Daniel Sutter: Lessons from lottery jackpots
Did you win the recent Mega Millions or Powerball $400 million jackpots? If not, perhaps you are lucky, since big jackpots often make people miserable. The “lottery curse” and related research findings suggest that perhaps we should rethink our economic priorities. We all know what we would buy with some extra money, so a big jackpot presumably would be much better. Furthermore, the rich and famous look to be having lots of fun. So winning millions should be great, right? And yet many lottery winners end up destitute, in prison, or dead. Although the murders are tragic, I am more interested in the personal or financial wounds lottery winners experience. Cases like Mr. Jack Whittaker, who won $315 million in a West Virginia lottery in 2002. Four years later, Mr. Whittaker was bankrupt, and his daughter and granddaughter died of drug overdoses. In an interview, Mr. Whittaker said that he wished he had thrown the winning ticket away. Additional sad stories abound. Yet with lottery jackpots every week, there are thousands of winners. Dozens of sad stories do not demonstrate a pattern. Research on lottery winners reveals some interesting results. For example, many lottery winners do not go on wild spending sprees. Winners most commonly purchase houses and cars, and give significant amounts to their children and churches. Half or more of winners keep working, although this depends on the winner’s job. Winners with low paying, low skilled jobs are more likely to quit, while professionals with rewarding jobs frequently keep working. Surprisingly, however, lottery winners are not significantly happier than control groups. In happiness research, people answer a question of the form, “Overall, how happy are you in life?” on a numerical scale. Lottery riches do not raise these scores. Cross-country happiness research additionally finds that the richest nations are not the happiest. Prosperity and happiness are correlated, but at a reasonably high level of wealth, more money does not increase happiness. These findings suggest that perhaps economic growth should no longer be an important goal for our economy. To appreciate the current importance of growth, the lack of a year with three percent growth under President Obama has caused great concern. And the recent Republican tax reforms were sold as potentially spurring growth. Deemphasizing growth could have numerous implications for policy. High marginal income taxes on top earners are currently viewed as reducing work effort and slowing growth. But if some people pursuit raises at the expense of life balance and happiness, the high tax rate could increase happiness by making raises less rewarding. The “lottery curse” and happiness research do not, I think, justify a rethinking of economic policy. Psychologists recognize that people adjust their baseline after improvements. We quickly take smart phones and flat screen TVs for granted. We often fixate on that next thing we want. Answers to happiness surveys likely reflect the frustrations without adequate contemplation of the values. And even if new products quickly get taken for granted, going back to old ways may be quite unpleasant. Most of us recognize that money is just a means to an end, and that having more money does not automatically makes us happier. Money cannot tell us what will make us happy. And we appreciate the numerous tradeoffs between money and happiness. High paying jobs often involve lots of time, travel, and stress, which can impact an entire family. Many people pass up a high salary for a job or a lifestyle of their choosing. A free economy and society enables human happiness. Economic freedom allows us to make decisions about things that matter. It is the freedom to earn a living in whatever field we choose, to start a business, live where we want, and even make less money. It is not a coincidence that the Declaration of Independence included the “pursuit of happiness” among our fundamental liberties. No one or thing can give us happiness, even Powerball. Perhaps lottery jackpots, though, can help us relearn a lesson America’s Founders knew long ago. ••• Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.
When will Robert Bentley, Legislature answer ‘the call,’ put lottery on Nov. ballot?
During the past couple of months, everywhere I go people continually ask me why in the world the Legislature could not simply put the issue of whether they could vote for or against a lottery on the November ballot. The fact that this inquiry has lingered for this long tells me that folks are upset about this travesty. They are mad at the Legislature. However, the blame lies with the governor. Indeed, the Legislature met in a special session to address this issue of whether or not to put the lottery proposal on the ballot and let you vote on this lingering issue. Most polls indicate that the good people of Alabama would vote in favor of it, provided there are no sweetheart deals, hidden chicanery or favoritism in the proposal. Most Republicans would vote in favor of it because they are tired of their money being sent to Georgia, Florida and Tennessee to help their schools, roads and indigents rather than keep their money at home helping Alabamians. Folks in the Heart of Dixie are going to buy lottery tickets. They are just going to buy them in our surrounding states. It was noticeable that a good many of the legislators, who represent border counties, voted against the referendum. This is similar to bygone days when most of the dry counties in the state continued to vote dry due to an ironic coalition between the bootleggers and preachers. I seriously think that some of these border counties are reaping a bonanza in gas tax revenue from the throng of cars headed to border states to buy lottery tickets. They say that cars are backed up for miles around every state border when these super Powerball extravaganzas occur. Well, to answer your questions, it is difficult to pass anything in a congress or Legislature. That is why they have the old adage, “It takes an act of Congress to get something accomplished.” In Alabama, extraordinary special sessions of the Legislature are the way to go to get something accomplished if you are the governor. The Legislature has to address what the governor calls the legislature into session for, it is called “the call.” George Wallace was a master of using special sessions to get what he wanted done. He would call them repeatedly. However, before he called them, he would have his ducks in a row. He would have called you on the phone, had you visit with him one on one in his office at the capitol or at the governor’s mansion. He would know what the vote count was on his issue before he called a special session. He would not waste taxpayer money on a session without any accomplishment. Well folks, our good ole doctor Governor Bentley ain’t George Wallace. Ole Bentley did waste money that the state General Fund does not have to squander. That is why the special session was called. It was designed to help bolster the beleaguered General Fund. Bentley failed because he did just the opposite of Wallace. He did not call any legislators. They heard about the session on the news. Even though Gov. Bentley shoulders the blame for failure to at least put the lottery issue on the ballot, he has shown profound leadership with his creation of an advisory council on gambling. This is a prudent, rational, and unbiased approach to the entire gambling issue. Bentley is right when he says the issue of gambling in the state is something that will never end unless we come together and figure out a way for the people of this state to have a say in its resolution. This advisory panel has done a thorough job of studying this issue. Jim Byard and Clinton Carter, two bright stars in Bentley’s cabinet, have led the comprehensive study of gaming. The commission looked at what other states are doing to reap revenue from gambling that already exists to get a clearer picture of what a lottery would generate for state coffers. They have looked at all gambits of gambling in the state, not just the lottery. They are designing a long-term approach to present to the legislature. The administration has extended the panel’s deadline to report to the legislature from January 31 to June, probably because they do not want to deal with gambling during this legislative session. The final solution must allow Alabamians to vote on this issue. See you next week. ___ Steve Flowers is Alabama’s leading political columnist. His weekly column appears in over 60 Alabama newspapers. He served 16 years in the state legislature. Steve may be reached at www.steveflowers.us.
