I can't think of any single act of government that creates more inequality than the lottery—at least per dollar raised and spent. Think about it. Thousands of (mostly below-average income) people buy tickets and, after the drawing, one of them becomes immensely wealthy. As far as I can tell, the single largest winner in the United States at $315 million was Jack Whittaker, a West Virginia businessman who was already well off when he won!
I can’t think of anything in the private sector that even begins to compare to this reverse Robin Hood redistribution from the poor to the rich and the nouveau riche. And remember, in order to pull it off, government first has to establish a monopoly, keeping private competitors (who would at least raise the poor bettor's expected return) out of the market.
If you really care about the ethics of income distribution , a lottery has wonderful heuristic value. For example, if you’re the kind of person who thinks that rich people don’t deserve their riches, that their wealth is the result of good fortune and chance, or that income is somehow collectively rather than individually generated—that is, if you are inclined to believe that life itself is one big lottery—then in your search for genuine unfairness, a real live lottery winner is hard to beat.
After all, the lottery winner didn’t do anything special. He did what everybody else did: he bought a ticket. His immense winnings are by definition the result of good luck and random chance. He surely did nothing to warrant, merit or deserve his wealth. Unlike in the economy, the winner's winnings really are made possible by the losers' losses. The lottery's rich get rich precisely because the lottery's poor become poorer.
So here’s the question of the day: When is the last time a liberal friend or acquaintance of yours complained about the lottery? When’s the last time The New York Times complained? Or The New Republic? Or Mother Jones?
I believe that the vast majority of people in the world do not care about inequality. People who buy lottery tickets are among them. When is the last time you heard of lottery ticket buyers supporting a tax on lottery winners with the proceeds given to the losers?
I also believe that most middle income folks do not care about it either and do not support blatant redistribution. I know that requires an explanation, so I will be brief.