National Ripoff

The “numbers game” is type of illegal lottery that was common in the United States, and there are two interesting things about it.

The Game

It worked a lot like modern legal lotteries: you placed a bet on some random number or numbers, and won if your number(s) came up.

Secure Random Numbers

The first interesting thing is the problem: if the whole thing is illegal, how do you generate a random number that everyone can trust, and without it being an obvious event for law enforcement to target?

It turns out to be not that hard: the games used some well known published random number: the last digits of the balance of the US Treasury, or middle digits of the number of shares traded on a public stock exchange.

So, everyone could easily agree on whether some individual had won—and in a way that was obviously fair.

Upgrade

The second interesting thing is what happened when the games were largely supplanted by legal, state-run lotteries.

The “numbers game” as run by organized crime typically paid out 60-80%: a bet of one dollar would, on average, net you 60-80 cents return. And because the game was illegal anyway, you would naturally not declare winnings as income and so would not pay tax.

In legal US state lotteries, the state typically pays out only 50%, and then you pay tax on top of that. So your dollar will, on average, get you maybe half as much as the illegal version.

Perspective

In the UK the National Lottery, launched in 1994, pays out about 50%; a quarter goes to “good causes”, ten percent just lands in the state coffers, and the remainder goes to the people who actually run the lottery including selling the tickets.

I remember this being a big deal, partly because a lot of publicity was given to the various community-enhancing projects across “health, education, environment and charitable causes”, but mostly because it paid for a major refurbishment of our local community sports centre.

In retrospect the whole thing was—and still is—an astonishingly cynical, and depressingly successful, regressive tax.

Wrapup

So, that’s that. Life, amiright?

I’m going to have to aim for a purely positive post next, to re-establish some good vibes around here.

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