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The system-maintenance function of the modern lottery

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The system-maintenance function of the modern lottery
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Weiss, Dan
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English
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vii, 116 leaves : ; 28 cm

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Subjects / Keywords:
Lotteries -- States -- United States ( lcsh )
Marginality, Social ( lcsh )
Social status -- United States ( lcsh )
Lotteries -- U.S. states ( fast )
Marginality, Social ( fast )
Social status ( fast )
United States ( fast )
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bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

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Bibliography:
Includes bibliographical references (leaves 113-116).
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Department of Political Science
Statement of Responsibility:
by Dan Weiss.

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Full Text
THE SYSTEM-MAINTENANCE FUNCTION OF THE MODERN LOTTERY
by
Dan Weiss
B.A., University of Colorado, Boulder, 1998
A thesis submitted to the
University of Colorado at Denver
in partial fulfillment
of the requirements for the degree of
Master of Arts
Political Science
2005


This thesis for Master of Arts
i
i
degree by
Dan Weiss
has been approved
by
i
Date
i
{
i
I


Weiss, Dan (M.A., Political Science)
The System-Maintenance Function of the Modem Lottery
Thesis directed by Professor Tony Robinson
ABSTRACT
The modem state-sanctioned lottery games are considered alongside the illegal
numbers game of Depression-era Harlem as similar cultural phenomena that
provided, and provide, the illusion of opportunity to members of marginalized
constituencies. The fantasy inherent in the prospect of beating 600 to 1 in the case
of the illegal numbers or 1,000,000 to 1 in the case of the modem lottery could
serve to maintain the current American socioeconomic paradigm, one that is tolerant
of vast inequality of opportunity.
This abstract accurately represents the content of the canc...........
its publication.
Signed
in


CONTENTS
Figures............................................vi
Tables............................................vii
CHAPTER
1. INTRODUCTION.....................................1
2. HISTORY AND EVOLUTION OF THE ILLEGAL NUMBERS GAME...7
3. WHO PLAYED THE NUMBERS?.........................17
4. THE ECONOMIC STATUS OF NUMBERS PLAYERS..........28
The Legitimate Economy......................28
The Illegitimate Economy....................35
5. THE SYSTEM-MAINTENANCE FUNCTION OF THE NUMBERS...45
6. HISTORY AND EVOLUTION OF THE MODERN LOTTERY......56
7. THE STRUCTURE OF THE MODERN LOTTERY.............61
8. WHO PLAYS THE MODERN LOTTERY?...................69
9. THE ECONOMIC STATUS OF MODERN LOTTERY PLAYERS....77
10. WHY PLAY THE MODERN LOTTERY?...................87
11. PROPORTIONAL OPPORTUNITY CLOSURE: THE SYSTEM-
MAINTENANCE FUNCTION OF THE MODERN LOTTERY.........96
12. CONCLUSION
110


WORKS CITED
113
v


FIGURES
Figure
5.1 Horizontal Contact in a Vertical Hierarchy........................48
7.1 The Heart Stopper..................................................64
11.1 Proportional Opportunity Closure..................................103


Table
TABLES
3.1 Policy Arrests in New York City 1920-1935........................21
8.2 Earl Survey Absolute Expenditure by Income (2004)...............72
8.1 Herring and Bledsoe Absolute Expenditure by Income (1994)........72
9.1 Median Household Income by Educational Attainment of Households.. 80
9.2 Trends in Real and Relative Wage Rates by Education, Race, and Sex.. 81


CHAPTER 1
INTRODUCTION
The Lottery, with its weekly pay-out of enormous prizes, was
the one public event to which the proles paid serious attention.
It was probable that there were some millions of proles for
whom the Lottery was the principal if not the only reason for
remaining alive. It was their delight, their folly, their anodyne,
their intellectual stimulant. Where the Lottery was concerned,
even people who could barely read and write seemed capable
of intricate calculations and staggering feats of memory.
-George Orwell, 1984
While much of Orwells dystopic vision did not come to pass, his description
of the states cooptation of the lottery was indeed quite prescient. Since 1963, the
year in which New Hampshire became the first state in America to sanction a game of
chance (Clotfelter and Cook, 135), the practice has spread successively to forty other
states, as of the year 2000 (Nibert, 5-6). After roughly six decades of prohibiting
lotteries, many additional states have begun to reconsider their stance in recent
decades faced with budget shortfalls and the beginning of an anti-tax revolt that
continues to this day. The painless (McGowan, 1994) and voluntary tax-revenue
potential in state-sanctioned games of chance proved to be an irresistible opportunity.
It is also important to note that, in fairness to the representatives who
introduced legislation to legalize state lotteries, they were acting in accordance with
public opinion. Clotfelter and Cook write that the adaptation of state-sanctioned
1


lottery games was perhaps inevitable in a democracy: a polity in which ...an idea
with broad popular support cannot be resisted forever. The adoption process
...often takes the form of the public demanding what their most respected political
and religious leaders did not want them to have (Clotfelter and Cook, 135). Mary
Herring and Timothy Bledsoe note that in 1971, under fiscal pressure, the voters of
Michigan removed their states lottery prohibition by a 3 to 1 margin. By 1990, the
state boasted $1.2 billion in lottery sales. At present, roughly 75% of adult American
citizens participate in the various lotteries, regardless of class, race, age, sex, and
income or education level (Herring and Bledsoe, 1-3).
The widespread and habitual involvement of Americans in state-sanctioned
lotteries is less of a natural evolution than a deliberate strategy by the operators of
these games to increase profits. Gerda Reiths work on the history of gambling in
western civilization ascribes several similar characteristics of modem games of
chance to a phenomenon she labels the democratization of gambling. Reith posits
that sometime during the 18th and 19th centuries, gambling was deliberately
restructured to entice previously excluded members of society. While previously an
activity of intense and often excessive wagering by members of the elite, the house
realized that a vast pool of untapped resources existed in the poor and middle class.
Games that would allow for more modest wagers but prolonged play became
dominant. These games were designed to ensure a steady flow of money to the
organizers by sacrificing larger wagers for a larger volume of players (Reith, 74).
2


However, those who dreamed of creating vast numbers of poor gambling
addicts were confronted by an early American societal taboo that was well established
among this community. Supported in large part by religious authorities, this sanction
against gambling stood in the way of a populist gambling1 campaign, and would
need to be undermined from both the top and bottom of the social and political
hierarchy. For example, the numbers operators2 would donate heavily to inner city
churches in an effort to link their fate to that of the church. Given the lack of reliable
philanthropy in Depression Era Harlem, the numbers games became a chief source of
financial support for African-American congregations, and therefore the religious
authorities could no longer afford to preach against gambling, instead contenting
themselves with relegating it to the status of a lesser sin (Myrdal, 940.)
The gambling taboo was undermined from below with a deliberate effort to
democratize and privatize participation. Democratization was achieved by simply
reducing the amount of money necessary to participate and therefore opening play to
individuals previously barred by prohibitive selling prices. Buy-in amounts were
1 This term is my own, for now, as I have not seen it in any of the literature I have encountered.
Populist, while a term often associated with politics, not gambling, is apropos, for the deliberate nature
of the restructuring that Reith describes, is very much like a political cause. The task of the gambling
interests then was not simply one of marketing, for they had to convince the average Joe that it was
morally acceptable to gamble before he would gamble. Before marketing, the organizers had to alter a
religious and moral paradigm among a large number of people. In this sense they were politicians
first, and marketers second.
2 The term operators will refer to those at the very top of the organizational hierarchy of the illegal
numbers institution. These individuals, also commonly referred to as bankers, were responsible for
providing the capital necessary to start and run a neighborhood-wide numbers game.
3


reconceived in terms of dollars, quarters, and even pennies, thereby opening the
-3
market to all socioeconomic classes. Privatization was achieved, in one instance by
the modem lottery, with the introduction of the instant-scratch game. In this format
individual players were responsible for revealing the numerical or symbolic
information that would determine the winner of that days game. The brilliance of
this scheme cannot be underestimated, as it provided the selection process with an
aura of legitimacy and control. If the player himself was the one to reveal winning
information, then his or her worry about a fixed selection of winning numbers
could be significantly reduced. Further, the physical act of scratching could be
conducted at ones own pace, allowing for a false assumption of control over the
outcome.
The populist gambling campaign was spectacularly successful, as indicated by
the dramatic reversal of the position of American states regarding legal gambling
since the middle of the 20th century. While they were previously ardent foes and
vigorous prosecutors of gambling for the masses, the majority of state governments
has now come to rely upon lotteries for revenue, and therefore are staunch advocates 3
3 Privatization is my adaptation of a term common to modem American politics to the institution of
gambling. Part of the effort to bring gambling to the masses involved allowing the individual
participant to take over the process whereby winning numbers were selected or revealed, a process
previously run by the state or by the house. This effort manifests itself in the advent of the Clearing
House numbers game, which allowed players to determine the winning number themselves from
public financial data, and the more modem instant-scratch lottery ticket, whose vinyl covering could
be scratched off by the player, revealing the all-important information beneath at a time, place and
pace of their choosing. In both cases, though the selection of the winning sequence is still under the
control of the operators of the game, the unveiling of that information, previously conducted by the
operators, is now the purview of the individual participant.
4


of participation. While the adoption of state-sponsored lotteries has provoked some
criticism, the broad participation rates indicate that the majority approves of, has not
considered, or does not deem relevant, the political, social, and economic impact of
these games. The premise of this thesis is that state-sanctioned lotteries do have a
noticeable impact upon the political atmosphere of the community in which they exist,
and that this effect is significant enough to be worthy of examination.
The argument will proceed by historical analogy, beginning with a discussion
of the illegal numbers and policy games that flourished in Chicagos South Side
and New Yorks Harlem neighborhoods in the first half of the 20th century. The
impact of these games has been well documented and well analyzed, and the
connection between games of chance and hopes for social mobility will be
demonstrable. This thesis will attempt to show that the psychological and potential
political effect of declining or stagnating social mobility in these neighborhoods was
mitigated by the existence of a perceived opportunity in the form of illegal gambling.
The link between the illegal numbers game and the legal state lottery could
hardly be more explicit. In fact, one variety of the state lottery games is a deliberate
copy of the numbers. While the scope of the argument will need to extend from the
urban ghetto to the state or even the nation, the similarity of the games and a
corresponding decline in social mobility in both ghetto communities, and in the
American community as a whole during periods of popularization of the games, will
5


allow for a similarly structured argument to be made about both the numbers and the
modem lottery flourish, and the social functions they serve.
This thesis investigates the degree of truth in the following hypothesis
regarding the social function of the lottery: the modem lottery system for those on
the lower end of Americas socioeconomic ladder provides a replacement
opportunity.4 This act of substitution of fantasy in the place of real opportunity in
turn serves to maintain a system in which vast inequality of wealth is taken as a
natural condition of existence. As real social mobility declines, perceived social
mobility remains stable, or even increases, because individuals remain convinced that
America still is the place where one can go from rags to riches. The lottery plays a
significant role in maintaining the perception of American social mobility. Anyone
over 18 can buy a lottery' ticket, regardless of age, race, or class, and despite the long
odds against winning a major jackpot, a large segment of the population believes that
they are one dollar away from salvation. For this reason, the state sponsorship of
lotteries that reward their winners with money is a vehicle well-suited to perform the
vital function of system-maintenance.
4 This phrase, as far as I can tell, is my own, but is suggested by David Niberts argument, presented in
Hitting the Lottery Jackpot, that the modem state-sanctioned lottery serves to provide the illusion of
opportunity among marginal communities where real opportunities have all but disappeared. He
argues that the lottery is not only questionable state policy (51), but that the game legitimates
inequality (87) and serves as an obstacle to change (106).
6


CHAPTER 2
HISTORY AND EVOLUTION
OF THE ILLEGAL NUMBERS GAME
The game known as the numbers during Depression Era Harlem grew out of
Puerto Rican and Cuban barbershops during the first decade of the 20th century
(Schatzberg, 43). Section 324 of the New York State Penal Code of 1895 had
previously declared all lotteries to be unlawful -a public nuisance and therefore
the primitive numbers games were forced to evolve underground. The Penal Code
was referring specifically to raffle-like contests that had previously been sponsored
by the state going as far back as the first American colony in Jamestown, Virginia.
The Code defined contriving, drawing, or assisting as actions that would result
in a felony charge. Selling, running, and office work were to be considered a
misdemeanor (Schatzberg, 40). Despite official prohibition by the state, games of
chance remained popular in Harlem. The purportedly moral outrage of local
government towards gambling was not organically generated by New Yorkers, and
was never widely shared by members of this community. Consequently, demand for
the evolving institution of the numbers only grew with state prosecution.
Therefore, despite prohibition the game continued to develop outside of the public
eye. Legend has it that West African immigrants attached the label numbers to a
7


Spanish game originally known as bolita (Schatzberg, 44). This game is also
closely related to, but different from, the game known as policy, a wheel-based
lottery game popular during the same period. However, in many texts, the label
policy has been used to describe the numbers game. Therefore, the two terms have
become somewhat synonymous, and unless otherwise mentioned, the term policy
will also refer to the numbers in this paper.
The exact origin of the numbers is at this date as much myth as history. Some
say that the first numbers king5 was a Spaniard named Carmalita, who was
responsible for operating the first numbers game from a barbershop in the 1920s
(Schatzberg, 97). His game was operated in secret, from the perspective of the law.
That is to say that the game would not be conducted in the presence of a police officer
who had not been silenced with a bribe. However, since there were very few such
officers regularly patrolling Harlem, and even fewer conducting sweeps of
neighborhood barber shops, the game was, for all intents and purposes, played in
public. All in the neighborhood would know where to go if they were looking to
5 The numbers kings and queens, those at the top of the socioeconomic ladder who bankrolled
Harlems games of chance, will be discussed further.
8


wager a small sum.6
An alternate history credits a man named Casper Holstein with the invention
of the first true numbers game: the Clearing House game. Regardless of its precise
origin, the Clearing House game was responsible for the explosion of interest in the
numbers. The Clearing House game, like other numbers games, was based upon the
daily or twice daily selection of a three-digit number, between 000 and 999, inclusive.
The Clearing House Bank of New York would publish its financial data in local
newspapers and a three digit number would be determined the winner. Schatzberg
describes the selection procedure as follows:
.. .the Clearing House totals on a given day might include the
following entries: Exchanges, $831 million, balances, $92 million,
Federal Reserve Banks credit balances, $75 million dollars. To figure
out the winning number from these totals.. .using the last two figures
from the millions column of the exchanges total ($831 million) a 31
and the third digit from the same column of the balances total ($92
million) a 2, and combining them to form 312 (Schatzberg, 41).7
6 The game was a private, or secret, from the perspective of the local, state, and federal government.
However, the game was very public from the perspective of the Harlem resident. The great divide
between these two worlds will become evident again when this investigation turns to a discussion of
legal and illegal forms of numbers gambling, and again when describing the legitimate and
illegitimate economies of Harlem. The state is commonly ascribed a role of maintaining a domestic
monopoly over the use of force (Weber, 1918). In addition, however, during the 19th and 20th centuries
the American state, seeking to create a national economy, has increasingly asserted final jurisdiction in
matters of commerce. While numbers gambling was for many decades deemed an illegal activity,
punishable by fines and/or jail time, since the late 1960s the state itself has created a legal version
of this game in which citizens are encouraged to participate. An activity that was once the sole
purview of the illegitimate economy, the world of gangsters and racketeers, has now become a
legitimate activity of ordinary law-abiding citizens. The sudden shift calls into question the very
legitimacy of the dichotomy, and gives one pause when confronting similar constructs.
7 The two in the $92 million figure is indeed in the third position, if the potential hundred million
dollar digit -in this case a zero is included.
9


The significance of the Clearing House game was that it determined winning
numbers from data generally viewed as incorruptible. Lotteries had long since
confronted the problem of legitimacy and had sought to present the actual drawing in
as positive light as possible. The early policy wheels would conduct their drawings in
public, with the individual who actually selected the winning numbers being required
to wear a blindfold (Lombardo, 46). One of the urban legends associated with early
New York City policy games was that the winning numbers were selected in
Kentucky by a blindfolded child again a testimony to the innocence that players and
operators alike sought to invest in the process (Lombardo, 50). Claude McKay writes
that this effort was largely successful, and is in fact one of the principal reasons for
the numbers w'ild success. The numbers game has gripped all of Harlem precisely
because there is no obvious trickery in it (107). He continues that the games
illegitimate tie to the New York Stock Exchange only further endowed this
particular format with an aura of credibility that previous formats simply could not
match. McKay writes: The magnetism of the game was heightened by its
illegitimate link to the Stock Exchange. Harlem folk thought that they too had a little
part in the ramifications of the stock market (109).
In addition to a format that was thought to be even more incorruptible than
blindfolded children, the Clearing House game for the first time made use of the mass
media to help disseminate information about the game. Clearing House Bank data
was printed in the financial section of all New York daily newspapers, and was
10


therefore readily accessible to all players. Most critically, this information was
disseminated without the need for a bureaucratic structure to supervise this spread of
information (Schatzberg, 40). The operators of the numbers game as do those who
promote the modem lottery by inserting the game into a feature segment of the
evening news co-opted the mass media into its effort and thereby saved a large
amount of money it would have otherwise had to spend on publication. Rufus
Schatzberg describes many of the earliest games as requiring a banker, collector, and
runner, all roles that, given the aid of the newspapers, could be taken on by one
person. In fact, he writes that the need for an office staff was in fact a status symbol
that only the biggest of the numbers games would ever achieve (41).
The bigger games did indeed develop a hierarchy of specialized functions,
each with its own set of risks and rewards. The bettor would give his number to a
writer, or a runner, who would collect many bets, and turn them over to the
controller. The runners were the foot soldiers and ambassadors of the game.
Responsible for walking a beat, of sorts, and collecting individual wagers, these
individuals were also recruited for their familiarity with and popularity in local
neighborhoods. A typical controller would have roughly fifty runners under his wing.
The controllers were the bureaucrats of the game, keeping track of all bets and
payoffs. They in turn were working for the bankers, the true bosses of the game,
who would collect and store the profits and provide money for the bettors that won
each day. Successful bankers would make enormous profits, and would live
11


deliberately extravagant lifestyles in a competition with other bankers to achieve the
exalted status of a numbers king or numbers queen. This payoff money would be
distributed down the hierarchy, first to the controllers and then to the runners, who
would actually visit the winning bettors with their money (Haley and Malcolm X,
85).
Regardless of the size of the operation, however, the Clearing House format
allowed individual players to simply get a newspaper and determine the winning
number themselves without having to depend upon the numbers operators to provide
that information. This format gave the selection and propagation of the winning
number a legitimacy that simply could not be matched by other formats (Schatzberg,
41). Additionally, the ability of the individual to calculate for himself the winning
number from an array of public information infused the selection process with an aura
of control. Though the actual control exhibited by any one player was largely
illusory, the Clearing House format nevertheless allowed individual players to reveal
the winning number for themselves. The selection process was effectively
democratized. The modem state-sanctioned lottery experienced a similar explosion
in popularity after it introduced instant-scratch games, a format which similarly
democratized the selection process for the modem player.
In addition to the incorruptible format and use of the mass media, a buy-in
price set deliberately at a very low level helped the numbers to explode in popularity.
Players would typically wager between fifty cents and one dollar on a number, and
12


the most common sum wagered was in fact one dollar (Haley and Malcolm X, 85).
However, smaller sums could be wagered, and therefore the game was quite
affordable even in the most destitute areas of Harlem. Malcolm X, who was himself
a numbers runner for some time, described his best friend Shorty as a habitual
player, one of many Harlemites who played one dollar every day (Haley and Malcolm
X, 45). Alternative betting options combinate, for example allowed for a single
penny, wagered six-fold, to constitute a bet. Furthermore, those who simply did not
have any money to bet, but wanted to play, would frequently be allowed to play on
credit (Haley and Malcolm X, 51). The importance of the low buy-in cannot be
underestimated, it allowed those who worked, those looking for work, and those out
of work to play with similar dedication. Gunnar Myrdal writes of the popularity of
the game:
This game caught on quickly among Negroes because one may
bet as little as one penny, and the rewards are high if one wins
(as much as 600 to 1). In a community where most of the
people are either on relief or in the lowest-income brackets
such rewards must seem exceptionally alluring. The average
amounts bet each year, however, often amount to a staggering
sum in relation to the average incomes in the Negro
community... (330).
The low buy-in is also a pillar of the modem state-sanctioned lotteries,
in no small part due to its success at attracting numbers participants. As
modem games of chance have increasingly become pastimes of the lower and
I
13


middle class, a low initial investment is critical for allowing such players into
the market.8
Given that the operators of the games are relying upon smaller investments by
the players, they must expand the market of willing participants to ensure greater
profits. Another critical vehicle by which this goal is accomplished is the hierarchical
prize structure. This system of payout combines a large grand prize with several
lesser prizes of declining value. The odds of winning the grand prize are
prohibitively low approaching zero from the standpoint of an individual player.
The odds of winning the lesser prizes increase as their value decreases. While the
grand prize may not be won at all on a particular day, lesser prizes are won with
regularity. Critically, these smaller victories contribute to the overall sense that
someone wins every day. In Harlem, before the publication of the days financial
data, players could select a three-digit number which would pay $600 for a $1 bet if
all three digits were selected in the correct order (Schatzberg, 41). However, should a
player select the correct numbers, but not in the correct order, he or she would receive
a lesser but not insignificant payoff. Similarly, smaller rewards were given to those
who selected two of three correct numbers, or even one of three correct numbers. As
8 The origin of the term policy, and likely the source of its considerable misapplication to the
numbers game, lies with this very urge to allow even the poorest to participate in games of chance.
Dating back perhaps as far as the eighteenth century, the term policy comes from the common
practice of allowing players to buy-insurance policies on certain numbers in a lottery. Schatzberg
writes: .. .lottery ticket dealers as a sideline to their business sold insurance on numbers. The
London shops tried to reach players who could not afford to buy a whole ticket or a share of a ticket,
sold players an insurance policy on numbers of their choice (34).
14


previously mentioned, one popular alternative was to combinate a number, whereby
the selection of 712, for example, could be extended into a penny bet on all six
possible combinations of the digits 7, 1, and 2 (Haley and Malcolm X, 84). While the
odds of selecting all three numbers in correct order were indeed prohibitive, the two
digit, single-digit, and combinate options guaranteed that some players would hit
every day.
Claude McKay describes the regularity with which players would succeed,
even if only for the smaller sums offered: Yet not a day passes but somebody does
win. The stakes may be small or big, more often small, but still that is great incentive
for everybody to play (108). As described by Malcolm X, someone did in fact hit
every day, and in the tightly knit community of Harlem, these individuals would often
be someone he knew (Haley and Malcolm X, 85). Every day, someone you knew
was likely to hit and of course it was neighborhood news; if big enough a hit,
neighborhood excitement (84-5). Through word-of-mouth, the dream of hitting the
numbers was a reality that all could experience at least vicariously every single day.
The Clearing House numbers game, the first format to achieve such
widespread notoriety, did so based on three important factors. First, the game
continued the practice of earlier numbers games of offering participation to even the
most destitute of prospective players. It erected no financial barriers to play; by
offering participation for one dollar, one penny, or even on credit, the format
continued to democratize the institution of numbers gaming, in stark contrast to other
15


financial institutions of Harlem that were closed to dark-skinned citizens. Second, the
game effectively privatized the number-selection process, and thereby solved many of
the questions of data incorruptibility that previous games had used blind children to
address. Third, the simultaneous offering of a hierarchical prize structure a large
award very difficult to win and several secondary awards with increasingly favorable
odds proved to be a particularly alluring combination for potential players. Each of
these phenomena will be similarly associated with the explosion of state-sponsored
lottery gaming in the latter half of the 20th century.
16


CHAPTER 3
WHO PLAYED THE NUMBERS?
Qualitative measurements of participation indicate that the numbers was a
veritable institution that drew upon all social and economic groups for its devoted
players. Participation was both broad and deep; many of Harlems residents played
and many played with striking regularity. Exact quantitative participation rates of the
sort that can be used to characterize the modem state-sanctioned lotteries are much
harder to find for the institution of illegal numbers. Sociologists of the time did not
conduct the elaborate surveys of participation that have been done with respect to
instant-scratch games, the lotto, and other 21st century games of chance. However,
the extremely widespread nature of participation in the numbers can be gleaned from
a wide range of anecdotal evidence from histories of this period. Nearly every history
of African American culture particularly that of the 20th century urban experience, is
replete with references to the numbers institution. Gunnar Myrdal writes from a
scholarly perspective:
One of the main forms of recreation among lower class Negroes is
gambling. Besides playing the numbers, Negroes are traditionally
expert poker players and crap-shooters. The excitement of gambling
coupled with the chance of gain is easily understandable in the light of
the monotony of rural life and of the unemployment of the cities (985).
17


Myrdal clearly indicates that the motivation for playing the numbers, to be
discussed in greater detail, was tied to the dismal state of the urban economy.
Malcolm Xs anecdotal evidence supports Myrdals academic claim, and provides
more detail as to the exact character of this recreation.
Every day, I would gamble all of my tips as high as fifteen and
twenty dollars on the numbers, and dream of what I would do when I
hit. I saw people on their long, wild spending sprees, after big hits. I
dont mean just hustlers who always had some money. I mean
ordinary working people, the kind that we otherwise almost never saw
in a bar like Smalls, who, with a good enough hit, had quit their jobs
working somewhere downtown for the white man. Often they had
bought a Cadillac, and sometimes for three or four days, they were
setting up drinks and buying steaks for all their friends... (85).
Malcolm X indicates that there was a clear celebratory character to this
recreation, a sometimes days-long party that allowed Harlemites to enjoy a life that
they normally could not hope to lead. Further, his portrait indicates the deep
penetration of the numbers game into the very fabric of Harlem culture. As suggested
by Myrdal, who believed numbers gaming to be a class-wide phenomenon, Malcolm
X indicates that Harlemites of all social standing were eager to place bets on their
favorite numbers. Ordinary working people played with the same devotion as did
hustlers. Claude McKay, celebrated biographer of Harlem, agreed: Numbers is a
peoples game, a community pastime in which old and young, literate and illiterate,
the neediest folk and the well-to-do all participate (101).
In addition to the participation being widely distributed among varying social
and economic classes, there were a large number of participants who seem to have
18


I
!
been regular players. Malcolm X continues: Practically everyone played every day
in the poverty ridden black ghetto of Harlem... Hundreds of thousands of New York
City Negroes, every day but Sunday, would play a penny on up to large sums on
three-digit numbers (Haley and Malcolm X, 84-5). From an academic perspective,
Malcolm Xs claim has certainly not been refuted. Cheryll Lynn Greenbergs history
of Depression Era Harlem found that (t)he most widespread criminal activity in
Harlem involved the numbers or policy game (38). In a study of the games in
Chicagos South Side the Midwest equivalent of Harlem Robert Lombardo writes
that by 1938, $1 million per month were wagered on 38 policy wheels in the South
Side, and that 20% of all relief money going to residents of this economically
depressed neighborhood was spent on this game of chance (50).
The use of the term criminal to describe numbers gaming activity is worthy
of further discussion, as it is by no means self-evident that this is the most accurate
word to describe the phenomenon. While the New York Police Department may
certainly have believed the numbers to be a criminal enterprise, the average Harlem
resident would have never characterized the game as such. The difference in
perspectives explains why the popularity of the game persisted and even grew as the
police attempted to eradicate its existence. As demonstrated by both Greenberg and
Schatzberg, arrests for policy or numbers participation skyrocketed in the early
1930s (Greenberg, 38).
i
i
19


During this period, Casper Holstein, the father of the Clearing House game,
was arrested by New York City authorities. However, Holstein was simply the most
public example of a much broader phenomenon that the city authorities could only
reactively engage. Between 1920 and 1930 there were 18,000 policy arrests,
referred to below in Table 3.1, a term loosely fitting several different levels of
participation in the numbers industry (Schatzberg, 82). Between 1930 and 1935, the
number of arrests increased to 36,000 (Schatzberg, 82). This is a dramatic increase
from 1800 arrests per year to 7200 arrests per year a 400% jump.9 The precise
numbers of arrests for each year appear in the table below. With only two exceptions,
arrests increase each year, sometimes dramatically so. (See table next page).
9 Arrest data alone is not sufficient evidence of a dramatic increase in lottery participation. Perhaps the
increase in arrests stems from an increased focus by the New York City police upon a problem that had
always existed. However, the data, while not a useful tool for making a quantitative measurement of
numbers participation for the reason mentioned above, nevertheless give credibility to the qualitative
suggestions of Harlem biographers that numbers gaming was pervasive.
20


I
I
Table 3.1** Policy Arrests in New York City 1920-1935
Year Lottery Arrests Policy Arrests
1920 59 7
1921 121 153
1922 258 654
1923 425 1,014
1924 712 774
1925 274 1,175
1926 262 1,452
1927 279 2,236
1928 218 2.807
1929 211 3,497
1930 378 4,334
1931 288 1,543
1932 503 3,730
1933 673 6,354
1934 15 10,360
1935 23 13,692
**Table adapted from Schatzberg, 80-1.
Schatzberg notes that the number of policy arrests increases much more
quickly than did the population of Harlem during these years (93). While population
growth for the period was roughly 2%, policy arrests increased far more quickly. It is
difficult to determine the precise causation of the increase. It is entirely possible that
increased police attention simply meant that previously ignored offenses now were
being prosecuted. However, the marked increase in policy arrests also occurred
roughly as the Clearing House Game was taking hold, and as the data indicates,
arrests for the traditional lottery increased at a much slower rate during this time.
21


Schatzberg postulates that the data demonstrates that the Clearing House game was in
fact drawing players away from more traditional formats, and that therefore these
records can be interpreted as an indirect measurement of the surge in popularity of the
numbers (85).
Despite the very official and public investigations, and despite the numerous
arrests for participation in numbers gambling, the popularity of the game was
unaffected. This is an indication that the larger societys taboo was never internalized
by the target of the prohibition, and further that there was a level of organic
community support for the numbers that no amount of arrests could eradicate.
Schatzberg describes his study of the illegal numbers as ...an illustration of the
criminalization of a community activity that was not perceived locally as a criminal
activity (7). His description is supported by the attitude that Harlem churches were
forced to adopt with regard to gambling. Myrdal writes:
Negro preachers usually support Negro business...The churches are,
of course, officially against such things, but gambling (especially
policy) among the members of the congregation is too widespread to
be stamped out... Some Negro ministers in Chicago meet the situation
by ignoring the policy playing that goes on; others openly endorse it
on the grounds that it provides jobs for Negroes and that gambling
isnt the worst sin. Some Spiritualist churches actually give out lucky
numbers to be played (940).
In this description, the term business is used to describe the same activity
that was described by Greenberg as criminal. The existence of conflicting
descriptives is appropriate, however, for it indicates two wildly divergent perspectives
22


of the institution. Greenberg appropriately describes the large majority of policy
arrests that occurred in Harlem as the criminalization of non-violent, revenue-
producing activities (Greenberg, 34-9). While the New York authorities saw only
antisocial behavior, Harlem residents saw individuals acting out of necessity, forced
into an illegal, but not immoral, trade because no legitimate opportunities could be
found. Myrdals use of the term business in this passage, which is otherwise
devoted to an illegal enterprise, is telling, for it reflects the dominant attitude taken by
the Harlem spiritual hierarchy with respect to the institution of numbers. The church
could simply not afford to view the numbers games through the traditional paradigm
of good and evil, sin and salvation. The shades of grey mentioned above are
remarkable for an institution that normally spends its time dividing the world between
heaven and hell. Because of the employment, credit, and philanthropy provided by
the numbers, the sin of gambling was relegated to the lesser status of not as bad
as... The numbers, if viewed as a legitimate business enterprise, could provide the
church with a pragmatic middle ground. The church could not in good conscience
remove gambling from its list of proscribed activities. Yet the delivery of its sermons
depended heavily upon the generosity of the gambling community. Therefore, with
an eye to God and an eye to the Bottom Line, pastors offered a nominal
condemnation of gambling without offending the sensibilities of the numbers
bankers, collectors, runners, and players who filled their pews every Sunday.
23


The numbers was indeed a business; while state authorities would never
recognize it as such, its ability to generate profit in an economically depressed
environment was all the proof that African-Americans needed of its legitimate status.
For example, the 38 policy wheels of Chicagos South Side neighborhood employed
5000 workers, grossed 18 million dollars in 1938, and generated $64 per capita in
economic activity (Light, 893). The tremendous profits generated by the numbers
could be seen at work in urban ghettos. Malcolm X relates what was common
knowledge to Harlems residents concerning the origin of most successful black-
owned businesses. On $15 the hit would mean $9,000. Famous hits like that had
bought controlling interests in lots of Harlems bars and restaurants, or even bought
some of them outright (Haley and Malcolm X, 85). By contrast, the legitimate
entrepreneurial sector was severely underperforming. Forced into low-profit service
sectors already saturated with competing firms, the black-owned barbershops and
restaurants of Harlem generated a measly $10 per capita of economic activity over the
course of one year (Greenberg, 27).
The enormous profit generated by the illegal gambling trade helped produce a
phenomenon widely associated with the Harlem Renaissance, but not necessarily with
illegal activity. During the 1920s and 1930s, Harlem was replete with examples of
individuals that had been previously nearly non-existent in American history: a
wealthy black man or woman. The presence of successful black men and women
only further eroded the legitimacy of the taboo against numbers gambling that the
24


state attempted to impose from the outside. Any social stigma that state prosecutors
hoped to create in Harlem was forced to compete with these dynamic individuals.
Commonly referred to as numbers kings or numbers queens, they were known
both for their wealth and for their conservative social habits.
Casper Holstein, the previously mentioned grandfather of the Clearing House
format, was one of the Big Six Harlem numbers bankers, and boasted a private fleet
of automobiles, large real estate holdings, and a controlling interest in the black
magazine Opportunity. His $1000 contribution to the United Negro Improvement
Association of the early 1920s was the largest independent support given to this
national institution (Schatzberg, 104) (McKay, 102). Holstein and other kings were
also sure to support local churches, perhaps the only institution that could ever put a
serious dent in their profits. Myrdal writes: .. .and often the contributions from
Negro policy racketeers especially in the North are a major source of support for
the church... (940) Churches and YMCAs alike became similarly dependent upon
the largesse of the numbers bankers, who during the era of Jim Crow, were the only
source of reliable philanthropy for black community institutions (Schatzberg, 12).
The numbers kings and queens enjoyed quite a reputation in the Harlem
community, a great deal of it conspicuously cultivated in an effort to demonstrate
their independence. Independence was, to be sure, a big factor in what drove these
individuals to organized crime in the first place. Schatzberg writes that a mere $200
was enough to start a numbers game during the Depression, and that this initial
25


investment, if combined with some glad-handing and familiarity with the
neighborhood, could be enough to guarantee a steady income free from white control
(15). Their freedom held powerful sway in a community that was only nominally
free. Legitimate residents of Harlem could vote, but could not expect much else in
a larger society that practiced discrimination in housing, employment, and wage
compensation. Malcolm X, upon his first meeting with a king, was clearly moved:
Every Negro Id ever known had made a point of flashing whatever
money they had. But these Harlem Negroes quietly laid a bill on the
bar. They drank. They nonchalantly nodded to the bartender to pour a
drink, for some friend...Their manners seemed natural; they were not
putting on airs (Haley and Malcolm X, 73).
Their freedom, from the perspective of an outsider, seems to have created an aura of
sophistication about them that other African-Americans simply did not possess.
Myrdal writes that this sort of perception was particularly prevalent among lower-
class Harlemites: While the members of the shady upper class are not accepted by
the respectable Negro upper and middle classes, the observer finds that they have a
great deal of status in the eyes of lower class Negroes and are not greatly condemned
by agencies for concerted Negro action or the Negro press (331).
The numbers kings and queens were the functional equivalent of todays NBA
basketball stars for a community that had little hope of a legitimate opportunity to
free themselves from socioeconomic prison. Kings and queens were role models;
they were living, breathing proof that a black man or woman could be successful.
The relative dearth of legitimately successful black Americans only made the
26


illegitimately successful stand out with greater clarity. The lavish lifestyles of the
latter served, as those of the NBA stars do today, to legitimize and popularize the
institution that created such wealth. The numbers were effectively a way out for
those who believed -rightly so that they were more than likely to end up no
wealthier than their parents. Schatzberg writes: Legitimate economic opportunities
on a scale available to whites were not available for most blacks.. .Those who could
make it in gambling activities often became role models for many others struggling to
survive in a racially hostile environment10 (13).
10 Italics in original.
27


CHAPTER 4
THE ECONOMIC STATUS OF NUMBERS PLAYERS
The Legitimate Economy
The allure of the numbers king lifestyle among the lower class, which was the
vast majority of Harlem at this time, is a reflection of the relative opportunity
differential between legitimate and illegitimate sectors of the economy. The
conventional economy during the 1920s and 30's was still largely closed to African
American citizens. Pervasive and institutionalized discrimination excluded black
men and women from opportunities that would have otherwise been available had
their skin been white. Perhaps most significantly, the labor unions were just as
discriminatory in their membership as other societal institutions. The inability of the
African-American worker to organize was a devastating handicap, for it meant that he
or she would be offered a significantly lower wage than would white workers for the
same job.11 Further, the absence of collective bargaining meant that the black worker
could not possibly hope to see a substantial increase in wages. Low-wages in turn
made every other aspect of life, from housing to food to education, relatively more
unattainable for the black worker, and therefore condemned him to membership in a
11 The foundational nature of the inability to organize will also be a critical feature of the demographic
that participates regularly in the modem lottery, similarly causing this group to receive stagnating or
declining wages, and thereby increasing the allure of unconventional means of making money.
28


permanent underclass. While there were significant barriers to upward mobility for
black Americans before the onset of the Great Depression, this general economic
downturn would only further rigidify these ceilings (Greenberg, 66).
Despite its status as the most prosperous African American neighborhood in
the United States, Harlem did not provide its residents shelter from the consequences
of being black in America. Even before the onset of the Great Depression, housing,
services, employment, and wages all were difficult to find for African-Americans,
and when found, were not equivalent in quality or quantity to similar opportunities for
white Americans. As more and more African-Americans gravitated to the Negro
capital, the geographic area of Harlem did not grow commensurately with its surge
in population. During the 1920s the black portion of the population of Manhattan
Island swelled from 5% to 12% (Greenberg, 13). Much of this immigration came
from the American South as former slaves turned sharecroppers gave up on their
struggle to make a living as tenant farmers. The boll weevil and soil exhaustion
drove nearly 1.5 million southern blacks to the industrial centers of the North and
Northeast between 1910 and 1930 (Wacquant, 2002,47), and nearly 300,000 to the
city of Harlem (Greenberg, 16), where the streets were thought to be paved with
metaphorical gold.
Ironically, as more blacks moved north, the once flexible racial boundaries of
the Harlem neighborhood became more rigid as white New Yorkers feared the spread
of this swelling community to other parts of the city (Greenberg, 15). This
29


segregation led to dramatic overcrowding within the confines of black Harlem. In
1925, the black neighborhoods of Manhattan Island including Harlem had roughly
336 residents per square acre. The white neighborhoods had only 223 residents in the
same area (Greenberg, 31). Much of this difference can be accounted for by the
phenomenon of lodging, a common practice among black Harlemites whereby
residents would house family members and non-family members in their living rooms
for a fee. In 1925, nearly 26% of Harlem residents had lodgers. Two-thirds of
these lodgers were not extended family members (Greenberg, 31). The phenomenon
of lodging can in turn be explained by overt rent discrimination. In 1928 the average
working-class white family paid $316 per month in rent while a similar black family
would be charged $480 (Greenberg, 29). From 1919 to 1927, the average New York
City rent rose by 10%, while the average rent in Harlem increased by 100%
(Greenberg, 29). In his autobiography, Malcolm X describes a rent party, a tool
used often by black families to raise the extra dollars necessary to bridge the gap
between wages and housing costs.
People offering you little cards advertising rent-raising parties.
I went to one of these thirty or forty Negroes sweating, eating,
drinking, dancing, and gambling in a jammed, beat-up apartment, the
record player going full blast, the fried chicken or chitlins with potato
salad and collard greens for a dollar a plate, and cans of beer or shots
of liquor for fifty cents (76).
Overcrowding in Harlem during the Harlem Renaissance is a superficially
counter-intuitive phenomenon, for the 1920s are thought to be a particularly
30


prosperous period in America and in Harlem as well. However, though prosperous
for some, the economic growth of the period did not trickle down to those at the
bottom of the socioeconomic ladder. Cheryl Greenberg refers to the roaring
twenties as the depression before the depression when considering how blacks
fared during this period (41). The related phenomena of persistent high
unemployment and discriminatory wage scales combined to keep black Harlem poor
while white Manhattan got rich.
During the ten-year span of the roaring twenties, black unemployment in
Harlem remained unchanged in all sectors of the economy (Greenberg, 21). Those
that could find jobs during this period were employed primarily in service
occupations or menial industrial work (Myrdal, 206). The majority of industries
simply refused to hire black workers. Despite Progressive Era reforms, the
government sector was still largely inaccessible to blacks, even those recently
graduated from black universities. The Irish maintained their stranglehold on the
New York police department, and there were no black doctors or nurses to be found
working in New Yorks public hospitals (Greenberg, 26). Greenberg writes:
One of the largest public utilities in New York State... (admitted)
outright that it would continue to exclude blacks. The Mayors
Commission on Conditions in Harlem believed utilities excluded
blacks because of tradition and custom, because they believed blacks
to be less efficient, and because they feared the negative reaction of
white workers (72).
31


The public telephone company, gas company, and milk company similarly
excluded blacks from consideration for employment (Greenberg, 72). Loic
Wacquant describes the sum total of all of the aforementioned obstacles as a
job ceiling (2002,47) that forced African-American workers into ...the
most hazardous, menial, and underpaid occupations in both industry and
personal services (2002, 47).
Those enterprising black entrepreneurs who hoped to subvert discriminatory
hiring practices found themselves the victim of discriminatory lending practices.
Capital for black-owned enterprises proved difficult to find. Despite comprising an
overwhelming majority of Harlems population, blacks owned less than 20 percent of
its businesses (Greenberg, 27). Because of their deficient capitalization, black
entrepreneurs were forced into low profit sectors. Therefore these low profit sectors
were saturated with competition among African-Americans. In 1928, there were 330
black-owned barber shops, 198 black-owned food shops, and 129 black-owned
laundry shops. As previously stated, the entire black-owned business sector in
Harlem generated a measly $10 per capita in one year (Greenberg, 27).
Those black workers who did find jobs did not necessarily find union jobs, for
the unions at this time were just as discriminatory as the rest of American society.
Greenberg cites Louise Kennedy as describing this obstacle as one of the chief
impediments faced by black workers during this period.
32


Blacks had long been barred from many training and apprenticeship
programs, and from skilled and white-collar positions. Both
employers and trade unions practiced such exclusion...the attitude of
organized labor is one of the most persistent and effective checks to
the Negros advancement in skilled work...Since most trades in New
York were unionized, and most unions excluded or discriminated
against blacks, advancement for them was almost impossible (19).
The animosity between black workers and unions was unfortunately self-
reinforcing, as strikes by white workers were often broken with black
strikebreakers who were desperate for any work. Needless to say, working as
scabs did not endear these black workers to their potential labor organizers.
Together the low-skill required for black work and the lack of union
organizing in these sectors depressed black wages well below the level commanded
by similarly skilled white workers. For example, an elevator boy posting in 1928
advertised a $65 per month salary for black applicants and a $90 per month salary for
white applicants. The median weekly wage for laundry work in 1928 was $8.85 for
black women and $16 for white women. Those few blacks fortunate enough to land
jobs in industrial sectors earned on average $2 to $5 less per week than their white
colleagues (Greenberg, 22, 24-5).
The dismal state of black opportunity as described above is one of pre-
Depression Harlem. The onset of the Great Depression in 1929 only exacerbated the
problems faced by the black Harlemite. The first years of the Depression saw pay
scales and working hours in every industry decline. Skilled workers saw their income
cut in half, while the professional class saw their income decrease by one third.
33


Unemployment skyrocketed, eventually to reach a peak of 25% nationwide. In New
York City, nearly 15% lost their employment during the first full year of the
Depression 1930 while 25% of Harlems workers lost their jobs during this year
(Greenberg, 42).
Everyone moved down the economic ladder regardless of race. However,
black workers, often described as the last hired and the first fired (Myrdal, 207),
were the first to feel the effects of the nationwide economic contraction. Low-skill
and low-wage positions that had once been the mainstay of black employment
suddenly became intensely competitive, as formerly middle-class white workers
sought jobs previously labeled as black work. New Yorks Welfare Council
estimated that black workers lost their jobs three to four times faster than white
workers. By 1935, the unemployment rate in Harlem surpassed the national average
to reach a staggering 35% (Greenberg, 44). The unemployment rate for black males
was 25.4%, and for white males 19.4%. For black female workers, unemployment
stood at 28.5% relative to 11.2% for white females (Greenberg, 44).
Employment discrimination and the persistent 33-50% wage discrepancy
drove a disproportionate number of black Harlemites to relief programs. Though
only 5% of New York Citys population, blacks represented 15% of its unemployed
and 27% of those on welfare (Greenberg, 66). Of those blacks on welfare, 75% had
never applied for relief before (Greenberg, 45). In addition to the social stigma
attached to welfare, those on relief simply did not get enough to make ends meet.
34


Greenbergs minimum budget for 1932 was roughly $87 per month, and the
average relief package provided only $27 per month (Greenberg, 45). The end result
of this race to the bottom, as former black jobs became white jobs and blacks
went on relief, could be found in the New York City public schools. In 1930 nearly
16% of students were characterized as malnourished. By 1932 that fraction had
risen to 21%.
The cycle that developed through the interaction of these various levels of
institutionalized discrimination condemned black Harlemites to what Wacquant labels
structural economic marginality (2002, 48). He argues that the Harlem economy,
similar to that of any black American ghetto of this time, functioned as a city within
a city (2002, 48), completely decoupled (1999, 1642) from the fortunes of the
larger city, state, and national economy. As demonstrated by the continuing struggle
of the Harlem economy during the roaring twenties, economic growth simply did
not trickle down. Wacquant writes of the consequence of this decoupling:
...upswings in aggregate income and employment have little beneficial effect upon
life-chances in the neighborhoods of relegation... (1999, 1642).
The Illegitimate Economy
The existence and maintenance of an illegitimate economy, sociologists
suggest, is closely related to the performance of the legitimate economy. If the
35


officially sanctioned economy fails to provide an individual with a means to fulfill
welfare and independence values, then one will turn to illicit enterprises. Ivan
Light defines these businesses as an almost inevitable reaction by a group that faces
significant obstacles to conventional economic opportunity. In particular, Light cites
studies of low-income community lending patterns:
...successive studies of pawnbrokers and loan sharks have concluded
that poor people turn to high-priced lenders because they are unable to
obtain credit in cheaper institutions.. .the poor are making unwise,
destructive, or wasteful purchases, but circumstances rather than
improvidence necessitates the waste (893).
The salient feature of Lights argument is that circumstances are the driving
force behind the individual decision to enter the unconventional economy. Bad
decisions appear so only to those who were never forced to make such a decision by
virtue of a higher socioeconomic standing and, in particular, access to less usurious
lenders. Schatzberg similarly describes the motivation behind overwhelming black
participation in the unconventional economy citing Robert Mertons more general
notion that any deviant group, regardless of the nature of the metric by which
deviance is defined as a natural site for the invention of unconventional methods of
employment (Schatzberg, 6). Francis Ianni concurs, and suggests further that
organized crime can be viewed as a permanent feature of the American economic
landscape, one that successive groups of new immigrants have used as a means of
social mobility (280). He writes: Organized crime, (though illegal), is a function of
social and economic life in the United States, and it can also be viewed as falling on a
36


continuum that has the legitimate business world at the other end" (108). African-
American involvement in the illegal numbers is functionally similar to Irish, Italian,
or Puerto Rican immigrant participation in a number of illicit enterprises. Again the
driving force behind this development is the lack of access to mainstream opportunity
that the immigrant group must accept, and overcome, in order to achieve welfare and
independence.
Such a frame is ideal for the consideration of Harlems numbers industry.
While commonly associated in popular culture with organized criminal syndicates,
the origin of the numbers is far less shady, to use Myrdals term (330). Most of the
numbers kings and queens had no criminal record when they got started in the
business (Schatzberg, 3). While involvement in the numbers would quickly generate
a criminal record, often the criminal activity behind the popular perception of the
early numbers kings as gangsters was non-violent and only revenue-producing in
nature (Greenberg, 192). In fact, between 1931 and 1935, half of all black arrests in
Harlem were for simple possession of policy slips (Greenberg, 177). Additionally,
Greenberg suggests that high black crime rates were a product of discriminatory
prosecutors, who would prosecute blacks vigorously for minor offenses and quash
similar claims against whites (36).
It is important to avoid romanticizing the lives of the numbers racketeers.
They were, especially in later years, far from angelic in their behavior. Nevertheless,
the criminal nature of their background was largely made up of non-violent minor
37


violations, hardly the stuff of gangster lore. The numbers bankers of the 1920s and
early 30s were more businessmen than violent sociopaths. Myrdal writes:
Negroes have not usually been organized into gangs involved in all
kinds of criminal activities as have the white gangs; they tend to be
individual entrepreneurs usually in the gambling rackets and in
machine politics businesses which are illegal but tacitly accepted by
public opinion (331).
Ironically, it was to defend the numbers racket from a takeover bid by the
Irish Dutch Shultz mob in the mid 1930s that the black gangsters would
resort to more violent crime (Schatzberg, 19).
The first and most successful black numbers bankers in fact were drawn from
the entrepreneurial class (Schatzberg. 97), those dispirited by the bleak prospect of
the low-profit barber-shop. Their staff, if necessary, was recruited from family or
proximate neighborhoods (Schatzberg, 15). The signature innovation of these
individuals, in the context of gamblings more general history, was to apply business
principles to an industry that had been previously run in a much more ad-hoc manner
(Schatzberg, 47). Schatzberg cites a news article from the New York Daily news:
Another banker, Diamond, raided by police a few weeks ago, was
found to be operating systematically, applying modem business
principles to his methods. Latest model tabulating machines, expert
stenographer, typewriter, etc., made up his office equipment (47).
Ianni argues that black organized crime, of which the numbers racket was a subset,
exhibited a behavioral organization that was explicitly modeled after the small
business. He writes:
38


...(the) entrepreneurial model...is the model of the small businessman,
the individual entrepreneur, whose illegal activities are carried out
though a network of individuals related to him in that activity for
mutual profit. In many respects, these crime networks are similar or
identical to the kind of network that would coalesce around an
individual Black...who established his own small legitimate business
(299).
Indeed the numbers racket, particularly during the years before the Schultz
mob takeover, seems to have operated much more like a parallel financial institution,
and furthermore, one that was able to generate a significant level of employment. In
terms of employment, capital formation, and philanthropy, the numbers functioned
like a parallel government. Only the absence of any overt attempt by the numbers
racket to police the streets prevents this analogy of an alternative system from
being extended even further. Particularly when viewed against the backdrop of
Depression-Era Harlem, when the national economy ceased to provide any
meaningful opportunity for many African-American residents, the successes of the
numbers institution are startling.
As nationwide unemployment peaked at 25%, and in Harlem even higher at
35%, the numbers bankers were able to employ a large number of young black men
and women that otherwise would have had no work. Myrdal writes: ...the numbers
racket probably does give considerable amount of employment at decent pay. The
game gives employment to more than 4,000 people and maintains a weekly payroll of
$40,000 in salaries and commissions. No other business in the Negro community is
so large or so influential (332, 1269). Light goes so far as to suggest that the
39


numbers performed a function similar to the work-relief programs instituted by
President Franklin D. Roosevelt at the national level. However, even in cases where
the direct support of a friend is involved, blacks understand their numbers gambling
as a local form of work-relief (897). Not only did the numbers economy provide
work, but participation in the game was at least in some cases understood to be a self-
conscious attempt to keep young men and women employed. McKay writes: Most
people play with friends or relatives only. Sometimes a collector is a person out of
work, who picks up numbers from his friends. The friends get others to play and so
the person is helped collectively (113). Again, with reference only to the years
before the Schultz mob moved in, roughly 1935, numbers runners were tipped one
dime for every dollar they could sell (Haley and Malcolm X, 85). These tips could
add up fast given a hard days work, as Malcolm X could testify to, having spent $15
to $20 per day on gambling himself. Given that the median monthly wage for black
men in 1928 was only $65 (Greenberg, 22), the employment provided by the numbers
also provided wages that could simply not be matched by the legitimate sector.
Myrdal describes these runners as middlemen, who despite their low status in the
hierarchy of the numbers industry were nevertheless significantly more well-to-do
than their counterparts in the official economy. The numbers racket requires a great
number of middlemen who are small fry from the point of view of those at the top but
who are not only rich in relation to most members of the community but also lead a
free and easy, rather romantic and exciting life (331).
40


In addition to employment and relatively high wages, the numbers also
provided a vehicle for credit, in the form of investment capital from a big hit or
savings from a series of smaller hits. In an era when predominantly white-owned
banks viewed black skin as a legitimate reason to deny an entrepreneur a loan, the
possibility of winning $600 was a credible alternative for someone looking for startup
capital. Indeed, the numbers racket represented perhaps the very best opportunity in
Harlem for an individual looking to start a high-profit business. Schatzberg writes:
Ivan Light perceives the (numbers) racket in poor communities as a
financial institution.. .Mainstream financial institutions have never
been able to provide generally prevailing service levels in poor
communities. In the resulting partial-service vacuum, blacks invented
numbers gambling. Numbers-gambling banks became sources of
capital and a major savings device of urban black communities (127).
The notion that gambling could be a form of savings is indeed
counterintuitive, but is suggested by Lights argument that in fact the average
numbers player does not bet a full one dollar, and therefore cannot expect to win a
life-altering $600, even assuming the unlikely event that he or she has picked all three
numbers in their correct order. A significant portion of players, Light suggests, play
fifty cents on a regular basis, perhaps for years, with the hope not of starting a
business, but of simply putting away a few dollars that would otherwise be spent
immediately. He writes: Numbers games attract funds which would not otherwise
be saved in depository accounts (897). Light demonstrates that consistent play at
low levels can in fact reduce the long odds of winning to the point where expected
41


return can match the amount invested. Light gives the example of a hypothetical
player who bets 50 cents four times per week for ten years, a common profile of an
urban African-American numbers participant (Light, 897). This individual would
spend roughly $1000, and could reasonably expect Light argues, to hit the jackpot
at least once, if not several times. At $270 per jackpot $300 minus a ten percent tip
for the runner this individual would have to win only four times in ten years to have
successfully saved money, with interest. Light believes that numbers participants are
at least intuitively aware of this possibility. When asked specifically about their
motivation for playing, numbers players will ...vigorously disclaim betting for the
thrill, fun or sport of it. Numbers gamblers view the game as a rational economic
activity and characteristically refer to their numbers bets as investments (Light,
896).
The numbers institution was also in the business of providing consumer credit,
or short-term loans for everyday items, including participation in the game. Light
writes: ...numbers gambling banks make credit available to poor people who would
otherwise be unable to obtain it (Light, 898). Roughly 9% of numbers gamblers in
the New York City game of the 1960s and 70s reported borrowing money from a
numbers runner for purposes other than gambling (Light, 898). The fraction of those
who reported borrowing money to gamble is even more significant. Light found that
18% of numbers gamblers admitted to having placed bets on credit. In particular,
23% of regular players those who spent at least one dollar per day borrowed from
42


the numbers to play the numbers (898). Light compares the role of the numbers in
New York City to those of a credit union or a loan shark in other low-income
communities. In fact, he writes that often the loan shark and the numbers runner are
often the same individual, one who .. .simply transfers money from one pocket to
another when he changes roles (898).
In addition to providing jobs and credit, the numbers game was the primary
source of philanthropy in the desperately poor Harlem neighborhood. As previously
discussed, the numbers kings and queens made concerted efforts to ingratiate
themselves with the churches in their community. The brilliance of this political
calculation cannot be understated, for the church was the only institution capable of
inhibiting the spread of the game. The church was won over not simply with
contributions to its coffers, but with a much wider effort to subsidize all manner of
African-American community programs. The father of the Clearing House game,
Casper Holstein made the first of these efforts:
When [Holstein] rose to wealth and position contributing to Negro
education, donating annually a substantial literary prize, and taking hundreds of the
poorer Negro children up the Hudson each summer... (Schatzberg, 47-8). Daniel
Jackson, who was Chicagos equivalent of Casper Holstein, was also famously
generous with his profits. .. .Of course, these bosses make a lot of money, but while
Jackson was in control he donated thousands to charities, the N.A.A.C.P., working
girls homes and the like. While Jackson was in power the colored people always had
43


a friend to go to (Myrdal, 1267). The numbers kings and queens made an effort to
subsidize many charitable causes, from educational programs to political
organizations to service providers. The wide range of their giving in turn helped to
win the hearts and minds of the churches that were also intimately involved with
these efforts. In this fashion a partnership of sorts developed between the two most
powerful institutions in the black ghetto. The numbers became a very prodigious
fundraiser for the causes identified by the church to be in need of support.
44


CHAPTER 5
THE SYSTEM-MAINTENANCE FUNCTION
OF THE ILLEGAL NUMBERS
As previously discussed, both pre-Depression and Depression-Era Harlem
were characterized by economic conditions that forced an entire demographic into
relief programs. Given that the minimum budget for the period was roughly $87 per
month, and the median male African-American salary was only $65 per month, there
existed a significant gap between means and ends (Greenberg, 22,45). Given such a
shortfall, the notion that many of these individuals played the numbers regularly
indicates superficially irrational behavior. However, the fifty cents spent each day by
the Harlem resident, sometimes with relief money or with credit, can be perceived as
a rational exercise if the subjective value of the transaction is considered.12
Friedman and Savage argue that gambling is only irrational from an
exceedingly narrow perspective. If one is to consider an individual purchase of a
number by a Harlem resident, then certainly the miniscule odds of winning the grand
prize do not justify the expenditure of a dollar that could otherwise be saved.
12 Once again this investigation confronts a dichotomy of perspective on the numbers game. For a
middle-class American a dollar spent on the numbers can indeed be seen an irrational exercise.
However, it is irrational only because this individual has other more effective ways of fulfilling value
needs. For the resident of economically depressed Harlem, the absence of other realistic avenues lends
at the very least a modicum of rationality to games of chance. One individuals waste of money is
another individuals investment.
45


Friedman and Savage go further and state that even when considering the hierarchical
prize structure, and the higher odds of winning a lesser prize, that the transaction is
still irrational from a narrow consideration of strict monetary value. However, they
suggest that there are subjective rewards to gambling that combine to push the value
function higher than it would otherwise exist.
One of the subjective rewards of the Harlem numbers game was community
involvement, loosely defined here to be a horizontal interaction among members of a
dominated group. The value of community involvement in the numbers was more
than simple entertainment. Light suggests that, in particular during the 1930s and
1940s, when the numbers game was still a largely black phenomenon, participation
was an expression of nascent black nationalism (897). The widely known origins of
the numbers game in black-owned barbershops tied the fortunes of the game to the
fortunes of the larger black community. Additionally, the success of the numbers
institution as a vehicle for producing if only a few highly visible wealthy and
independent black men and women, irrevocably infused the game with a sense of
what Light describes as race pride (897).
For African-American citizens confined to the bottom tiers of the American
socioeconomic hierarchy, the numbers game was a way to subtly resist an unjust
condition. Theories of hegemony, notably those of Marx and Gramsci, assume a rigid
set of relationships between members of a vertical hierarchy (Scott, 46). The
dominant groups maintain such hegemony over the production of symbol and
46


discourse that the subordinate groups will come to view their lot as natural or
inevitable (Scott, 72). Appealing to the historical record, however, James Scott
suggests that models of false consciousness do not account for the fact that protest
by subordinate groups has in fact been a regular historical phenomenon. He does not
believe that subordinate groups are incapable of resistance, but that on occasion they
are forced to resist in private.
Scott would allow that the public transcript does not always reveal the sort
of resistance that would be expected given the level of frustration of subordinate
groups. Scott defines the public transcript as a self-portrait of the elites... a highly
partisan and individual narrative designed to affirm or naturalize the existing political
order (Scott, 18). It cannot, therefore, be expected to contain a full and accurate
portrayal of the actions and values of subordinate political groups. Scotts hidden
transcript is the space in which the missing resistance occurs (Scott, 37). This
resistance is essentially a collection of horizontal interactions among subordinates
that the elite would like to believe do not exist. (See below.)
47


**Adapted from Scott, 62.13
The central feature of the public transcript that necessitates the existence of
the hidden transcript is rage suppression (Scott, 39). Citing numerous historical
examples from English feudal society to the American antebellum South, Scott
describes subordinate groups subjected to public insult who nevertheless fail to object
in public. Scott goes so far as to argue that the subordinate individual develops two
personalities, one public and one private (Scott, 33). The first reacts to public 13
13
In a totalitarian fantasy, these lower-level horizontal links would indeed be stamped out
completely. However, such control requires a degree of surveillance that few societies can achieve.
Scott cites North Korean POW camps as one of the few places where such control may have been
approximated. He does not believe that such control was achieved even in the Soviet Union, and
therefore certainly would not argue that such control existed in the Depression Era United States.
48


humiliation with deference. The second reacts to public humiliation in private -
with indignation. Such private resistance, carried out in the presence of other
subordinates, can develop into a cultural project, an institution whose very function is
that of hidden resistance.
Furthermore, such projects may not appear to be forms of dissent to the
outsider. In fact, they are designed not to appear disagreeable, for they exist within a
political order in which the elite often react with great violence to the slightest sign of
protest. Using Scott's example of resistance disguised as millennial religion, these
cultural projects will simultaneously appear harmless to an outsider while serving as
an outlet for suppressed rage to the insider. The institution of the illegal numbers
game served just such a purpose in Harlem during the Great Depression. Perhaps this
feature is why participation in the game was so vigorously opposed by white
authorities. The persistence of the game, and its continued growth under such
constant pressure, however, is a testament to its value as an expression of black
solidarity.
The only real result of the arrests and investigations was to drive the practice
into hiding. This fact does not mean, however, that business was no longer
conducted in public. In fact, numbers runners did continue to operate in broad
daylight despite the best efforts of the state. The policing simply forced them to
adjust their methods. Malcolm X, during his days as a numbers runner, was
counseled by his mentor to never to write down a single number, quite a staggering
49


feat of memory considering the many three-digit numbers he would be responsible for
during any given day (Lee).
This practice is illustrative of what is really meant by the use of hidden or
private. The practice of numbers running was indeed hidden in the sense that it
could not be conducted in the presence of police, more specifically, those officers that
were not themselves on the payroll. However, given the limited resources of the non-
corrupt NYPD, numbers running could occur anywhere in the city where the police
could not maintain a constant presence. In other words, numbers running could occur
everywhere. One might even go so far as to say that mere police presence was not
enough to deter participation in the numbers. Particularly for those skilled runners
who needed no paper, an illegal numbers transaction could occur in the presence of
police for it could be easily masked as a normal conversation. The public
presentation of such an encounter was quite different from the private presentation.
Scotts definition of hidden resistance includes three stipulations: 1) Such
resistance is specific to a given set of actors and to a social site as well (Scott, 15).
Clearly the numbers institution, while not exclusively a black phenomenon, was
popular in Harlem to a far larger degree than anywhere else in New York City. It was
also so closely connected with other autonomous black institutions the church,
among others that it was irrevocably tied to the black community. 2) Not only
speech acts, but other practices as well can be considered hidden resistance (15). In
an environment where discrimination in employment, housing, and lending sectors
50


was so prevalent, the mere act of participating in an illegal activity, in quasi-public
fashion, can be included in Scotts categorization of resistance. 3) The frontier
between the public and hidden transcripts is itself a zone of constant conflict, as the
dominant and subordinate groups seek to enlarge their freedom of interaction (15).
The example described above of a numbers transaction occurring in the presence of
an NYPD officer is an example of an unspoken attempt by the subordinate class to
enlarge its discursive freedom of movement. The attempt to conduct numbers
running in broad daylight is itself a subtle form of resistance, an attempt to deny the
dominant groups criminalization of an activity that was vital to the health of
Harlems black community. These transactions were a form of resistance to white
domination during the decades preceding the overt resistance of the Civil Rights era.
They constitute horizontal interaction among subordinate groups that those at the top
of the pyramid would like to believe do not exist.
The element of fantasy that Scott includes in his description of hidden
resistance is also present in the numbers game. As mentioned earlier, Scott cites
millennial religions and their apocalyptic fantasies as a form of private resistance to
oppression. While the fantasy associated with numbers gaming is far less violent, it is
fantasy nonetheless. The odds against winning are significant, 1 in 1000 for a $600
51


hit on the Clearing House game.14 Nevertheless, the simple fact that the probability
of winning is .001, and not zero, is significant, and speaks to the element of fantasy
present in this environment.
At a glance, it would appear irrational to play the numbers, for one who bets a
dollar on a number is likely to lose the dollar (99% probability) and unlikely to win
$600 (less than 0.1% probability.) Freidman and Savage argue that gamblers, like
those who purchase insurance, will engage in behavior that is superficially irrational.
Gamblers will choose a large chance of a small loss plus a small chance of a big gain
over the chance to avoid both risks (897-899). There is indeed an element of fantasy
in the mind of one who believes that his number is the one out of one thousand
possible that will be picked that day. However, the fantastical nature of the belief
does not negate the impact that a real win would have. Especially in a neighborhood
with such little opportunity, $600 is indeed a life-altering sum of money. Such a
jackpot would, given the ability of the winner to capitalize a business or even perhaps
to start a numbers game of their own, lift them up several rungs on the socioeconomic
ladder.
Friedman and Savage argue that the life-altering nature of the jackpot makes
the purchase of a number more rational than it would appear at first glance. They
14 While it was stated previously that someone won every day, this more optimistic view is from the
perspective of the community. Given the vicarious nature of the act of winning, the community did
indeed win every day. However, from the perspective of an individual, the big hits were few and far
between, if they ever occurred at all.
52


essentially incorporate the value of the fantasy itself into the cost-benefit analysis
made by a prospective numbers participant. There is value in the fantasy that can
provide satisfaction enough to justify the use of a dollar on a one-in-one-thousand
opportunity. While the use of the word opportunity may seem misplaced, James
Clotfelter and Phillip Cook argue that such odds, to the layperson, represent more of
an opportunity than they would a lost cause to the mathematician (135). The
dream of winning is itself an opportunity to imagine a future in which the first will be
last and the last will be first. It is a future in which the black Harlemite will be driven
about in a car several times as expensive as the one driven by a New York police
officer. Particularly for those subordinate groups who have no other way to deal with
the aggression naturally generated by frustrated opportunity, a numbers bet is a
particularly inviting option. The fantastical jackpot is the functional equivalent of the
millenialist's apocalypse minus the fire and brimstone.
James Scott argues that such fantasy, a form of hidden resistance, has a great
deal of value to a subordinate group that has no realistic chance of mounting a more
forceful, public, and perhaps violent opposition. American history is one of
purportedly universal democracy and human rights for all. But this characterization
is simply inaccurate in light of the history of African-American citizens. Though no
longer slaves, this population was, in the inter-war period under investigation here,
confined to an extremely narrow range of opportunity. Despite the manifest
hypocrisy of the justification for second-class citizenship, the African-American
53


population was at this point still in the formative stages of political organizing.
Additionally, the revolutionary experience of black service in World War II had yet to
take place, and therefore the massive and very public political movements of the post-
war decades were not realistic options. More aggressive tactics armed rebellion -
were even further removed from the realm of possibility due to the tremendous gap
between white and black resources. Scott writes:
For social science attuned to the relatively open politics of liberal
democracies and to loud, headline-grabbing protests, demonstrations,
and rebellions, the circumspect struggle waged daily by subordinate
groups is, like infrared rays, beyond the visible end of the spectrum.
That it should be invisible, as we have seen, is in large part by design -
a tactical choice bom of prudent awareness of the balance of power
(183).
One alternative to armed rebellion or massive street demonstrations was, for
urban ghetto residents, the numbers. This institution not only served as the only
viable means of moving up the socioeconomic ladder, but additionally provided a
way to flout the imposition of a gambling taboo upon the black community by its
white masters. The ability of the Harlem community to conduct this business with
relative impunity created a safe means of rebellion. Scott writes: This view of the
safe expression of aggression against a dominant figure is that it serves as a substitute
- albeit a second-best substitute for the real thing: direct aggression. At best, it is of
little or no consequence; at worst it is an evasion (184). By providing a safe way to
protest, the numbers obviated the need for more direct, public, and violent protest
54


that, during a period when African-Americans were being lynched with some
regularity, would have had much more dire consequences.
55


CHAPTER 6
HISTORY AND EVOLUTION
OF THE MODERN LOTTERY
At 8pm on a warm midsummers night, Baerlocher watched a woman
dressed in green polyester pants and a yellow-and-white-striped short-
sleeved top play a slot machine he designed called The Price is
Right. At first, the womans body language was noncommittal: she
stood half-turned from the game, as if no more than mildly curious
about the outcome of her wager. Price is what slot pros call a
cherry dribbler, a machine that dispenses lots of small payouts while
it nibbles at your stash rather than biting off large chunks of it. You
want to give the newbie lots of positive reinforcement to keep em
playing, Baerlocher told me. As if on cue, the woman hit a couple of
small jackpots and took a seat. Gotcha, Baerlocher said softly under
his breath (Rivlin, 48).
While this interview was conducted with a designer of slot machines, an
altogether different form of gambling from the game under investigation here, the
thinking of this professional is quite relevant. It allows an insiders perspective of the
extremely deliberate structuring of modem games of chance. There are two salient
features: a low buy-in price and a hierarchy of decreasing but more frequent payouts.
These characteristics are used to amplify the fantasy associated with participation.
Rivlins vignette explicitly discusses the notion of semi-frequent but small payouts, a
tool also used by the designers of the illegal numbers game. Additionally, though the
buy-in for modem slot machines is very low, allowing green-polyester clad
working-class vacationers to participate in an activity that was once reserved for the
56


upper crust of society. Rivlin makes this statement more explicit later in his piece,
writing: Craps, blackjack and roulette which once defined organized gambling -
are going the way of tuxedos and diamonds inside the modern-day casino, where the
standard dress these days tends toward polyester athletic wear (Rivlin, 49). The
games have become less sophisticated, and the dress code has become less strict.
This trend is less a natural and spontaneous evolution of gambling behavior than it is
deliberate gambling behavior modification directed by those who control the modem
casino.
As previously discussed, the typical buy-in for the illegal numbers game was
one dollar, though one could certainly wager less. Together the low entry-level
wager and frequent hits made the illegal numbers a spectacularly successful
institution. The modem lottery similarly makes use of the two pillars of the modem
slot machine and the illegal numbers game. In fact, Maureen Pirog-Good and her
colleague John Mikasell found that in 1990 the most common wager on the new
Indiana state lottery was one dollar. (Nearly one fifth 19.9% of their respondents
wagered this amount) (49). As will be discussed further, the modem state lotteries
also make use of a hierarchical prize structure, commonly providing a grand prize -
an extremely high payout with very low odds of winning with several secondary
prizes of ever more modest payouts coupled with slightly higher odds of winning.
Friedman and Savage, in their work on individual risk analysis, describe the populist
game structure as a very general trend among different types of gambling.
57


The one general feature of lotteries that is worth noting in this
preliminary survey, in addition to the general willingness of people to
participate in them is the structure of prizes that seems to have
developed. Lotteries rarely have just a single prize equal to the total
sum to be paid out as prizes. The largest prize is ordinarily not very
much larger than the next largest, and often there is not one largest
prize but several of the same size (287).
The modem American state lotteries represent the culmination of two to three
hundred years of refinement of the populist gambling paradigm. The very first
American lottery, not coincidentally, developed in one of the very first European
colonies: Jamestown of 161215 (Schatzberg, 31). From this date forward, the
institution of the lottery would do battle with religious and secular authorities, as it
was believed, and is still believed by some, that gambling is morally objectionable.
In 1733, the colony of Rhode Island forbid participation in lotteries, arguing that such
behavior caused their citizens to spend wastefully (Schatzberg, 31).
However, while the religious authorities of the colonies would consistently
discourage gambling, the relationship of the secular authority to the institution of the
lottery was far more complicated. In a trend that will be readily recognized by the
modem American citizen, by 1744; all of the thirteen colonies had sanctioned lottery
participation as a means of gathering tax revenue. The political economy of this
period dictated the need for internal infrastructure and the lottery was viewed as an
effective way to raise funds for roads, bridges, and canals (Schatzberg, 32). Usually
15 Given the seemingly universal appeal of games of chance, I assume the Native Americans to have
engaged in gambling as well, but their activities are beyond the scope of this investigation.
58


a group of citizens would petition the state government for permission to set up a
lottery in order to satisfy a need for a religious or social improvement program that
could not be readily financed by voluntary donations or taxes (Schatzberg, 32). The
administration of this early form of state lottery, essentially a state-sanctioned raffle,
was extremely cumbersome and time-consuming, thereby limiting its potential as a
generator of revenue. The evolution of the lottery over the next centuries would not
drastically alter this basic format but instead would concentrate on simplifying and
accelerating the pace at which lotteries could be conducted. Illegally run lotteries
would follow a similar format, but would not be sanctioned by the state. The
simultaneous existence of legal and illegal games of chance is a consistent feature of
the American socio-political landscape. Depending upon the influence of religious-
minded citizens over state and federal government the lottery would alternately be
condemned as sin or accepted as a reliable stream of government revenue. The love-
hate relationship between lottery and state continued for the next three centuries, and
continues to this day.
The twentieth century witnessed a swing from one extreme to the other of the
aforementioned debate. Most recently, the argument has favored those who wish to
legalize, tax, and regulate certain games of chance. The revolt against general
taxation precipitated by small-government conservatives has been wildly successful
and has reduced the revenue available to states in every region. The level of
indebtedness of state governments has risen dramatically since 1980, the first year of
59


the Reagan Revolution and the beginning of subsequent reductions in federal
assistance to the states. In 1980, the total state debt amounted to $122 million. By
1985, that figure had increased to $212 million, by 1990 $318 million, 1995 $427
million, and by 2000 $548 million (United States Bureau of Census, No. 435).
States have turned to legal lotteries as one means of addressing their burgeoning
fiscal crises. Joseph McRary and Stephen Condrey write: Governments, in their
search for new revenue sources while holding the line on taxes, are relying more
frequently on legalized gambling, such as casinos, video poker, and state-run
lotteries (1).
60


CHAPTER 7
THE STRUCTURE OF THE MODERN LOTTERY
The simple definition of a lottery game, according to Charles Clotfelter and
Phillip Cook, is the opportunity to purchase a chance to win a prize whose
distribution is determined by a random drawing (51). Clotfelter and Cook further
identify four types of lottery formats that characterize the modem state-sponsored
game: passive drawings, instant-scratch games, (legal) numbers, and lotto (51).
Passive drawings are nothing more than raffles, and were the first format to be
sanctioned by the state, beginning with New Hampshire in 1964 (Clotfelter and Cook,
51). Tickets could be purchased for three dollars and drawings were held twice per
year. New York followed in 1967 with a passive drawing of its own. New Jersey
adopted a passive drawing in 1971, and drawings were held once per month
(Clotfelter and Cook, 52-4). Initially, all three of these games experienced relatively
poor sales. Only New Jerseys game was able to evolve into a money-making
operation.
The juxtaposition of the three early games is illustrative of a general trend in
modem American state lotteries. The New Hampshire game is a primitive one, not
altogether different from some of the earliest lotteries in Jamestown and other
American colonies. Its frequency of two drawings per year places a fairly low ceiling
61


on the amount of revenue the game is able to generate. Additionally, the high buy-in
($3) and low payout rate ($0.31) of this game combined to limit its appeal. The New
York game improved upon the New Hampshire model by lowering the buy-in ($1),
and increasing the frequency of drawings to one per month. Finally, New Jersey
further reduced the buy-in ($0.50), and introduced a computerized system and
modem marketing to the institution of the state lottery. New Jerseys was the first
state-sanctioned lottery to exhibit a growth in sales (Ciotfelter and Cook, 54). The
most important feature of this history is to note that one of two pillars of 20th century
democratized gambling the low buy-in is strictly adhered to.
However, the state-sanctioned passive drawing was a stepping stone to more
sophisticated formats, and though still in existence today, this format takes a backseat
to more recently perfected games. In the 1970s, a company named Scientific Games,
Inc. became the first to surmount the technical obstacles formerly preventing the
adoption of the instant-scratch game. This company developed a non-counterfeitable
ticket whose symbols could be covered with scratch-off vinyl (Ciotfelter and Cook,
54). This achievement would transform the state lottery industry, as instant-scratch
games proved to be extremely popular. Total lottery sales for the United States in
1980, as the scratch games were first being introduced, were $2.4 billion. Of that
figure, $527 million can be attributed to instant-scratch games, roughly 20% of the
market. By 1985, after the full implementation of the scratch format, total sales
reached $9 billion, a 275% increase. The latter half of the 1980s would witness total
62


sales jump from $9 billion to $20 billion, more than a 100% increase. During these
two periods, respectively, sales attributable to instant-scratch games increased from
$527 million in 1980 to $1.3 billion in 1985 and further to $5.2 billion in 1990. For
the decade, this expansion represents more than a 20-fold increase, or 2000% (United
States Bureau of Census, 291).
The popularity of this format was due to the privatization of the process by
which the games information was revealed. Assuming that the average player would
scratch from left to right, ticket producers developed the heart stopper. One
example of such a layout, demonstrated in the figure below, involved six symbols,
arranged in a 2 by 3 matrix. Two of the three necessary winning symbols would be
placed in the upper left and upper middle positions, in theory those that would be
revealed by the customer early in the scratching process. Therefore, the vast number
of losing tickets that would inevitably be produced by the ticket company could still
be infused with value. The lottery participant, blissfully unaware that he or she was
playing a losing ticket, could scratch off up to three additional symbols with the
knowledge that they were only one symbol away from winning.16
16 Such a tactic has an equivalent in the slot machine industry: the Wheel of Fortune. This slot
machine has a wheel that physically rotates, despite the fact that the calculation of the computer chip,
not the spinning of the wheel, actually determines the fate of the player. The physical artifact,
however, allows the player to see how close he or she has come to hitting the jackpot. Rivlin writes:
The presence of the wheel allows the slot machine to employ one of the most powerful feints in the
slot designers arsenal: the near miss (44).
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Figure 7.1
The Heart Stopper
Looking to further expand its market beyond that generated by the passive
drawing and the scratch game, the states looked to the illegal numbers game as a
reliable model. Given that the popularity of the numbers had survived concerted
attempts by the state to eradicate this game, the lottery institution sought to co-opt
some of the participants of the illegal game. Clotfelter and Cook write: Legal
numbers have become a mainstay of most of the largest state lotteries, particularly in
the Northeast. In format, payout rate, and even terminology these games are virtual
carbon copies of their illegal counterpart (56). The game devised by these states
mimicked the illegal game in every respect. Most states chose a 50% payout rate, or
500 to 1 payout on a straight bet (Clotfelter and Cook, 56). (As noted previously,
the illegal game actually paid 600 to 1 for a straight bet, a simple wager on three
numbers picked in the correct order.)
64


The most critical development of the modem American lottery, however, was
the implementation of the lotto format which together with the instant-scratch game
changed the face of institutionalized gambling. The growth of the lotto format
followed closely on the heels of the instant-scratch format. In 1980, lotto sales
contributed only $52 million to the $2.4 billion of total lottery sales of the United
States, 2% of the total. By 1985, however, lotto sales had risen to $3.6 billion, more
than one third of the national total of $9 billion. By 1990, lotto sales climbed to $8.6
billion, roughly 43% of the $20 billon total sales figure. The percentage increase in
lotto sales for the decade of the 1980s is a staggering 16,000%.
Primarily instituted in the early and mid 1980s, the popularity of the lotto can
be traced to the device of the accumulating grand prize. As readers are no doubt
aware, if no one wins the weekly and sometimes bi-weekly lotto drawing, the grand
prize increases, rather than remaining at a fixed sum. In the absence of a winner the
prize, therefore, can grow to hundreds of millions of dollars over the space of a few
short weeks. Not only does the enormous value of the prize generate participation,
but the changing usually growing value of the prize quickly becomes a
newsworthy event, particularly when the prize surpasses $100 million.
The brilliance of this scheme is that the structure of the game creates a
dramatic story in which everyone can participate, winners, non-winners, and even
non-participants. Lottery participants are, for obvious reasons, interested in the
current level of the grand prize. But the accumulating jackpot feature manages to
65


involve the losers of the game, for they can collectively help increase the grand prize.
The drama associated with a rapidly growing sum even involves non-participants, as
they are regularly informed of the current dollar amount of the prize by local
mainstream media outlets, billboards, and lunch-break conversations. Thus like the
Harlem numbers game, participation in the lottery is more accurately understood not
at the individual level, but at the communal level. In Harlem, part of the reason to bet
on a number was that your friend, next-door neighbor, and grocer bet and won last
week. The remarkable achievement of the lottery, though, has been to do on a
national level what the numbers game did in individual neighborhoods. It involves
winners, losers, non-participants, and even those who specifically avoid participation.
David Nibert labels this phenomenon the lottery culture (12).
Just like the numbers culture, lottery culture motivates individuals to join
based upon the perceived participation of their peers. Nibert cites the 1994 movie,
starring two of Hollywoods biggest stars, Nicholas Cage and Bridget Fonda, as an
example of the insinuation of this game into the collective American consciousness.
It Could Happen to You is a story of a waitress and a police officer two working-
class stiffs who split a grand prize. It is important to note that the numerous state
lottery institutions and officials around the nation probably did not make this happen.
They did not need to pay for the advertisement inherent in a feature-length film. By
1994 the lottery had become part of the background noise of American culture to the
degree that this film was an incurious reflection of an artifact whose existence was
66


already taken for granted. Nibert writes that the movie .reflects and perpetuates
the fantasy of having your life suddenly changed by winning millions of dollars (13).
The modem lottery, having evolved from New Hampshires primitive bi-
yearly passive drawing to todays bi-weekly state lotto drawings, clearly exhibits a
few noteworthy trends predicted by the previous analysis of the Harlem numbers
game. First, todays lottery games all utilize a hierarchical prize structure which
combines the allure of an enormous but unreachable prize with several significantly
smaller, but significantly more attainable, lesser jackpots. In the tradition of the
cherry dribbler slot machines of Las Vegas, these lesser prizes are designed to
provide players with positive reinforcement (Rivlin), in the absence of a grand
prize jackpot. Just as Harlemites could be rewarded for choosing one or two of three
correct numbers, modem day lotto participants are rewarded for partially correct
answers. Second, the buy-in of the lottery is kept very low, like the numbers, in order
to attract even the most destitute (Clotfelter and Cook, 51). The most explicit
example of this phenomenon is that the $1 ticket price was decided upon early in the
adoption of state lotteries, as early as 1967 in New York. However, despite the
inflation-induced decline in real value of one dollar, the buy-in for most state lotteries
has remained constant in absolute terms. Finally, the modem lottery has achieved a
level of communal participation unlike any other form of modem gambling with the
exception of the Harlem numbers game. These two games alone managed to become
67


a part of the everyday existence of nearly everyone within their respective universes
of participation.
68


CHAPTER 8
WHO PLAYS THE MODERN LOTTERY?
The masses that play the modem lottery exhibit certain patterns that indicate,
as with Harlems illegal numbers game, that participation is not uniform over all
demographics. The documentation of participation in the modem lottery has been
much more systematic than that of participation in the numbers. Social scientists
have conducted numerous studies to determine precisely the demographic
characteristics of those who play the lottery. Among these studies two metrics are
commonly used to define involvement: participation and expenditure.
One measure frequently used by the gaming industry is the
participation rate, that is, what percentage of the population has
purchased at least one ticket during a given time period. The other
measure is lottery expenditure, that is, how much individuals spend on
lottery play during a given time period, meaning the ticket price
multiplied by the number of tickets purchased (Pirog-Good and
Mikasell, 2).
Additionally, the latter measure, which will be referred to as absolute expenditure,
can be combined with annual income to produce a measure of relative expenditure.
This distinction will become critical with respect to income as a predictor of
participation.
Several factors have been investigated as possible predictors of lottery
participation, including time, sex, age, race, marital status, education, employment,
69


and income. The two most relevant variables for this investigation are education and
income. The role of education can be clearly and negatively correlated with both
participation and expenditure. Those with the least education play the most while
those with the most education play the least. ... when we examine the extent of
participation, it is clear that as educational achievement increases, lottery
participation tends to diminish... (Herring and Bledsoe, 5). This finding is
confirmed by Pirog-Good and Mikasell, who consistently find a 10% or greater
difference in likelihood of play between non-college graduates and college graduates.
In 1988, 14% of college graduates had participated in the lottery, while nearly 27% of
non-college graduates had played. In 1990, the difference was 31% to 52% in favor
of non-college graduates. By 1992, the discrepancy was 53% to 43%, again in favor
of the less educated (4). Joseph McCrary and Stephen Condrey also found lottery
participation to be inversely related to educational attainment. Education was also
related to the frequency of lottery play, in that those with fewer years of educational
attainment were more likely to play the lottery more frequently than those that have
gone to school beyond high-school (698).
When lottery play is measured by expenditure, education is similarly
negatively correlated. Those with less than a high-school diploma spent $225
annually. High-school graduates spent $154, while those with some post high-
school education spent $153 (Herring and Bledsoe, 6). College graduates or those
with graduate degrees spent only $93. As a percentage of income, the negative
70


correlation is even more striking. Those without high-school diplomas spent 1.28%
of their annual income, those with diplomas spent 0.60%, those with some college
0.53%, and those with a college degree spent 0.25% (Herring and Bledsoe, 6). This
relationship between education and lottery expenditure is confirmed by Joseph
McCrary and Stephen Condreys study of the Georgia state lottery. They write: The
primary findings of this study pertaining to lottery play corroborate results found in
earlier studies; lottery play is inversely related to education... (698).
Income also influences lottery play, but does so differently for participation
and expenditure. Generally, those with the lowest-income participate less than their
higher-earning counterparts. Specifically, Pirog-Good and Mikasell found that in
1992, 42% of those earning less than $15,000 annually participated in the state
lottery. Those earning $15,000 to $25,000 played at a similar rate 43%. Over half
- 53.6% of those in the next highest $10,000 interval played, while 57.6% of those
earning $35,000-$45,000 participated. The last was the highest participating income
category studied by Pirog-Good and Mikasell. Still, over half 55% of those
queried who earned over $50,000 annually bought tickets (Pirog-Good and Mikasell,
4). Herring and Bledsoe found a similar pattern. The percentage of those playing
steadily increases from 71% of those earning less than $10,000 annually, to 73% for
those earning $10,000-$20,000, 78% of those earning $20,000 -$50,000, and a high
value of 83% of those earning $50,000 to $70,000. Participation then dips slightly for
those earning more than $70,000 per year (6). Thus participation, loosely measured
71


by purchase of a lottery ticket at least once in the past year, rises along with income
until one considers the highest earning classes.
Expenditure, by contrast, exhibits a strong negative correlation with income,
similar to the association between education and lottery play. However, this negative
correlation is evident only when relative expenditure is considered. The influence of
the absolute-expenditure variable is far less clear. Two studies, Herring and Bledsoe
of 1994 and Earl Survey Research of 2004, find a roughly similar pattern of data,
though the more recent information seems to indicate that monthly expenditure has
increased over the last decade. (See tables below).
Table 8.1**
Herring and Bledsoe Absolute Expenditure by
Income (1994)
Income Monthly Expenditure Yearly Expenditure
Less $10,000 $11.58 $139
$10,000-19,999 $14.00 $168
$20,000-49,999 $12.00 $144
$50,000-69,999 $10.58 $127
$70,000+ $11.58 $139
Table 8.2** Earl Survey Absolute Expenditure by Income (2004)
Income Monthly Expenditure Yearly Expenditure
Less than $20,000 $76.50 $918.00
$20,000-29,000 $106.04 $1,272.48
$30,000-39,000 $79.32 $951.84
$40,000-49,000 $112.11 $1,345.32
$50,000-59,000 $39.24 $470.88
$60,000-75,000 $34.37 $412.44
$76,000-100,000 $28.96 $347.52
$100,000+ $71.42 $857.04
**Table 8.1 adapted from Herring and Bledsoe; Table 8.2 adapted from Earl
Survey Research Laboratory.
The Herring and Bledsoe study finds expenditure to be roughly constant. All
individuals, regardless of income, spend in the same $40 dollar range per year $127-
168. This range translates into even smaller variation in spending per month.
72


Notably, the very poor and the very rich spend the same average amount. While the
Earl Survey Research Laboratory study finds much greater absolute levels of
spending for all income categories, in this data the habits of the very poor and very
rich are also similar. However, the more recent survey finds a noticeable difference
in spending around the $50,000 threshold. Average monthly spending for those
earning below $50,000 is nearly $100, while average spending for those earning
above $50,000 but less than $100,000 is slightly more than $34.17
Another more recent investigation into lottery expenditure by Melissa
Kearney reveals somewhat higher expenditure per household on lottery tickets than
the previously-cited data suggests. Kearney finds that in 2003, the roughly $20
billion in lottery ticket revenue translated into an average expenditure of $212 per
adult living in a lottery state, and $372 per household nationwide (16). (This figure
represents $31 of monthly lottery' expenditure, and recent reports indicate that even
that figure may be rising. A recent Texas survey done in 2004 indicated that average
monthly expenditure had reached $44 (Gilbert, 1, Earl Survey Research Laboratory,
17 The Earl Survey Research Laboratory survey takes great pains to indicate that there were twelve
outliers in their survey, individuals who reported extremely large amounts of spending well outside
of the rest of the data. When these outliers are excluded, the monthly expenditure, by income level,
drops significantly. Those earning less than $20,000 spend $48.74 per month. The next highest
income categories, in order from least to greatest, spend $60.33, $64.33, $57.95, $39.24, $34.37,
$28.96, and $58.12, respectively. Despite the significant drop in most categories, there is still a
significant drop in spending above the $50,000 threshold. (It is also relevant to note that the twelve
outliers, all big spenders, reported having received less than a full high-school education) (Earl Survey
Research Laboratory, 4,8).
73


5), or $528.)18 Among African-American participants in the Kearney study who
claimed to have played at least once in 2002, average yearly expenditure was $476
(18).19
In terms of annual income there exists a stark negative correlation. For the
income categories described above, the relative expenditure drops from 1.51% to
0.84% to 0.42% to 0.24% to 0.18% (Herring and Bledsoe, 6). Herring and Bledsoe
write: ...It is when participation is measured as a percentage of income spent on
lottery tickets that the regressive trend becomes evident (Herring and Bledsoe, 5).
Notably, each successively higher income group spends roughly half, in relative
terms, as the next lowest-earning category. McCrary and Condreys findings support
this assertion, as they also demonstrated that lottery play was regressive, in that
those from the lowest-income categories spent a larger proportion of their income on
lottery tickets than those from higher income categories (699). Along with generally
higher expenditure figures, Kearneys data supports this notion as well, indicating
18 The $44 dollar figure does not include the effect of 12 of the 1,255 respondents to this survey who
admitted spending thousands of dollars per month on lottery tickets. When the spending habits of
these hard-core players are included in the analysis, the average monthly expenditure for this study
increases to $76 (Gilbert, 2).
19
The interesting addition Kearney makes to the lottery debate is an analysis of the impact of
household lottery expenditure upon non-gambling spending. (She) finds that household lottery
spending is financed entirely by reduction in non-gambling expenditure (Kearney, 20). Specifically,
Kearney finds that household non-gambling expenditure dips by $46 per month after the introduction
of a state lottery, a reduction of 2.4% (20).
74


that absolute spending is constant and relative spending inversely correlated with
rising income (18).
It is also important to note that the data cited above from the Pirog-Good and
Mikasell included both participants and non-participants. When one shrinks the
universe of these studies to lottery participants only, the negative correlation
discussed above becomes only more pronounced. Again, the authors are considering
relative expenditure on the upper Midwest lotteries from 1988 to 1992 for those
earning less than $15,000 and those earning more than $50,000 per year. Low-
income participants spent 3.26% of their take-home in 1988 while higher income
earners spent only 1.12%. In 1990, the gap temporarily shrinks: 2.57% to 1.09%.
However, by 1992, the difference between the poor and middle class players widens
sharply: 4.21 % to 0.94% (Pirog-Good and Mikasell, 7). As with the previous sample
set, the expenditure of the lowest-income players increases significantly over the
four-years under investigation, while the expenditure of the highest earners remains
constant.
The above data indicate that although lottery-playing is not confined to one
geographic area, as was numbers gambling, it is similarly concentrated among groups
with certain demographic characteristics. While the rich and well educated do indeed
play the lottery, they do so less frequently, and with less money, than do their poor
and uneducated counterparts. Such a difference in playing habits would seem to
suggest differing motivations for playing at all. The occasional player who buys a
75


ticket because he or she is moved by impulse at the cash register is quite far removed
from the habitual player who buys three tickets each week and always chooses the
same number, as if following a quasi-rational investment strategy. It is the latter
player that is the subject of this thesis, as their play cannot be so easily dismissed as
harmless. Greater insight into the motivation of the poor and uneducated lottery
player can be found by an investigation into the economic prospects faced by this
individual in 21st century America.
76


CHAPTER 9
THE ECONOMIC STATUS
OF MODERN LOTTERY PLAYERS
The most salient feature of the political economy of lottery-playing America
in the late 20th century is the stagnating wage. Bruce Western and Kieran Healy write
of the resulting declining purchasing power as part of a more general trend among
industrialized democracies that can be correlated with the decline of the labor union
as an effective bargaining tool (1). Comparing real wage growth in eighteen
industrialized democracies, Western and Healy find that workers in the United States,
from 1965 to 1^93, experienced only a 0.01% increase, second lowest in the entire
survey, above New Zealand. They write: ...by the 1980s and 1990s hourly wage
rates in the United States were falling by almost one percent annually (1). They
write: ...wage slowdown of 1980s and 1990s can be traced to labors declining
institutional position in the advanced capitalist labor markets (10). In the United
States and more conservative European nations, governments indifferent or overtly
hostile to labor have created an environment in which the union cannot protect a
workers wages from the harm caused by inflation.
In particular, Western and Healy focus on the percentage of the workforce that
is unionized as a measure of the wage-protection capability of collective bargaining
77


institutions (8). In the United States, union membership has dropped precipitously in
recent decades. In 1983, 20% of the American workforce was union members, while
23% were covered by a local union. By 1999, only 14% were union members and
15% covered by a union (United States Bureau of Census, No. 712). By 2003, the
decline continued, as only 12.9% of the American workforce was still unionized
(United States Bureau of Labor Statistics, 1).
Declining union membership has led to an increasing inability of workers to
influence their contracts of employment. Though not the only measure of union
strength, the number of work stoppages per year in the United States has declined
significantly along with union membership, indicating that unions no longer feel
confident in their ability to ultimately say no to a bad contract. As measured in
intensity by number of days idle, work stoppages peaked in 1970 at nearly 53
million. Throughout the 1970s, workers were collectively idle anywhere from 16
million to 31 million days per year. After Ronald Reagans dramatic action against
the air traffic controllers, the days idle measure dipped below 10 million for the
first time on record. With periodic upsurges, the general trend was downward, with
the 1990s witnessing a peak of only 6 million and a low of 2 million days idle per
year (United States Bureau of Census, No. 711).
Stagnating wages are particularly concentrated among the less-unionized
sectors of the workforce, and among a particular demographic: the least educated.
Perhaps the stagnating wages of low-wage earners would be less of a burden if these
78


individuals were able to jump easily from the sinking ship of the New Deal Era
middle-class manufacturing sector. However, the middle-class wage sectors of the
new economy, those experiencing at least modest wage growth, are in the financial
sector and therefore require a significant level of education. Lerman couches this
trend in terms of a larger shift taking place in the U.S. economy over recent decades.
The new jobs replacing the disappearing blue-collar positions require higher skills
and therefore more education. He writes:
Jobs in professional, technical, and managerial occupations, for
example, rose from 1 in 6 workers in 1950 to about 1 in 3 in 1995.
Over the most recent U.S. business cycle (1989-1995), an amazing 75
percent of the 7 million new jobs were in professional specialties or
managerial occupations. Not only are jobs moving toward high-skill
occupations, but skill demands are apparently increasing in other
occupations as well (1).
However, as previously demonstrated, education is one characteristic that is
strikingly deficient in lottery-playing America. For those hoping to abandon
stagnating wages, an educational deficit can be a crippling burden. Lerman argues
that in post-industrial America, any move to a higher-earning job is largely and
increasingly predicated upon educational attainment. Michael Mumper makes an
explicit measurement of this link between earnings and education. (See table next
page).
79


Table 9.1** Median Household Income by Educational Attainment of Households (2000) Educational Attainment Median Income ($)
Less than 9th grade 17,994
9th-12th grade, No Diploma 23,305
High-school Graduate 37.545
Associate's Degree 51,911
Bachelor's Degree 68,475
Master's Degree 80,516
Professional Degree 102,791
** Table 2, Mumper, 100.
The stark correlation between education and income could not be more
apparent. Quite simply, more education means more income. The Mumper data is
particularly telling for it illustrates the tremendous value of a diploma, high-school or
college. A high-school diploma increases median income by roughly $14,000, a
relative jump of more than 50%. The education pay gap or the difference in earning
potential between high-school and four-year-college graduates is approximately
$31,000, nearly 50%. Lerman found a similar gap in earnings: For example, the
differential in average earnings between workers with a college degree and workers
with only a high-school degree expanded from 33 percent to 50 percent over the
1979-1995 period (1).
Not only do high-school and college graduates begin from different earnings
categories, but the rate of change of these wages is similarly determined by
80


educational attainment. Lerman demonstrates this phenomenon quantitatively in his
study of wage changes from 1984 to 1995. While breaking down wage growth by
race and sex in addition to education, Lerman found a consistent result in white males
and females, as well as black females. Those with the least education saw wages
decline, stagnate, or grow only modestly. Those with more education generally
experienced wage growth, increasingly robust with higher attainment levels.
Those with no high-school diploma fared the worst over the decade under discussion.
(See table below).
Table 9.2** Trends in Real and Relative Wage Rates by Education, Race, and Sex: 1984-1995 Percent Change in Real Wages
High-school Dropout High-school Graduate Some College College Grad or Post-Graduate
White Male -4.9% -1.5% -1.8% 8.6%
Black Male 6.9 14.8 6.1 8.5
White Female 0 11.2 10.7 18.4
Black Female 10.5 11 12.9 19.3
**Adapted from Lerman, Table 2.
Though Lerman does not distinguish between four-year and two-year
programs, his results suggest that, at a minimum, one must complete high-school to
ensure growing wages in the present United States economy. However, white males,
a significant portion of this economy, still experienced real wage decline with a high-
school diploma. A college degree seems to be the only way one can guarantee wage
increases across the demographic spectrum. The simple answer, then, is to suggest
that everyone attend a post-secondary program of some sort in order to guard against
81


>yr\
future wage stagnation or decline. However, for the lowest-income families ,
college tuition is becoming increasingly out of reach. In a study of Southern post-
secondary colleges, Joseph Marks finds unbridgeable gaps between income and the
costs of the all-important college degree. In absolute terms and as adjusted for
inflation, four-year college tuitions in the United States have increased dramatically,
an average of $3400, or 16.8% (Marks. 4). These absolute increases have caused
college tuition to eat up an increasing share of low-income family budgets. At public
four-year colleges in 2002, the families of students spent nearly 30% of their income,
whereas in 1997 these families spent only 26%. The gap between income and tuition
has driven the majority of new students onto the financial-aid rolls. Marks writes:
Large percentages of first-time college students now rely on student financial aid.
More than 75 percent of students nationally now rely on student financial aid. Ten
years ago the figure was more like 55 percent (Marks, 10). Michael Mumper writes
of the particular burden these circumstances place upon low-income families:
Beginning in the 1980s, a series of forces comprised to make access to public
higher education more difficult for low-income and disadvantaged students
[including] rising tuition [and] changes in the federal student aid programs... (97).
Tuition hikes, increasing reliance on financial aid, and cuts in federal grant
programs all add up to put postsecondary education further and further out of reach 20
20 In the Marks study that follows, low-income families will be defined as the lowest fifth of family
incomes (Marks, 9).
82


for low-wage-eaming families. This education, however, is the main vehicle out of
the lower class in the current post-industrial economy. The inevitable result of this
environment a society that demands education to move upwards but allows that
education to become unaffordable is the development of a permanent underclass.
Income and education are closely related phenomena, with causation flowing in both
directions. The low-wages of a father make college unaffordable for the daughter.
Low educational attainment in turn guarantees the daughter low-wages and similarly
precludes college for the grandson.
The above numbers indicate that, similar to their numbers-playing
counterparts confined to the racial ghetto of Harlem, lottery players largely come
from a class of individuals confined to a ghetto that is much harder to see, but no
less real in terms of its ability to preclude opportunity. Loic Wacquant defines the
term ghetto as ...the formation of a segmented, parallel, socio-spatial reality
serving the dual purpose of exploitation and ostracisation of a bounded ethnoracial
category... (Urban Marginality in the Coming Millennium, 1644). Depression-era
Harlem provides an excellent example of Wacquants ghetto. African-American
Harlemites were confined to a very specific geographic area whose boundaries only
rigidified with time. In addition to these individuals being confined to a physical
location, they were largely confined in the conventional economy to the lowest
socioeconomic class.
83


Wacquants definition of the ghetto, while certainly applicable to the racial
ghettos of urban America, comes in a discussion of what he terms the new urban
marginality (1639). The advanced marginality (1640) of 21st century America is
in part the result of the development of two distinctly separate and parallel universes
of employment. One consists of highly skilled positions for university trained
professionals and technical staff (1641) whose opportunities multiply with each
passing year. The other consists of disappearing low-skill jobs often filled by
temporary workers who receive no benefits of any kind. Wacquant argues that both a
quantitative and qualitative shift have occurred in the latter universe to reduce both
the number of jobs available and the quality of life that the remaining jobs provide.
He writes:
The new urban marginality is the by-product of a double
transformation of the sphere of work. The one is quantitative and
entails the elimination of millions of low-skilled jobs under the
combined press of automation and foreign labour competition. The
other is qualitative, involving the degradation and dispersion of basic
conditions of employment, remuneration and social insurance for
virtually all but the most protected workers (1642).
The goal of the preceding chapter has been to demonstrate the existence of a
virtual ghetto whose residents, while not confined geographically, are nevertheless
living in a world that is increasingly disconnected from that of the more educated.
This virtual ghetto of low-skill, low-wage, de-unionized temporary work is not
populated exclusively by one ethnic or racial group, and therefore does not precisely
fit Wacquants definition of a ghetto. However, the socioeconomic fortunes of low-
84


wage America have largely been decoupled (1642) Wacquant argues, from the
fluctuations of the larger economy. Furthermore, the decline of the prospects of low-
skill America occurs at a time when the national economy is experiencing capricious
but sturdy growth that has brought about spectacular material betterment for the
privileged... (1641). The detachment between the rising fortunes of the university-
trained professional and the sinking fortunes of the high-school diplomate reflect the
development of a 21st century ghetto, one that does not determine membership on the
basis of skin color, but on the basis of the ability to afford postsecondary education.21
From the perspective of this investigation, the salient feature of Wacquants ghetto is
not the racial differences that define the neighborhoods boundary, but the separate
and parallel nature of the relationship between the ghetto and the outside world. As
previously discussed, Harlems view of the roaring twenties was quite different
from that of white America. While the New York Stock Exchange celebrated,
Harlemites endured, facing poverty that persisted despite the growth of the national
economy. The 21st century ghetto of the uneducated exhibits this decoupling from the
21
Hiring practices in 21st century America are nominally democratic. Employers are not
permitted to discriminate on the basis of race, sex, age, income, or any other arbitrary characteristic of
prospective workers. However, employers are permitted to discriminate on the basis of skill or
education. This discrimination is viewed as just because it ensures that jobs requiring special skills are
staffed with appropriately educated individuals. Such discrimination therefore places a premium on
education, particularly post-secondary education, as demonstrated previously. Post-secondary
education, however, discriminates on the basis of income. Students of high-income families simply
have far more opportunity than do those of low-income families. For some low earners, post-
secondary education is not even an option because of ever-increasing college tuition. If access to
education is not universal, and if that education is a prerequisite for many jobs in post-industrial
America, then it is fair to say that there exists a significant level of employment discrimination albeit
indirect on the basis of income.
85


national economy and therefore increasing permanence, and is therefore functionally
similar to Depression-era Harlem. Wacquant writes: ..(poverty) now appears to be
increasingly long-term if not permanent, disconnected from macroeconomic
trends... (1640).
86


CHAPTER 10
WHY PLAY THE MODERN LOTTERY?
The existence of persistent or inheritable poverty would do serious damage to
the myth of American meritocracy. Increasing inequality of wealth is sustainable
only if those at the very bottom feel that they have the opportunity to move up. While
there is no shortage of opportunity for the university-trained professional at the top of
Wacquants hierarchy, for those at the bottom of the dual occupational structure
(1640), the legitimate economy provides precious little hope. The lottery, essentially
an institutionalized form of numbers gambling, exists in this vacuum to provide a
perceived opportunity in an environment in which very few real opportunities exist.
The perceived opportunity of the lottery dovetails nicely with the myth of American
social mobility, for a winning lottery ticket is perhaps the ultimate rags-to-riches
success story. Not only does it support the notion that anyone can make it in America
but it does so in a uniquely democratic way. Through the lottery, wealth and status
are potentially available to anyone with a dollar regardless of education or income.
Further, its riches can be attained with the simple act of scratching a ticket or picking
a sequence of numbers.
There is some evidence to suggest that some lottery participants play the game
precisely because of its potential for otherwise unattainable social mobility. The
l
87


notion that some might play as a means of making money seems improbable at best,
as the odds of winning a significant sum of money are extremely small. However,
just as Harlem numbers players referred to their digits as investments, modem
lottery players also perceive financial gain in their game of choice. The simple fact
that the probability of winning is not zero induces a significant portion of lottery
participants to view the enterprise as a money-maker. Garrick Blalock, David Just,
and Daniel Simon make the quintessential^ American analogy to a football play -
the hail-mary as a means of describing the attitude of some lottery players
towards their tickets: .consumers, especially those in dire economic
circumstances, see lotteries as a convenient and accessible tool for radically altering
their standard of living, a government-run, financial hail-mary strategy (3). The
analogy is quite useful as it aptly describes the over-weighted influence one
successful play has among numerous other failures. While 99 out of 100 hail mary
passes fail, the one that succeeds becomes a story that is passed down from
generation to generation, thereby inflating the perceived probabilistic value of the
strategy.
This faint possibility seems to explain the apparently irrational nature of the
purchase of the one-dollar lottery ticket, a transaction whose expected value -
roughly fifty cents (Blalock, Just and Simon, 7) is just over half the input value. On
the surface it would seem that an individual who purchases a ticket is deliberately
throwing away fifty cents. As previously discussed, Friedman and Savage decry the
88


preceding analysis as overly simplistic, arguing that there are subjective values that
intercede to make the expected value of the purchase higher than it would appear to
one considering only the financial aspects of the transaction. In addition to that of
Friedman and Savage, there are three additional theories that attempt to explain
lottery participation. One such theory posits that cognitive biases and lack of
information lead lottery participants to misconceive their odds of winning, and
therefore inflate the expected value of their purchase. (Blalock, Just and Simon, 8)
According to this hypothesis individuals put too much faith in the one possible
chance of winning a game whose odds favor a loss by 1,000,000 to 1 odds.
Simultaneously, individuals discount the 999,999 possible chances of losing.
Effectively, the one chance of winning is infused with probabilistic value it should
not have; when compared side by side with one of the 999,999 ways to lose the game,
the winning possibility becomes more likely than the losing possibility, a clear
cognitive distortion.22 Another, Daniel Kahneman and Amos Tverskys prospect
theory, claims that individuals make decisions on the basis of their future prospects
with an eye to a reference level of wealth that they would like to achieve or
maintain (Kahneman and Tversky, 263). Prospect Theory is based upon the notion
that individuals underemphasize the pleasure of financial gains, while
22 While much of the research behind this thesis focused elsewhere, there are many who suggest that
these cognitive distortions are not necessarily inherent to the human mind, but created and nurtured,
deliberately so, by the lottery industry. The marketing appendage of the institution carefully amplifies
the example of the rare winner through TV, radio, and newspapers, and studiously ignores the far more
likely example of the lottery loser.
!
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overemphasizing the pain from financial losses (Blalock, Just and Simon, 11). This
bias in turn leads to risk-averse behavior when satisfactory wealth has been achieved
and risk-seeking behavior when that reference level of wealth is absent. Kahneman
and Tversky label this phenomenon the reflection effect, arguing that positive
prospects will induce individuals to choose certainty over risk, while negative
prospects will induce individuals to choose risk over certainty (Kahneman and
Tversky, 268.) Blalock, Just and Simon interpret Prospect Theory, as applied to the
purchase of a lottery ticket, to suggest a desperation hypothesis (4). They argue
that those falling down the socioeconomic ladder are the most likely to play the
lottery due to overemphasis of financial pain, rather than because of cognitive
misperceptions or misunderstanding of mathematical probability. They write:
Thus, increasing distance between current wealth and reference wealth
can lead an individual to play a lottery they otherwise would not. If an
individual falls below the poverty line, he will be more likely to play
the lottery until he either returns to his reference wealth, or adjusts his
reference wealth downward (13).
Blalock, Just, and Simon support their conclusion with the observation that
the primary demographic behind the fluctuation in lottery sales is .. .those in the
upper end of poverty (20) In their study, for every 1 % increase in the poverty rate, a
corresponding rise of $2.44 in lottery purchases per capita ensued (16). When the
effect of those just under the poverty line is separated from the desperately poor, the
evidence is even more striking. Again, when the overall poverty rate increased by
1%, those in the top 50% of the impoverished increased their lottery purchases, per
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capita, by $3.18, while those in the bottom 50% of the poor increased purchases by
only $0.55 (Blalock, Just and Simon, 30) Those above the poverty line were not
found to increase their lottery purchases by any statistically significant amount. By
way of explanation, the authors argue that the desperation hypothesis does not
apply to those earning middle-or upper-income salaries (17).
Middle-and upper-income participants seem to play for a much different
reason, labeled by Blalock and colleagues as the entertainment hypothesis (3). The
increase in lottery purchases of the newly poor, though significant from a statistical
perspective, nevertheless amounts to only a few dollars, and thus it has been
suggested (Kearney, 2002) that such a small absolute expenditure is more indicative
of an entertainment expense rather than a desperate ploy to make money. This
explanation for lottery purchases is also taken up by Clotfelter and Cook, who note
that, for reasons they are unable to explain, the lottery enjoys significantly greater
market penetration than all other similarly priced forms of entertainment (73). They
cite one Arizona study that found 50% of its respondents to have played in the last
year, and roughly one third to have played regularly (73). Building from Clotfelter
and Cooks suspicions, Miyazaki and colleagues compare their data on lottery-sales
increases to the fluctuation of movie-ticket sales for those recently slipping below the
poverty line. They argue that since lottery tickets function as an inferior good sales
rise as income declines then movie tickets should function similarly if the newly
poor are really reacting to their downturn in prospects by seeking more entertainment.
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However, the authors found poverty to have no statistically significant effect upon
movie sales. Movie tickets function as a normal good their sales rise as income
rises, and decline as income declines irrespective of an individuals level of wealth
(18). By inference, the authors then argue that lottery tickets do not function purely
as entertainment and that they must provide something akin to hope for those who
have become newly impoverished.
Hoping to buttress their claim that the lottery is a money-making strategy of
the desperate, Blalock, Just, and Simon then cite two surveys that specifically ask
lottery participants why they chose to play. Among all respondents to a California
survey, roughly 50% cited entertainment, and 50% cited making money as the
primary motivation. However, when income is taken into consideration, the two
competing motivations are revealed to be concentrated among certain demographics.
Among those who earned less than $30,000 per year, making money beat
entertainment by 25% (Blalock, Just and Simon, 3). A study by Anthony Miyazaki,
Jeff Langenderfer, and David Sprott also supports the primacy of the money-
making motivation. They found that 46% of their respondents purchased a ticket to
make money, 18% were impulse buyers who listed convenience as a primary
motivation, while only 10% played the lottery for enjoyment (8). Similar findings
were reported by a Consumer Federation of America Survey that asked respondents
to identify what strategy they thought would be most likely to help them obtain half a
million dollars in their lifetime. Among all respondents, 47% listed save and invest
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as their favored strategy, while 27% cited win the lottery. Among those earning
between $15,000 and $25,000, responses were practically inverted 45% cited win
the lottery while 31% answered save and invest (Blalock, Just and Simon, 3).
These results seem to indicate that the desperation hypothesis and the
entertainment hypothesis are both credible theories about why individuals play the
lottery. However, each theory is accurate for a specific income demographic.
Miyazaki and his colleagues suggest that motivations to purchase differ for the rich
and poor. While middle-and upper-income demographics may indeed play the lottery
for fun, the poor view the purchase primarily as a money-making opportunity. They
write: Players with lower incomes were more likely to cite money than fun, whereas
the reverse was true for players with higher incomes, suggesting that winning may be
a stronger motivational factor for lower-income consumers (4).
Each discussion of why individuals play the lottery that has been presented in
this paper includes the basic notion that there is much more to the value of a
purchased lottery ticket than expected financial reward. In addition to a very small
chance of winning a very large sum of money, lottery players get social value from
participation in a community-wide news item that they can expect to see on local TV.
They gain entertainment or enjoyment out of the processes of selecting their number
or scratching the ticket, or discussing their purchase with the convenience-store
vendor. And some get hope, an incalculable value of participation that is specifically
nurtured by the gaming establishment with it could happen to you stories (Nibert,
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