how does someone winning the lottery not ruin the economy?


how does someone winning the lottery not ruin the economy?

In: Economics


The money won comes from the people who purchase lottery tickets. Because of this, it’s just money that gets moved from one point to another. Money that would hurt the economy would be if the government prints more money so instead of money being moved, it is created thus diluting its value.

1. The economy is huge. The US’s GDP is around 19 TRILLION. The largest lottery jackpot in history was 1.5 billion, or 1/12,666th of the GDP of the country. Most jackpots are worth a fraction of that.

2. This money isn’t just printed out of nowhere. Money that goes into the lottery system is put in a fund that’s used for payouts. So it’s not functionally different than a business saving up $1.5 billion dollars and then spending it all at once on say, building a new building or buying another company.

The largest lottery jackpots are a few hundred million dollars, and the vast majority of them are smaller, which just isn’t large enough to affect the economy as a whole. The US economy produces about $58 billion per day, or about $2.4 billion per hour, so even a $500 million jackpot win is the value of about 12 minutes of the US economy’s production. It’s a drop in the bucket.

A lottery win can disrupt a local area, though. In a relatively small town, the sudden injection of tens or hundreds of millions of dollars can cause all sorts of weird things to happen with land values and whatnot, as well as a host of social issues. That’s a pretty localized phenomenon, though.

Wouldn’t a better question be how would it ruin the economy? I just don’t understand why you think it would.