Why I Am Inoculated Against Powerball Fever
As a matter of principle, I do not gamble.
There is a theological reason for this. It is the doctrine of the sovereignty of God. Calvinists have opposed gambling for centuries. Gambling assumes that God is not sovereign; rather, either chance is sovereign or the law of large numbers is sovereign. Neither is sovereign. So, gambling is therefore a religious act of defiance: a public testimony against the sovereignty of God.
I figured this by age 20, but a decade later, I found a 17th-century sermon on lotteries when I was working on my Ph.D. dissertation on the view property Puritan New England. It was by Cotton Mather. He was opposed to lotteries. So were the Puritan clerics of Boston. But by the later 1600's, their influence was fading.
INSURANCE IS NOT GAMBLING
I do believe in the power of the law of large numbers. This is why I believe in insurance. But Murray Rothbard convinced me in 1963 of the fundamental difference between gambling and insurance. In Man, Economy, and State (1962), he wrote this:
It is not accurate to apply terms like "gambling" or "betting" to situations either of risk or of uncertainty. These terms have unfavorable emotional implications, and for this reason: they refer to situations where new risks or uncertainties are created for the enjoyment of the uncertainties themselves. Gambling on the throw of the dice and betting on horse races are examples of the deliberate creation by the bettor or gambler of new uncertainties which otherwise would not have existed. The entrepreneur, on the other hand, is not creating uncertainties for the fun of it. On the contrary, he tries to reduce them as much as possible. The uncertainties he confronts are already inherent in the market situation, indeed in the nature of human action; someone must deal with them, and he is the most skilled or willing candidate. In the same way, an operator of a gambling establishment or of a race track is not creating new risks; he is an entrepreneur trying to judge the situation on the market, and neither a gambler nor a bettor (2nd ed., Mises Institute, p. 555).
Insurance is one of the great discoveries in the history of man. It enables people to secure themselves against the effects of statistically predictable negative events in life. By surrendering ownership of money in advance, we gain legal access to far more money in the future, if some statistically predictable negative event occurs in our lives.
I don't believe any of this is random, but I surely believe in taking advantage of insurance to protect myself against the outcome of statistically predictable aggregate events.
Gambling is a zero-sum game. Somebody wins because other people lose. I don't want to win on that basis unless the nature of the game is imposed by the real world, and therefore is not a game. Commodity futures speculation is a zero-sum transaction, but it is not a zero-sum game. It enables people who don't want to bear uncertainty, namely, producers, to transfer this uncertainty to speculators. Then speculators enter into a zero-sum transaction with each other. Out of this competition comes an array of prices. These prices guide other producers free of charge -- a tremendous benefit to society. This is no game.
My antipathy to lotteries goes back to Cotton Mather and Murray Rothbard -- an unlikely pair of teachers.
WEALTH AND RESPONSIBILITY
The larger the Powerball payout gets, the less I would be tempted to buy a Powerball ticket. That is because of the inescapable nature of personal responsibility. The larger the number gets, the greater the responsibility of winning it. I wrote about this in 2003 in an article titled "The Horror of being Oprah."
The fundamental biblical principle regarding wealth is this one: from him to whom much is given, much is expected. It is taught in this passage: "But he that knew not, and did commit things worthy of stripes, shall be beaten with few stripes. For unto whomsoever much is given, of him shall be much required: and to whom men have committed much, of him they will ask the more" (Luke 12:48).
Another important goal of mine is to keep from sharing most of the money with state and federal governments. I would want to minimize my taxes. Federal law does not allow you to deduct in any year more than 50% of your income by means of donations.
I could immediately give it to my church before the lottery. If the church won, it would be $1.5 billion richer. What do you think that would do to the local church? It would create battles inside the congregation to gain control of the distribution of all that money. There would be plenty of prosperity in the church, but there would not be much peace.
If somebody gave me a Powerball ticket, I would ask someone else if he wanted to buy it for a dollar. I would not waste that dollar. I can handle giving away a dollar. I can handle spending a dollar. And, because it was a gift, I don't have to declare it as taxable income.
I would immediately give it to a nonprofit organization. I would not hang onto it long enough to win the money.
I would probably give it to Franklin Graham's outfit, Samaritan's Purse. Of anybody I can think of who probably wouldn't waste too much of the money, it would be Franklin Graham. But it would turn his organization into a large bureaucracy if it won the lottery. I would assume that God would be sparing of that possibility. Somebody else would win it.
I did play the ponies once. A friend of mine told me that he was going to the track, and he said there was a horse that I had a responsibility to bet on because of its name: Sharp Decline. It was consistent with my view of the stock market at the time. I gave him two dollars. It was 6 to 1. It won. So, I gave my friend the 12 bucks for his newborn daughter.
My wife and I, and John Mauldin and his wife, were given tickets to the series of lotteries that transferred FCC-controlled frequencies to the cell phone industry. The federal government did not use an auction, which it should have used, to allocate these valuable resources. My friend Terry Easton and his partner figured out a way to beat the lottery system statistically. So, I offered participation to my subscribers. Easton was right. A lot of us beat the system. My wife and I won 50% of two cities lotteries, worth millions. But that was not a zero-sum game. That was a real market allocation of assets. We gave away half the money.
CONCLUSION
There is no escape from responsibility. People think there is, but there isn't. They look at $1.5 billion, or a cash settlement of $800 million, and they think: "I could handle that." No, they couldn't. I don't think wastrels could get rid of that much money, even after taxes. But they would waste it. And they are responsible before God and man for every dime they waste.
I think of all those billionaires in the world today, and I shudder when I think of the responsibility they have. As long as they keep making money, they are doing the world a service. But they are going to have to transfer that money at some point to nonprofit, tax-deductible entities, in order to keep the governments from getting their hands on the money. We know what disasters governments would do with the money. But think of the disasters that a bunch of upper middle class lifetime bureaucrats in nonprofit foundations would do with the money. We already know what they would do with the money. We can study the history of the Rockefeller Foundation, the various Carnegie foundations, the Ford Foundation, and the neoconservative Washington Beltway think tanks. As Cyrano said: "No, thank you. No, thank you. And again I say, no, thank you."