Running and playing Lotteries

In Hong Kong, the national lottery is not very popular at all. The Hong Kong Chinese people do not deign games in which victory is dependent solely on luck as worthy of their hard earned cash. Instead, they like to bet on horses where at least form and features and other skill factors are involved.

On the other hand, perhaps it is the very fact that winning the lottery is purely based on luck that accounts for the popularity of lotteries all over the rest of the world. Leaving aside the need for disposable funds to spend, which are more likely to be more available to the knowledge workers, lotteries do not discriminate against the unintelligent.

At the end of the day, for me, a non-player, the lottery is like watching rather than playing football- you can want you team to win or numbers to come in with all of your heart, but in your head you know that as a spectator you can do nothing about the outcome. You have no influence other than being there and buying your ticket to get into the ground or enter the prize draw.

When Great Britain introduced its national lottery in the mid 1990s, many people learned a very important lesson about economics. One of the bidding consortia to run the lottery system offered to donate all of the profits to charitable causes, retaining no percentage as private profit. This consortium did not win the lottery license. Yet the winning consortium of private sector companies kept a share of the profits for themselves.

On the face of it, many people thought that the charitable bid should have won. When the lottery became vastly popular with the vast majority of British adults taking part, that small percentage profit amounted to a large sum of money for the private sector lottery operators. There was some considerable uproar.

A subtle but incisive argument that much of the general public missed was that it is better to have 99% of '100 million collected by an efficient lottery going to charity than 100% of '75 million from a charitable consortium with no profit motive incentive to maximize lottery revenues. Similarly, higher revenues are not much good if costs are higher too because profit equates to revenue minus cost. The private sector consortium has a greater incentive to keep costs down to maximize profits, a slice of which went to them.

Running a reliable nationwide lottery is a vastly complicated and risky undertaking: especially given the negative publicity if the system fails. You have the satellites beaming information around, the tens of thousands of retail terminals linked to the central totalizer by these satellites, the advertising and public relations and running the television draw and untold other logistics and entertainment challenges. Anyone doing this well deserves to earn a fair return. As usual the private sector was the best way of maximizing income for both the private sector and the public good causes in particular.

Given that profit is a reward for a good service well carried out, the British lottery operator deserves its reward. On the other hand, perhaps we should be willing to earn our income by creating some value of our own- not through a lottery.

Don’t forget to enact your destiny rather than simply relying on the lottery of life. Don’t just wait for your ticket to come in.

Author: Simon Buckingham

What do you think?

To make a comment to the author, send e-mail to simon@unorgan.com

 

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