Lottery Loopholes and Deadly Doctors

Our Freakonomics Radio project includes a regular podcast and Marketplace segment. But twice a year, we also produce a set of five one-hour specials that play on public-radio stations across the country. Find a station near you.

Season 2, Episode 5

Americans have a famously low savings rate: a Harvard survey found that half of us, if faced with an emergency, couldn’t come up with $2,000 in 30 days. Most people would rather spend than save — and one of our favorite expenditures is playing the lottery. Last year, we spent more than $58 billion on lottery tickets, or roughly $200 per person. As entertainment goes, the lottery is pretty cheap – a dollar and a dream, and all that. But as an investment, it offers a dreadful return, which is why the lottery is sometimes called “a tax on stupid people.”

This episode looks at a little-known financial initiative that might help people save money while giving them the thrill of the lottery. It’s called a Prize-Linked Savings (PLS) account, and it pools a sliver of the interest from all depositors and pays out cash lottery prizes. If you don’t win, you still have your savings – thus, a “no-lose lottery.” In places like the U.K. and South Africa, millions of people have been coaxed into saving money via a PLS plan. But state and federal officials in the U.S. aren’t very interested. Why? Here’s a hint: guess who runs (and profits from) the lotteries in our country?

Also in this episode, we take a broader look at financial literacy – or, really, financial illiteracy. In general, Americans aren’t very good at the basics of saving, investing and retirement planning. So we want to know: How do we improve our grade?  We’ll hear from one scholar who wants to put financial literacy in the schools and another who thinks that’d be a waste of time. Guests also include two members of President Obama’s economic team and National Book Award-winner Sherwin Nuland.

And if education isn’t the route to financial literacy, maybe we can learn something from how one Los Angeles hospital solved the problem of its doctors failing to wash their hands.


I'm interested to hear what people think of these schemes. My father has invested in Premium Bonds for my son, because it is "a bit of fun". We have elected to reinvest any winnings.

Melanie Eiger

I found the new one hour specials on the WNYC web site.

Last year, I was able to download the one hour specials as podcasts. However, this time, I unable to find anything to click on to either download or listen. Can this be done?


As I listened to the debate between the two experts on individual financial education vs experts advising the public, it occurred to me that this show (and others) are a form of financial education for those who choose to engage with it. As for educating everyone, I agree with one of the guests that it's just not realistic to expect that to happen, if only because of individual aptitude and interest much less the resources to provide that education. But I think there's a middle ground, just as there is in other areas, health care, automotive repair, house construction, etc., etc. Those who have the motivation get enough education to make informed decisions and to be active participants in directing the experts in their work. Others prefer to just "trust" the experts and when they do wrong, pursue punishment, compensation or whatever. There will always need to be a role for regulation and legal recourse. That's just human nature that unless there's some sort of oversight, there will be abuse and taking advantage of others. So I think we already have the answer to which way to go... both ways!


James Blackburn

I LOVED the Lottery Loopholes/Save to Win piece! Since I don't play the lottery but DO need a more attractive savings incentive, this idea really makes sense! I was enormously disappointed with the indifference voiced by the gentleman from the treasury dept. I noticed he favored "other avenues" of reaching the same goal, yet he didn't mention a single example. To him I say, "A good idea today is better than a great idea tomorrow." The lazy treasury dept. notwithstanding, I, for one, hope to see a "Save to Win" type program become available in my state!
James Blackburn
Portland, Oregon