggle to improve themselves. Make themselves better. Then what would they all accomplish, except to work even harder at being poor? For one thing, the harder they work, the more labor they supply, the lower the price of labor. If the demand curve for labor is inelastic, they will be the poorer for their increased efforts. Do the wealthy begrudge them their beer and football?
The law of averages says there will always be the poor. This puts the lie to the claim that the poor are poor because they want to be. It’s statistics. Granted, sometimes the exceptional, or the lucky, will prevail, but most will not.
It is not up to the poor, as a class, to further make themselves better. They are not the ones with the capital. Each one optimizes his situation, according to his perceptions. The conservative bases his theory on rational agents, and then claims the poor are behaving irrationally. No. The poor are responding rationally to the web of circumstance and incentive, or lack thereof, they find themselves in.
Hmm… Sort of off the track of the lottery and Rawlsian inference. But I think a real case could be made for bounded rationality. And the poor would not be the only ones who rationally, ie out of narrow self interest, choose to hide behind a veil of ignorance.