&#91FORUM&#93Lottery fever and a big headache

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&#91FORUM&#93Lottery fever and a big headache

"An alligator has a man clamped in his mouth, cries in sadness for a while and then swallows him." (Anonymous 13th-century priest.)

"The government licenses a new lottery, watches as a fever for the game sweeps the country, then issues measures to contain it for the public welfare. In the process, it doesn't forget to set aside a large share for itself." (Comment on Korea's new Lotto game.)

If the alligator had any mercy, he would have not attacked the man in the first place. If the government were concerned about gambling obsessions, it would not have licensed the lottery in the first place.

Let's look at three of the problems that surfaced with the new Lotto.

First are worries about the side effects of gambling encouraged by the government. Economic theory has it that people are inherently risk-averse and should therefore tend to avoid gambling. They would not be drawn to it even if it were a perfectly fair game. But the lottery -- guessing six of 45 possible numbers -- has a smaller expected rate of return than gambling on horse racing, so why has it succeeded in capturing the attention of so many people? The government let the jackpot grow to an astronomical sum and encouraged bettors with the slogan, "Turn your life completely around!" Allowing the player to pick his own numbers gives the impression that somehow he has a better chance to win. There was talk of winning a fortune on every street corner and in every office; people abandoned their rational thinking. If the phenomenon continues to the degree that gambling becomes a permanent obsession of the public, and the idea of working hard for the money is diminished, that is a road to an unhealthy society.

Then there is the phenomenon that people from middle and low income brackets are buying many tickets. That is tantamount to collecting more taxes from the poor. Income disparities and distortions in the distribution of wealth in our society after the financial crisis of 1997 have deepened, and this pseudo-tax lottery will worsen the distortions.

There is also the matter of how much the government is benefiting from the lottery. It takes 30 percent of the sales proceeds and then collects taxes from the winners. It says the money is used by a number of funds for the public good. But we need to scrutinize those funds first. Many of them were designed originally in part to bypass strict audit and inspections, a must for government spending, and there is a general belief that their management fails to meet efficiency tests because of the government's management. Now that we have much larger amounts of money than estimated going to these funds, we wonder whether the use of that money has been thought out.

The government forecast about 360 billion won ($300 million) in total sales from the lottery in its first year. The government and the beneficiary agencies have perhaps made plans for spending their share based on that estimate. But sales surpassed 400 billion won in just first 2-1/2 months, and the government will probably reap three times more than it expected this year.

The government should not stop at limiting the number of times that the jackpot can be carried over to the next game if there is no winner and think about the fundamentals of the funds it gets. The amount and purpose of funds the government reaps should be defined clearly and precisely. In the United States, the share allocated for public use is often limited to a single area, such as education. Ours is a potpourri. The next thing to do would be to reorganize the array of existing lotteries. Any improvements to the system must be fundamental; there should not be a trickle of changes here and there.

The public must also change, and look at the game rationally. We need to think about what Adam Smith said: The more lottery tickets you buy, the better the odds of losing.

* The writer is director of the JoongAng Ilbo Economic Research Institute.

by Ro Sung-tae
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