MILTON FRIEDMAN AND L J. SAVAGE losses against which he carries insurance. It seems highly unlikely that there is a That is, he is paying something to escape sharp dichotomy between the individuals who purchase insurance and those who The empirical evidence for the willing- gamble. It seems much more likely that ness of individuals to purchase lottery. willing to. We can cite no direct evidence many do both or, at any rate, would be tickets, or engage in similar forms of gambling, is also extensive. Many gov. for this asserted fact, though indirect evi- ernments find, and more governments dence and casual observation give us con have found, lotteries an effective means siderable confidence that it is correct. It of raising revenue I7 Though illegal, the validity is suggested by the extensiveness numbers"game and similar forms of of both gambling and the purchase of in gambling are reported to flourish in the surance. It is also suggested by some of ed States, 8 particularly among the the available evidence on how people in- lower income class vest their funds. The widespread legisla- tion against "bucket shops certain alternative with a higher expected value that relatively poor people must have For example, special life-insurance policies pur- stocks of a"blue-sky"variety. Yet the hased to cover a single railroad or airplane trip are bulk of the property income of the lower han a means of achieving certainty. (5)Even aside income classes consists of interest and from these qualifications, actual purchase of insur- rents and relatively little of dividends ince would give at best a lower limit to the number whereas the reverse is true for the upper These qualifications ofi et one another thigh. income classes. 9 Rents and interest are some types of receipts that tend to be derived from investments with relatively little ed by the evidence cited that a large fraction of risk, and so correspond to the purchase ole in all income classes are willing to buy insur- of insurance, whereas investment in spe examples, currently conduct lotteries he but three chase of lottery ticke ds to the pur- ulative stocks corresp ublic. Great Britain conducted lotteries from 1694 same person both to buy insurance and thereafter, both directly by state governments and mium, in the one case to avoid risk, in under state charters granted to further specific the other. to bear risk. And indeed it tory of lotteries in Great Britain see C. L'Estrange wou ld be inconsistent for a person to be New York State, A. F. Ross, "History of Lotteries in much value. Since most legal wagering is 1907). There seem to be no direct estimates of the track, gambling is available only to those who go to fraction of the people who purchase tickets in state watch the races and is combined with participation or other legal lotteries, and it is clear that such in the mechanics of the game of chance figures would be difficult to get from data obtained 19 Delaware I ncome Statistics, Vol. I (Bureau of ith running the Economic and B from legal lotteries, and casual impressions of ob- Delaware, 1941, Table r; Minnesota Incomes, 1938- relevant units (families or income recipients) purchase tickets ely, individual Table 27; FAHanna,J.APechman,SM.Lerner Analysis of wisconsin Income(Studies in Income Evidence from wagering on horse races, where and Wealth, "Vol. IX (National Bureau of Eco- this has been legalized, is too ambiguous to be of nomic Research, 1948)), Part Il, Table I