Vice Squad
Tuesday, March 04, 2008
Thailand to Legalise Gambling?
The Prime Minister of Thailand seems to have a soft spot for legal vice. He has recently indicated that he would like to legalise daily lotteries, and has followed that up by declaring that he will legalise casino gambling, too. Somehow, he does not show the same liberalising tendencies when it comes to the war on drugs.
[Update: Pete at Drug WarRant has more on Thailand's murderous drug war.]
Labels: casino, drugs, gambling, lottery, Thailand
Thursday, December 27, 2007
New York Times on Vice Policy
A friend of Vice Squad brings our attention to yesterday's and today's business sections in the New York Times. Yesterday, Times economics writer David Leonhardt called for higher taxes on beer and wine. Today, we learn about the state of Texas's intention to introduce a $50 scratch-off lottery ticket, on the heels of other high-priced varieties that cost up to $30 each. The articles share a certain affinity for Vice Squad-style policy directions -- higher alcohol taxes and concerns about the under-regulation of gambling being venerable Vice Squad topics -- but more importantly, they share a reliance upon the ideas of friend of Vice Squad Phil Cook. Phil is both source and part-subject for the alcohol tax article, and his recent alcohol-policy tome, Paying the Tab, is described as "a wonderful little book". (Little? OK, the text per se is "only" about 200 pages, but I never viewed the book as little in terms of length or depth.) For the lottery article, Phil gets a reduced role of providing a short quote.
The lottery article notes that "traditional" lotto has been declining in popularity in Texas -- a "problem" that besets many state lotteries. Further, it provides some demographic statistics on lottery players, with yet more evidence that poorer people tend to spend more money, in absolute terms, on the lottery than do richer individuals:
In 2006, according to a University of North Texas survey commissioned by
state lottery officials, the typical black player spent $70 a month on the
lottery, compared with $47 for Hispanics and $20 for whites.
The demographic differences were especially sharp when it came to
scratch-offs. Players with a high school degree or less typically buy $20 a
month worth of scratch-off tickets, compared with $10 for college graduates. Similarly, players with an annual income of less than $12,000 spent 33 percent more a month than those with incomes above $100,000.
Labels: alcohol, Cook, lottery, taxes, Texas
Saturday, December 08, 2007
A New British Lottery?
No, not that one to pay for the London Olympics (later complemented by a more straightforward raid on National Lottery proceeds). This lottery is proposed to get people to vote -- or as those wacky Brits say, to "incentivise" voting. The suggestion to use gambling to lure punters to the polls survived a filter that screened out the possibility of doughnut giveaways because -- I am not making this up -- of concerns about obesity.
The linked Guardian article doesn't mention that the Yanks had the lottery idea first (though California's primacy in doughnut distribution merits notice); Arizona voters, uncompensated, didn't care for the idea.
Labels: Arizona, Britain, lottery, obesity
Monday, October 22, 2007
More on Lotteries for the Times
The New York Times on Sunday added its third installment to its series on the state lotteries. This time we learned a lot about the two companies that dominate the provision of instant tickets, online games, and other lottery paraphernalia in the US. The companies operate globally and lobby to promote lotteries, but to be honest, this 5-webpage third installment began to run up against my blogging-disabled attention span; your mileage may vary. At any rate, the series and the webpage extras are, collectively, a great place to learn about US state lotteries.
Thursday, October 18, 2007
Iowa Lottery Contretemps
On October 7, the New York Times initiated a series on state lotteries in the US. Vice Squad noted at that time that the data from the Times's interactive map had some weird entries for Iowa. On October 14, the Times published the second installment of the series, about privatization of state lotteries. The odd Iowa numbers, which indicate very high administrative expenses (relative to lottery revenues), seem to be connected with a sort of quasi-privatization -- and one that should serve as a warning to other states.
The story is nicely told in "The Iowa Lottery's TouchPlay Debacle," an article by Keith C. Miller that appeared in Volume 11, number 2 of the Gaming Law Review. While the Iowa lottery has been around for more than two decades, it was only in 2003 that lottery operations were moved from the state fiscal authorities to the nonprofit "Iowa Lottery Authority," which adopted a corporate outlook and aimed at increasing profits. Earlier, in 2002, the Iowa legislature had asked the Lottery to look into the prospects for dispensing lottery tickets via terminals with video screens. By April 2004, such video terminals were available on a statewide basis -- but the numbers were small, and the terminals tended to be placed in bars. In January, 2005, 422 of the machines -- known as TouchPlay -- were available across the state.
What do these machines actually look like? Well, as Vice Squad has noted before, it is possible for clever designers to arrange games that fall under the legal definition of bingo or lotteries nevertheless to look and play almost identically to slot machines -- and this was what the TouchPlay machines did. (They apparently had much lower rates of return than actual slot machines in Iowa, however, which are regulated to return at least 80 percent of bets on average.) So the adoption of video terminals by the state lottery looked a lot like spreading slot machines into new, non-casino locales. This might have been tolerated, except that those 422 machines of January 2005 suddenly morphed into 4,876 machines one year later (with some 4,000 more ordered); the machines often were located in grocery stores and other places where kids were a standard part of the clientèle. Iowans rebelled against the stealth invasion of slots into their daily lives, the legislature listened, and a ban on TouchPlay machines commenced on May 4, 2006. Why the high administrative costs? Presumably because the Lottery had to rely on contracts with private companies to provide the machines and ancillary services, and those firms needed to receive payment -- but this is just a guess.
The Performance Report of the Iowa Lottery Authority for fiscal year 2006 (July 1, 2005 to June 30, 2006) is available online (13-page pdf here), and it appears to be the source for the Times's Iowa lottery data. Here's an understated bullet point from page 1: "Net revenue from TouchPlay machines totaled over $121.4 million in fiscal year 2006, compared to $6.4 million in fiscal year 2005. The TouchPlay program was ended in May 2006." On page 5, we learn that the more than $121 million in TouchPlay revenue compared with the performance target of, er, $17 million -- a piece of Stakhanovite plan overfulfillment.
As for state lottery privatizations, Miller's article contains (page 96) an implicit warning, based on the change in lottery oversight to a non-profit organization charged with being more businesslike than the state entity that preceded it: "One might conclude that the 'depoliticization,' of the Lottery contributed to a climate of lax legislative oversight, and that the TouchPlay controversy was an outgrowth of this environment."
Labels: gambling, lottery, slot machine
Sunday, October 14, 2007
State "Sales" of Lotteries
Last week Vice Squad noted a new series of articles from the New York Times on state lotteries. Today brought the second installment in the series, this one focusing on the possibility that states will sell (actually, in all likelihood, lease long-term) their lottery operations to private companies. The article details the extent to which these privatizations are being pushed by Wall Street investment banks, which figure to make out big-time in the course of lottery lease deals. Newcomers to politics will be surprised to learn that some of the representatives of the Wall Street firms that are highlighting privatization are, coincidentally, former high-ranking government officials, sometimes in the very states they are targeting.
The problem, of course, is that the lotteries are worth more (and the fees for the deals are commensurately higher) the more revenues that they can generate in the future. But as with all vices, revenue maximization alone does not conduce to the public welfare. The Times quotes Vice Squad regular Phil Cook: “'In principle, it’s possible to regulate the lottery, even if it’s privately run,' he says. 'But that’s going to require sustained will power on the part of state governments, and whether they are going to have that in practice is an open question.'”
There are two points that aren't really brought up in the Times article, but which I think are important. First, people tire of lotteries, and so maintaining or increasing revenues in the long-run requires the introduction of new games, new forms of ticket distribution, and innovative marketing angles; how these issues will be handled will be key to the social and revenue effects of any long-term privatization. Second, the length of the lease is obviously of paramount importance. I think that there is something to be said for short-term leases, on the order of the seven-to-ten years that have been employed in Britain. These relatively short lease terms mean that private lottery operators will be leery of conducting their operations in ways that raise public concerns, because visible problems would make it less likely that the same firm would be awarded a renewal when the original lease expires.
Labels: Cook, gambling, lottery
Sunday, October 07, 2007
"Behind the Jackpot"
The front page of the New York Times today featured an article on state lotteries in the US, as part of an eventual series (I suppose) entitled "Behind the Jackpot." The online version also features a spiffy and informative interactive map where you can check out some state-by-state figures, and a 10-minute-plus video focusing on North Carolina's recent adoption of a state lottery. The relatively small contribution that lotteries make to overall education budgets, even when proceeds are earmarked for education, is highlighted, as are some of the unsavory marketing tools employed in some states. The overall tone of the article (and video) is quite negative, and to my mind, ingenuously so. The article and video make a big deal over the fact that the majority of money spent by lottery ticket buyers does not go to the state as net revenue -- but this mainly is because you have to return something like half the money in prizes to have a sustainable lottery. The map notes that the Massachusetts lottery has the highest payback rate -- 72 percent -- and attracts the largest per-capita spending, and that other states hope to emulate it. Massachusetts's sort of success can be spun as failure (and is so spun in the article) if your measure of success is the percentage of ticket revenues that remains in state coffers. I agree that marketing and administrative expenses are worth keeping track of, and there is something to be said for controlling advertising and not seeking to maximize profits, but the percentage of the spend that becomes net state revenue, which almost has to be less than 50 percent, is just not an important metric. (Whew.)
The Iowa figures on the map, which seem to suggest that administrative expenses equal 40 percent of the ticket sales, appear dodgy. Ignoring those, the lowest payback rate is reported to be in North Dakota, where prizes are 49% of sales and the lottery is not very popular ($35 in annual sales per capita). Per-capita ticket sales in Massachusetts are a staggering $699 yearly.
Friday, June 08, 2007
Troilus and Cressida
By way of excuse for not posting, let me mention that I saw Troilus and Cressida at the Chicago Shakespeare Theatre on Thursday night. (Here's a review.) Fortunately, my blog-indolence was rewarded, not only because the play was good but because an important plot element turned on the topic of the most recent Vice Squad post: a rigged lottery. (Yes, I should have remembered, but by golly, my command of Troilus and Cressida is not what it should be.) Hector (you no doubt will recall) issues a general challenge to the Greeks, though it is clear that the intent of the challenge is to draw Achilles into battle. Crafty Ulysses decides that it would best serve the Greeks' turn if they instead announced that a lottery would be undertaken to choose their combatant, and then fixed things up to make sure that Ajax, not Ulysses, won the lottery:
No, make a lottery;So the Greeks rig the lottery, and Troy falls: I summarize. Lotteries, it seems, have a long history of being less than trustworthy.
And, by device, let blockish Ajax draw
The sort to fight with Hector
Labels: gambling, lottery, Shakespeare, solipsism
Wednesday, June 06, 2007
Lottery Fraud?
Imagine that you and lots of other folks regularly take part in a contest of luck. As it turns out, the organizer of the contest seems to win an awful lot. That would raise your suspicions, no? Well, that scenario has played out in the western Canadian province of British Columbia, with respect to the lotteries operated by the province's agent, British Columbia Lottery Corporation, and some of the retailers who sell lottery tickets.
An Ombudsman's report (142-page pdf here) issued in May details some of the problems; the report makes for sobering reading. Whether a lottery ticket was a winner, and of how large of prize, was frequently determined by a machine under the control of retailers and not easily verifiable by the customer. So if a patron handed a lottery ticket to a retail employee to check to see if the ticket were a winner, an opportunity might have arisen. The retailer might have been able to misrepresent a winning ticket as a loser to the rightful owner, and then claim the winning prize him or herself. If the customer expressed suspicions, the retailer might have been able to backtrack, claim that an error had been made, apologize, and pass over the winnings or the winning ticket. Surely, though, such theoretical opportunities for malfeasance would not be taken advantage of in practice.
Page 25 of the Ombudsman's report summarizes some scenarios of British Columbian lottery retailers who were very, very lucky:
• A retailer that won 13 times in 2000/2001. This retailer also won three timesWow. And people are worried that those unscrupulous offshore internet casinos might cheat their customers.
in 1999/2000, two times in 1998-1999, one time in 1997/1998. The winnings for
this retailer totalled in the range of $175,000.
• A retailer winning 11 times between 2001 and 2007. All but one of those wins,
were in excess of $10,000 and included 4 wins in 2003/2004 and four wins
2005/2006. The winnings for this retailer totalled in the range of $300,000.
• A retailer with multiple Keno wins. In 2005/2006 there were 120 major Keno
wins. Of the 120 major Keno wins, 15 were won by retailers (1.3 per cent of the
population won approximately 12.5 per cent of all major Keno wins in
2005/2006). Of the 15 major retailer Keno wins, three were won by the same
retailer. That means that one retailer won 20 per cent of the 15 retailer Keno wins
in 2005/2006. This retailer was a joint winner and had 10 wins between 2003
and 2007 for a total win amount of about $100,000.
Labels: Canada, gambling, lottery
Sunday, August 21, 2005
NASCAR Vice
Outrunning revenooers was one impetus for what has developed into stock car racing. NASCAR has had tobacco company and beer brewer sponsorship in the past, and recently took on sponsors from the hard liquor industry. Further, according to an article in today's New York Times, NASCAR also has a tie-in to the gambling world. Some scratch-off tickets for the South Carolina Education Lottery include pictures of drivers, their racecars, and the NASCAR logo; see for yourself -- and for $3, you, too, can have a one-in-750,000 chance of winning $50,000 (plus the possibility of smaller prizes). Or perhaps, if $3 is a bit steep, you should consider Shrimp & Grits 2, where your $1 ticket could yield a $2000 payoff! The National Football League isn't participating in a lottery ticket tie-in, but other sports associations are not so reserved:
But Nascar is hardly alone in its pursuit of gambling income. The company that licenses sports leagues and athletes for use on lottery tickets, MDI Entertainment L.L.C., has also signed the N.B.A., the N.H.L. and the golfers Vijay Singh and Annika Sorenstam to use on lottery tickets. The leagues or the athletes receive a cut of the income from the tickets as well as merchandising money from league or team products that are awarded as part of the game.
Labels: alcohol, lottery, marketing
Wednesday, May 11, 2005
Specialty Lottery Tickets
Interest in lotteries has a tendency to flatten out and even contract over time. As a result, lottery operators often look for new games or delivery systems or ad campaigns to boost demand. In the New York Times Magazine this week, Rob Walker tells of one such effort by the New York Lottery: a special Mother's Day lotto ticket. The $5 ticket is printed in the form of a Mother's Day card, and comes with its own envelope. Disappointed Mom's were reported to exclaim, "Junior, you know I prefer the Lucky 7's scratch-offs," as Western civilization concedes. Oh yeah, there are birthday-themed lottery games, too. Maybe they should try a fortune cookie version.
Walker notes that legal lotteries sold $48.8 billion worth of tickets during a recent 12-month period.
Friday, April 29, 2005
Money Can't Buy You Freedom
What are the odds that...two former jackpot winners in Britain's National Lottery would end up in the same courthouse on the same day, and both would be jailed for vice-related crime? One "winner" received a nine-month sentence for his substantial stash of various illicit drugs -- apparently he is a dealer as well as a user -- and the second received three months after he tried to smuggle some 14,000 pouches of tobacco into the island nation, presumably to evade tax. I enjoyed the public transport analogy offered by one public servant:
"We've never had the pleasure of having a Lotto winner in the dock here before," said one official at Maidstone Crown Court, "and then, like the buses, two come along together."
Labels: Britain, drugs, lottery, taxes, tobacco
Monday, December 13, 2004
London Lottery, Linkless
This post comes to you from an internet cafe in London, from where I don't think that I will be able to add any links. Sorry. While on the subject of the location of Vice Squad, I should mention that I am slated to be away from Chicago for the next two weeks (London, Moscow, Baltimore). This will make for sporadic blogging, I am afraid, but that is in keeping with the uneven pace of the past couple of months. I maintain this odd confidence that come February, I will be able to be a more attentive vice blogger. Hope over experience, as it were, to draw upon London history.
Not only can I not link, I managed not to bring yesterday's Observer with me, complete with its two articles touching upon the National Lottery. The first article concerned an examination by statisticians of past winning lottery numbers. The British National Lottery uses one of those 'numbered ping pong ball' selection methods. Anyway, the results seem to be fairly consistent with the hypothesis that the draws are 'truly random,' though there are some anomalies. Then again, some anomalies should be expected, even if the draws met the (impossible in practice) 'truly random' ideal! But one of the anomalies is pretty severe, suggesting that the ping pong method might have a detectable (and potentially exploitable) bias. What is the mysterious bias? The number 38 has been drawn waaaaaay too much. Wow.
The second lottery story in the Observer, and furthered in today's Guardian, is that there seem to have been some irregularities in distributing the revenues raised by the National Lottery. Specifically, some charities look as if they received their lottery grants through a less-than-arm's-length process. Details are sketchy -- even if I had managed to bring the article with me.
Tuesday, October 12, 2004
Teachers For Gambling
When states try to introduce a lottery, they not infrequently earmark some of the revenues to go to politically-popular causes -- education is a standard beneficiary. Lottery money (in the US) is green, however, like other revenues, so unless the lottery funds cover the entire state budget (plus some) within the earmarked category, then it isn't clear that the earmarking actually increases the resources available to the targeted cause. That is, money is fungible, so if the legislature has been giving $1000 per pupil to education and earmarked lottery funds come in at $200 per pupil, the legislature can simply cut back its other contributions to $800. The fact that there is an earmarked stream of revenues does not imply that the targeted cause will see a rise in its overall stream of revenues. And sure enough, this "futility reasoning" frequently seems to be borne out in practice; see the discussion in the text in the vicinity of endnotes 10 to 18 here. Of course, the legislative adjustment might not be immediate, so there might be a short-term revenue hike. All-in-all, though, earmarking that helps to market the introduction of a lottery can be a little misleading. (Some places, like Georgia and Britain, designed their lotteries to skirt the "fungibility" problem. One way to do this is to earmark the revenues for something that you otherwise would not fund at all. A problem with that approach, however, is that it means you must be dedicating the revenues to activities that were not previously regarded as strong candidates for major public funding.)
Sorry for the long-winded introduction. On to Michigan, where state lottery profits are earmarked to education. There's an upcoming ballot proposal that, if approved, would alter the state constitution to require a successful referendum before the state can expand certain forms of legal gambling. Enter here another effect of earmarking: strange political bedfellows: "In apocalyptic terms, Michigan school officials described on Monday a proposed constitutional amendment to limit gambling, predicting it would lead to drastic declines in state lottery money for the classroom." The lottery only contributes about 5% of the state revenues that go to the public schools, though, so the risk (except for that pesky transitional period) to public school funding from the ballot proposal should not be very severe.
Monday, September 06, 2004
The British Gambling Boom
To complete today's gambling trifecta, here's a thoughtful article about the expansion of gambling in Scotland and the UK generally. The author, a gambler himself, is sympathetic to gambling, but he paints quite a portrait of the aftermath of both winning and losing sessions. He admits to ambivalence about the expansion of gambling:
Most visits, it’s a couple of hundred quid win or lose. Then it is about paying for my entertainment, with any winnings coming as a bonus. The problem is how easy it is for an enjoyable night to slide into a downward spiral of chasing losses and going on tilt.The author also provides a little history on the regulation of gambling in the UK, and he claims that the introduction of the British National Lottery a decade ago "helped make gambling respectable." His description of sociability within casinos mimics my own limited observation in this arena:
All that whooping and shouting around a craps table that goes on in American films looks very lively and exciting, but I've never seen anything like it in a British casino. Win or lose, a night at my local casino can be a joyless experience. A group of strangers having a good or bad run at a blackjack or roulette table might congratulate or commiserate with one another, but it's difficult to imagine a more hollow form of social intercourse.
Going with friends is pointless because essentially casino gambling is not a team sport. The restaurant and bar areas in any casino give everything a veneer of sociability but in the end it's all about the money. After all, who is really socialising at 5am on a Wednesday?
Labels: addiction, Britain, gambling, lottery
Tuesday, August 31, 2004
Swedish Teenager Shoplifts a Lottery Ticket....
...and he wins. Or rather, he loses. Or maybe he wins. At any rate, the scratch off card had the winning three clover symbols, guaranteeing a payoff of at least $150,000 to be doled out over the next ten years, with the further possibility of a much higher payoff. Surveillance tapes gave the shoplifter away, however, and the store manager went to the boy's home and collected the winning ticket. Looks like the manager won't have a valid claim to the loot either, despite his hopes, as the ticket is not really a winner unless it was first sold. The only way the boy might come out a winner, sort of, is that it is not yet known whether charges will be filed.
In other lottery news, today's Chicago Tribune had a front page story (registration required) about a fellow who twenty years ago won the then-biggest North American lottery jackpot to date, $40 million. (He -- or rather his father -- purchased his winning ticket fair and square.) The article's theme is what regular folks he and his family are. (His wife agreed to marry him just before he hit the jackpot.) Sure, strangers dun him for donations, he won't let his picture appear in the paper, his brother, a co-winner along with the dad, wouldn't be interviewed for the story, and he retired at age 29, but he's jes' folks like the rest of us. What do you mean, you detect a hint of envy in Vice Squad's voice?
Labels: lottery, Sweden, teens
Tuesday, August 17, 2004
Should An Incarcerated Felon Be Allowed to Win the Lottery?
A generous Vice Squad reader brings our attention to this story out of the UK last week. An offender "was jailed between 1973 and 1987 for a series of sex attacks on women. He was returned to prison in 1989 for attempting to rape a 60-year-old woman in a park." But he was allowed out on work release, and one day, he bought a lottery ticket. He beat the astronomical odds, winning 7 million pounds (more than $12 million.) Now the Home Secretary wants to make sure that such a stroke of luck does not happen again to an incarcerated individual, via legislation that "would force offenders who won the lottery or other wealthy criminals to contribute to a compensation fund for victims of crime." The generous VS reader also noted that the Home Secretary spotted injustice in this particular lottery win -- presumably, then, not in the others?
Given that the National Lottery returns to winners only about 50 pence out of every pound ticket purchased, it might be thought that requiring prisoners to purchase lottery tickets would be a better route to preclude injustice.
Tyler Cowen at Marginal Revolution recently looked at the practice in some US localities of charging prisoners for room and board.
Friday, June 25, 2004
How Many Lottery Big Winners Go Bankrupt?
During my recent ex-Chicago sojourn, I asked if anyone could verify the following quote from the June 15, 2004 edition of Redeye (the Chicago Tribune-affiliated tabloid): "...Unable to manage their sudden wealth, a third of winners end up bankrupt." Glen Raphael of blogjack.org kindly looked into the matter, and sent along an e-note including this link to some Google answers. Following a lead from Google answers, Glen identified a possible source for the 1/3 number in a quote from the Certified Financial Planner Board of Standards:
Responding to an April 2002 article in Investment News, CFP Board made an offer to the National Association of State and Provincial Lotteries to provide the organization's members with information to distribute to winners. The Investment News article highlighted the lack of financial guidance many winners receive from state lottery agencies; estimates show that nearly one-third of lottery winners become bankrupt.Glen noted that the claim does not seem to be consistent with what else is known about lottery winners, and that the CFP Board presumably has an interest in promoting financial planning to lottery winners. So it looks as if the basis for the 1/3 claim in Redeye is quite thin indeed.
Incidentally, the one fact about lottery winners that is fairly well established is that after an initial burst of exuberance, they are not made happier by the windfall. For an evolutionary economics approach to the "hedonic treadmill," download the Rayo and Becker paper from this webpage.
Friday, June 18, 2004
Do Big Lottery Winners Frequently Go Bankrupt?
I don't know, and as I am not in Chicago, I can't really look it up easily. But I ask because the June 15, 2004 edition of Redeye (the Chicago Tribune-affiliated tabloid) includes (in an article on what happens after you win the lottery) the following claim: "...Unable to manage their sudden wealth, a third of winners end up bankrupt." Sounds like urban legend or mythical numbers to me, but I am willing to be persuaded otherwise.
Monday, March 29, 2004
The Tennessee Lottery
The state of Tennessee instituted a lottery in January of this year. The Tennessee lottery follows the Georgia model, with proceeds going to scholarships for Tennessee high school graduates to attend in-state (public or private) colleges. The Nashville Tennessean has been covering the lottery pretty closely. Sunday's Tennessean brought a debate about a recent legislative initiative, one that would augment the current "Play Responsibly" message on tickets and ads with something more pointed ("WARNING: GAMBLING, INCLUDING PLAYING THE LOTTERY, CAN BE ADDICTIVE") or a toll-free phone number for help with gambling addiction. Here's the view of a prominent opponent to gambling, while here is the take from the state senator who helped spearhead the state referendum on a lottery.
Labels: addiction, gambling, lottery
