Saturday, January 29, 2011

A Smart Lottery

I don't think much of lotteries. Study after study has shown that the people who play lotteries are those who can't afford it--the poor and uneducated. They also spend a larger percentage of their income on tickets, making it a kind of regressive tax.

I was listening to a Freakanomics podcast the other day, and heard what I think is one of the best ideas to come along in a long time. It's called a prize-linked savings account. It's changed my mind about 'lotteries', and I think it's time Utah allows this kind of lottery.

Let me explain.

Americans, on average, spend more than they make. We like to put things on our credit card. When bank accounts get drained, many people often become desperate and play the lottery, hoping to strike it rich. And of course, the odds are against them, and they only end up deeper in the hole.

What Americans really need to do is save more. They need to put money away in case it's needed later. It's a simple concept, but one that millions just don't seem to get.

A prize-linked savings (PSL) account could be the answer to this problem. PSL is often called the no-lose lottery. The idea is simple. When you buy a lottery ticket you either win or lose. If you lose, you've lost all your money. If you win, you get more than you spent, but the odds are against you.

With a PSL, you put money in a savings account. Every month, the bank picks a handful of lucky winners, and gives them a large sum of money. The banks pay this money from the interest earned on all the accounts. If you didn't win, no big deal, you haven't lost a cent. You can either pull your money out, or you can keep it in for a chance to win next month. In other words, the only thing you lose is the interest you would have earned in a regular savings account.

The PSL idea was tried in South Africa with incredible success. Poor people, many of whom never even had a bank account to begin with, suddenly were pouring into the banks and putting money in PSLs. It was so successful, in fact, that the government of South Africa sued the bank, and shut down the program. Why? Because the government of South Africa runs a lottery, and they realized they were losing revenue. That's right, people stopped playing the lottery, and were saving money. And the government shut the program down.

Here in the states we're no better. It's illegal in almost every state to do something like PSL, because it competes with the state run lotteries. States don't want to lose money. Banks could encourage people to save, and American needs it's citizens to be more responsible with their money, but it's illegal because it would hurt State's bottom line.

Here in Utah, we don't have a lottery. Many people cross over to Reno, or up into Idaho or Colorado to play the lottery. Why not be trailblazers and allow PSL here in Utah? It would encourage our citizens to save, and it would very likely  keep more money here in the state.

I wouldn't use PSLs, because I think I can get a better return through careful investing. But for thousands of people who play the lottery, and see it as a wealth building strategy, this would be a much better option. Both for them, and for the rest of society, because they'd be more responsible, and would need to turn to social programs less often. The Legislature is in session. Let's allow PSLs here in Utah, and see what happens.

By the way, I linked to the Freakonomics article above, I highly recommend reading the whole article, as well as listen to the podcast (15 minutes or so). Michigan is currently experimenting with PSLs, with some intriguing results. Billie June Smith deposited $75, and won $100,000.

And everybody else? Well, their savings accounts are still full.

Wednesday, January 12, 2011

Something We Can All Agree On

I happened to be driving my son to scouts, and heard part of President Obama's speech at the Tucson Memorial. His words were powerful and moving. You can read the entire speech here, but I wanted to especially quote this bit:

When a tragedy like this strikes, it is part of our nature to demand explanations - to try to impose some order on the chaos, and make sense out of that which seems senseless. Already we've seen a national conversation commence, not only about the motivations behind these killings, but about everything from the merits of gun safety laws to the adequacy of our mental health systems. Much of this process, of debating what might be done to prevent such tragedies in the future, is an essential ingredient in our exercise of self-government.

But at a time when our discourse has become so sharply polarized - at a time when we are far too eager to lay the blame for all that ails the world at the feet of those who think differently than we do - it's important for us to pause for a moment and make sure that we are talking with each other in a way that heals, not a way that wounds.

Scripture tells us that there is evil in the world, and that terrible things happen for reasons that defy human understanding. In the words of Job, "when I looked for light, then came darkness." Bad things happen, and we must guard against simple explanations in the aftermath.

For the truth is that none of us can know exactly what triggered this vicious attack. None of us can know with any certainty what might have stopped those shots from being fired, or what thoughts lurked in the inner recesses of a violent man's mind.

So yes, we must examine all the facts behind this tragedy. We cannot and will not be passive in the face of such violence. We should be willing to challenge old assumptions in order to lessen the prospects of violence in the future.

But what we can't do is use this tragedy as one more occasion to turn on one another. As we discuss these issues, let each of us do so with a good dose of humility. Rather than pointing fingers or assigning blame, let us use this occasion to expand our moral imaginations, to listen to each other more carefully, to sharpen our instincts for empathy, and remind ourselves of all the ways our hopes and dreams are bound together.

And then this:

I believe we can be better. Those who died here, those who saved lives here - they help me believe. We may not be able to stop all evil in the world, but I know that how we treat one another is entirely up to us. I believe that for all our imperfections, we are full of decency and goodness, and that the forces that divide us are not as strong as those that unite us.

That's what I believe, in part because that's what a child like Christina Taylor Green believed. Imagine: here was a young girl who was just becoming aware of our democracy; just beginning to understand the obligations of citizenship; just starting to glimpse the fact that someday she too might play a part in shaping her nation's future. She had been elected to her student council; she saw public service as something exciting, something hopeful. She was off to meet her congresswoman, someone she was sure was good and important and might be a role model. She saw all this through the eyes of a child, undimmed by the cynicism or vitriol that we adults all too often just take for granted.

I want us to live up to her expectations. I want our democracy to be as good as she imagined it. All of us - we should do everything we can to make sure this country lives up to our children's expectations.

Christina was given to us on September 11th, 2001, one of 50 babies born that day to be pictured in a book called "Faces of Hope." On either side of her photo in that book were simple wishes for a child's life. "I hope you help those in need," read one. "I hope you know all of the words to the National Anthem and sing it with your hand over your heart. I hope you jump in rain puddles."

If there are rain puddles in heaven, Christina is jumping in them today. And here on Earth, we place our hands over our hearts, and commit ourselves as Americans to forging a country that is forever worthy of her gentle, happy spirit.