By DAVID MOON, Moon Capital
February 25, 2001
Politics, religion and money, all in one column.
In the next two years, Tennesseens will debate the creation of creating a
state lottery. The arguments will be interesting, emotional and, at times,
completely irrational. I predict almost all of them will be completely off
A lottery should be first contemplated from its most basic question: what
would be the purpose of a lottery? If the purpose is to allow legalized
gambling, then we should remove the state prohibition on all forms of
gambling. In fact, casino gambling, run by private business people, with
profit motives and the discipline of competition would result in increased sales
and property taxes - perhaps greater than the net proceeds of a state-run
In fact, it is intellectually inconsistent to support a state lottery without
also favoring casino gambling and horse racing. People who argue that the
government must run the lottery in order to eliminate sleaze, cheating and the
unsavory characters attracted by legal gambling have obviously never been to a
legislative committee hearing in Nashville.
One of the most curious arguments in favor of the lottery is that Tennessee
is only one of a handful of states without a lottery and that we are losing
revenues to Kentucky, Mississippi and Georgia. This is sort of the 'Mommy,
everybody else is doing it' argument and should be treated with the same respect
as your mother treated it when you were five years old. If everyone else
jumps off a bridge, does that mean we should, too?
Some proponents will argue the state budgetary implications for a
lottery. Since a lottery is basically a business where people give you
money and receive (net) nothing in return, a lottery should fatten the coffers
of our state treasury. Most reports indicate that lotteries generate
significant excess revenues in their first couple of years, when there is still
a newness and novelty to them. After that, revenues actually decline until
they reach an equilibrium level below the first couple of years. A lottery
is not the solution to our state's budget woes.
One of my favorite arguments in favor of a lottery is that it is a voluntary
tax. A state-sponsored lottery is merely a tax on stupidity. And
since you get less of something as you tax it more, perhaps there are actually
some societal benefits for exploiting poor math skills.
The arguments against a lottery often begin with moral overtones. But
unless we are prepared to adopt a very specific state-imposed moral code, this
is a difficult argument. Are all games of chance immoral? Does this
include school-sponsored cake walks? What about football pools at the
office? A Saturday night poker game with beer and
cigars? Buying Internet stocks? The state already participates
in several 'sin businesses,' at least as defined by many lottery
moralists. Beer, wine, liquor, cigarettes ' the state participates in all
of these businesses by its heavy taxation of these products.
That the state is even considering a lottery is the result of a
government-imposed ban on an entire industry; the state constitution prohibits
gambling. The state government contemplates profiting from this
government-created monopoly, while still prohibiting its citizens from engaging
in the same business.
The state of Tennessee should not be in the lottery business, precisely
because that's what gambling is - a business. There are plenty of
businesses the state might consider entering, particularly if it can create for
itself a legally protected monopoly. But that is not the function of a
state government. This should not be about morality (except that it is
immoral for a government to outlaw a thing it chooses to do itself) or solving a
funding crisis. This is about the basic distinction between the public and
private sectors - and the proper purpose of each.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).