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Monday, May 15, 2006

Redeeming Lottery Tickets

Ian Ayres

In this Forbes column, Barry Nalebuff and I suggest creating a new lotto ticket that lets people have the excitement of a traditional lottery while they are investing for their retirement.
A lottery savings ticket would look just like a lotto ticket, scratch like a lotto ticket, cost a buck and pay out the same prizes. The only difference would be that half the revenue would be earmarked for a personal retirement savings account rather than for education. There would still be about a third for prizes and the remainder for administering the game.

Extolling the benefits of abstinence is likely to be no more effective with gambling than it has been with sex education. Instead of denying the pleasure that people get from gambling, we harness it to produce more savings.

One of the great difficulties in encouraging private savings has been to find some mechanism that will produce a disciplined pattern of ongoing contributions. The beautiful thing about the lottery is that hard-core players play their number religiously.

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