Monday, June 04, 2007

On Lotteries and Kerala

In 2005, when Oommen Chandy was the Chief Minister, there was a huge campaign against Online and Other-State Lotteries. If I recollect the incidents correctly, the Government first tried to ban online lotteries, and then tried to ban all the other-state lotteries. The move wasnt approved by the Supreme Court and thus, there were two options
  • Allow uncontrolled operation of lotteries in the state OR
  • To ban all lotteries

Quite obviously, the government thought that Option 2 was the way to go. And thus came the ban on lotteries in the state (Ref: Kerala Bans All Lotteries) in early 2005. I thought that it was a positive move (as lotteries promote the habit of speculative investment among the masses and hence has to be discouraged), and that the LDF and other organizations would welcome the decision. But, that was not what happened.

And there were reports on the Effects of the Lottery Ban

Indeed, some consequences of Lottery ban were bad, although expected. For instance, the Kerala State Lottery which had started in 1967 (under the EMS Government) had resulted in thousands of people (mostly handicapped people) earning their daily bread out of it. The concern was genuine, what would those people do? But, I expected that the LDF would have been more constructuve and would have come up with recommendations for alternative sources of employment to the handicapped.

Let me draw your attention once again to one of Achuthanandan's reasons for protesting against the lottery ban. That it causes an annual loss of 100s of crores to the Government. I can hardly think of a person like him talking in those lines. The customers of the Kerala State Lottery are mostly from the lower strata of the society, as those are the people who easily get attracted to these forms of gambling (I have seen long queues of autorickshaw drivers before the online lottery office at Edappally Toll). Let us assume that there are around 50 lakh people who buy lotteries. Thus, the government is in effect getting 200 rs extra from those people by getting them to indulge in gambling. Thus, for me, the lottery ban is a gain of 100 crores to the lottery buyers which include the autorickshaw drivers and the like (which infact, is a wonderful thing to happen).

And at last, the Kerala Lotteries resumed functioning :(

Let me draw your attention to what lotteries are, and what their effects are, on the society. Although the undesirable effects of lotteries are quite evident and obvious, I use three articles to pull information about lotteries from:

  • Wikipedia: A lottery is a popular form of gambling which involves the drawing of lots for a prize. Lotteries are most often run by governments or local states and are sometimes described as a regressive tax, since those most likely to buy tickets will typically be the less affluent members of a society. The astronomically high odds against winning have also led to the epithets of a "tax on stupidity", "math tax" or the oxymoron "voluntary tax" (playing the lottery is voluntary; taxes are not). They are intended to suggest that lotteries are governmental revenue-raising mechanisms that will attract only those consumers who fail to see that the game is a very bad deal. Indeed, the desire of lottery operators to guarantee themselves a profit requires that an average lottery ticket be worth substantially less than what it costs to buy. After taking into account the present value of the lottery prize as a single lump sum cash payment, the impact of any taxes that might apply, and the likelihood of having to share the prize with other winners, it is not uncommon to find that a ticket for a typical major lottery is worth less than one third of its purchase price.The fact that lotteries are commonly played leads to some contradictions against standard models of economic rationality. However, the expectations of some players may not be to win the game, but the thrill and indulgence in a fantasy of possibly becoming wealthy become the goal. Even ignoring the thrill factor, there is the theoretical possibility that the purchase of a lottery ticket could represent a gain in expected utility, even though it represents a loss in expected monetary value, thus making the purchase a rational decision. Insurance, for instance, represents negative expected monetary value but is not considered to be a tax on stupidity because it is generally believed to deliver positive expected utility to the individual.
  • Lenin on Lotteries: With their honeyed words they deceive the peasant in the same way as people are deceived by a lottery. I shall tell you what a lottery is. Let us suppose I have a cow, worth 50 rubles. I want to sell the cow by means of a lottery, so I offer everyone tickets at a ruble each. Everyone has a chance of getting the cow for one ruble! People are tempted and the rubles pour in. When I have collected a hundred rubles I proceed to draw the lottery: the one whose ticket is drawn gets the cow for a ruble, the others get nothing. Was the cow “cheap” for the people? No, it was very dear, because the total money they paid was double the value of the cow, because two persons (the one who ran the lottery and the one who won the cow) gained without doing any work, and gained at the expense of the ninety-nine who lost their money. Thus, those who say that lotteries are advantageous to the people are simply practising deceit on the people. Those who promise to deliver the peasants from poverty and want by means of co-operatives of every kind (societies for buying cheap and selling profitably), improved farming, banks, and all that sort of thing, are deceiving them in exactly the same way. Just as in a lottery where there is one winner and all the rest are losers, so it is with these things: one middle peasant may manage to get rich, but ninety-nine of his fellow peasants bend their backs all their lives, never escape from want, and even sink more deeply into poverty.
  • Truth About Gambling: Lottery is one of the most senseless and speculative "investments" on Earth. It promotes the spending of real money for a highly elusive product (the win). It is deceitful in that the real product delivered reportedly 14 million times to one (14,000,000:1) is FALSE HOPE. It encourages the diversion of capital from reasonable investment vehicles which yield reasonable returns to a senseless investment which reportedly has been mathematically calculated to yield a significant return only once out of every 14 million times. From a local economic point of view, it has a highly negative multiplier effect. It promotes a harmful practice: unwise investing. It uses miseducation to promise education: People are encouraged to participate in this "investment" fraud, and are then told that the money gained from such an "investment" will be used to "educate" them. Lottery siphons money from the community but provides neither a comparable good nor service in return. (An honest tax could better benefit the community and would be more sound in moral, economic and psychological character. A tax called a tax is an honest tax. A tax called a chance is a fraud). It promotes psychological instability by encouraging individuals to commit real, hard-earned assets to mostly unreal, highly improbable trade activities. To grant a fair return to all would kill the lottery. It lives and thrives by consuming the hard-earned resources of losers. Its very life depends on the losses of many. Its best customers must be losers. It robs so many to pay so few. If it is a tax it is an unfair tax because it succeeds only in collecting from the gullible. Its negative impact is doubled: 1. It (by siphoning funds) weakens the regular economy; and 2. It creates a wholly defective side economy. It's one of the worse budgeting lessons a child could ever be taught. It exploits the weak and seeks to weaken the strong. It destroys soundness.

Given all these effects of lotteries, the LDF can be expected to be "lottery-haters". But, what has been happening in Kerala is just the opposite. To cite a few examples,

  • EMS Government in 1967 started the Kerala State Lottery, which declares on its web page "Indiayil Aadyam, Ennum Munnil"
  • The LDF protested against the Lottery Ban by the UDF in 2005
  • The Kerala Sports Super Bumper was launched by the LDF in 2007 to mobilize 200 crores for infrastructural developments at the Grass-root levels of the state

How the Kerala State Lottery is presented to the people is another interesting thing to note:

  • Kerala State Lotteries webpage has the following text in it (It talks about development, the prize money, development, poverty and what not.. bah): Have you ever noticed a Lottery agent walking through the road with lottery tickets in his/her hand? Well we may not notice him/her at first. But think, he too plays his part in re-sourcing money for the development of roads, bridges, hospitals, schools and much more. Channelising ones money for the development of the state is the success behind the Department of Lotteries. More than that, it is the sole income-source for many a downtrodden public in the society. Today, with more than 35,000 authorised agents and over 100,000 retail sellers; spanning over 14 districts, it is a major benefactor to the development of the state, self-employment for the poor and the common, and poverty eradication. The lottery department gains importance in this context, with much opportunity in front of it to conquer. Its social commitment towards the poor and needy hasn’t brought down the amount of prize money it disburses. The department gives away lakhs of prizes a week, through its four weekly lotteries and through its six bumper lotteries.
  • Description about Kerala Lottery and it's history talks about alleviating poverty through lotteries!!!!
  • The Onam Bumper Lottery has its caption as: Aishwaryapoornamaaya Thiruvonathe Varavelkku, Onam Bumper Lotteryil Pankedukku!!!!

Hope we do start realizing soon that Lottery is an evil and that Kerala would become a Lottery-free state sometime soon.


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