The lottery in Babylon

An acquaintance of mine, a professor at a top business school, is a big fan of state-run lotteries. “It’s a tax that poor people pay voluntarily!” he tells me with starry-eyed wonder. This is the kind of thing that makes me sympathetic to Marxist accounts of false consciousness. Clearly a considerable amount of weight is being put here on the concept of what counts as “voluntary.”

Lotteries are interesting examples of the practical limits of providing people with transparent information. It seems probable that even poorly educated and relatively innumerate people understand that purchasing a lottery ticket is on average a markedly losing proposition for the purchaser, since it’s well known that the government makes a lot of money on lotteries. So why do people buy lottery tickets? The most benign explanation is that playing the lottery is a form of consumption — that people enjoy gambling for its own sake and therefore derive psychic income from it, even though gambling has a negative return on investment in simple pecuniary terms. Less benign explanations include magical thinking and its near cousin desperation.

The less benign accounts take on particular force when one sees statistics on how much money poor people spend on lottery tickets relative to middle class and upper class people (Supposedly people with incomes of less than $13,000 per year spend something like 9% of their income on lotteries).

Increasingly, choosing to attend law school is coming to resemble purchasing an enormous number of lottery tickets. Let us count the ways:

(1) Collective outcomes are markedly negative for law school graduates as a group. In other words, the winners in the law school game are now seriously outnumbered by the losers, in both simple numerical and aggregated utility terms. This is certainly true for law graduates as a whole, and is also true at a very large majority of individual schools, indeed quite possibly all schools outside the top X (X here being a very small number whose precise identity I’m not interested in quibbling about at the moment).

(2) The law school game, like the lottery, is based in large part on redistributing wealth from some students to other students. This is most obvious in the context of tuition cross-subsidization via “merit” scholarships (these “scholarships consist of simply discounting the tuition charged to some students, which in effect raises the tuition paid by everyone else) but is true in a deeper sense in that, under contemporary conditions, winning at the law school game requires that there be many losers whose losses are precisely what make one a winner (in other words the game has become strongly negative sum). You can’t finish in the top 10% of the class unless 90% of your classmates don’t.

(3) Outcomes are largely random. People do well in law school not because they work hard (everybody works hard, at least until they recognize outcomes are largely random) but because they have a knack for doing well on issue-spotting exams, that do a very good job of measuring how well people do on issue-spotting exams but measure nothing else of value. In this sense law school grades are not much different than lottery numbers. Some come up, most don’t, and this fact doesn’t have much to do with the inherent virtue or vice of the players.

(4) In the case of both lotteries and law schools, the crucial ideological justification for the game is that the participants are entering into it voluntarily. This is why the one thing on which even the most dedicated defenders of the legal academic status quo agree is that law schools should be transparent about outcomes. Nobody is willing to defend a gamble in which those who run it lie about the odds. But here is where the analogy between lotteries and law schools is most troubling. After all, the state doesn’t need to lie about the odds to get the poorest of its citizens to spend nearly one out of every ten dollars on lottery tickets. “All you need is a dollar and a dream!” appears to work just as well, in at least some social contexts, as “98% of our graduates have jobs nine months after graduation.”

In other words, what if you give people good information about the extent to which you’re ripping them off, and they insist on getting ripped off anyway? Of course in the world in which rational agents maximize their utility on the basis of adequate information regarding costs, benefits, and risk this can’t happen by definition. But it turns out we don’t live in that world. We live in a world of markedly bounded rationality, where people are prone to optimism bias, have short time horizons and poor options within them, and are therefore more than willing to spend a dollar on a dream — or $150,000 that they don’t have as the case may be.