Someone in a small Florida town has the winning ticket for the largest Powerball jackpot in history—nearly $600 million. The prize has reignited the debate over lotteries, which produce much-needed revenue for state governments by encouraging, as critics argue, a form of gambling. At ThinkProgress, Bryce Covert argues that lotteries amount to a regressive tax, as poor people are more likely to purchase tickets than wealthier citizens:

[Poor people] spend a larger percentage of their income on the lottery, and many studies of state lotteries have found that low-income Americans account for most of the sales and that sales are highest in the poorest areas. One study found that a reason for this is that “lotteries set off a vicious cycle that not only exploits low-income individuals’ desires to escape poverty but also directly prevents them from improving upon their financial situations.” The loss in income of buying tickets that provide no reward is harder to bear on a slim budget.

Covert offers the standard explanation for lottery ticket purchases among the poor -- the cost of the ticket seems to be a small price to pay for the possible chance to "escape poverty." In a chapter for our book, Insufficient Funds, however, economists Sendhil Mullainathan and Eldar Shafir suggest that the reality may be more complicated:

What is particularly interesting is the type of lottery ticket the poor typically buy—tickets with maximum payoffs of $200 to $500. If the poor are “buying dreams” through lottery tickets, these are quite modest dreams. Such small maximum payoffs are more consistent with lottery tickets as a vehicle for small-to-big conversion. An individual who struggles to save up to buy a $400 item, for example, would find it easy to buy a lottery ticket periodically. The recurring ticket costs are the “deposits,” which eventually lead to a win and the ability to buy the expensive item with the winnings. Notice the dominance of this method of “saving” over the typical savings account. There is no money accumulating and providing recurring temptation to dip into it to satisfy one’s own needs or those of family and friends. The individual loses his outlay until he (effectively) wins the desired item, the lottery ticket essentially serving as a commitment device, albeit an expensive one.