Dear Economist

Lottery

Dear Economist,

For fun, I always sign up for a lottery syndicate at my retirement home. Imagine my surprise when the syndicate won the roll-over jackpot. I now have a windfall of several hundred thousand pounds and, aged 88, I really have no need for the money. I would like to do something with it that will be of some wider benefit. Can you please advise?
— Edward Bowman, Torbay

Dear Mr Bowman,
Congratulations on your good fortune, your good nature, and your good sense. You’re wise to think carefully about how to make sure your money helps others. Some people in your position set up charitable trusts, but the sad truth is that it’s very expensive to pay administrators to make sure that the money is well spent. A far better approach is simply to burn the money. This will mean that the pound is suddenly in shorter supply, driving down prices in the shops. There are about £40bn in circulation. If you destroy £600,000, this will make each of the others buy about 0.002 per cent more – effectively, a gift of about a penny to each person in Britain.

Perhaps you feel that this is spreading a finite resource too thinly, and you might instead spend the money providing a so-called “public good”, which is costly to produce but cannot be used up through over-consumption. The most obvious public good is information on the internet, so you could use the money to fund a website that provides valuable information as a free service.

Your only problem will be deciding what information should be provided. You might consider paying for a weekly column – something educational and fun, which deserves to be read more widely. The answer is right in front of your nose.

First published at ft.com.

4th of September, 2004Dear Economist • Comments off