RALEIGH – Is North Carolina’s state lottery going to be a low-key education-finance agency for state government or a popular, high-grossing gambling business? For years, advocates for state-run lotto in the General Assembly argued for the former vision, promising to avoid the deceptive advertising and marketing abuses alleged in other states. In this year’s bill, ultimately successful, they spelled it out explicitly in the form of advertising restrictions.

But the restrictions won’t last. And neither, I predict, will attempts to hire a state lottery director at a salary that won’t scandalize the rest of state government.

The reason is simple. Lotteries are gambling enterprises, not charities or tax departments. Their success is inevitably tied to the effective use of advertising and other marketing techniques, as well as to the employment of talented, entrepreneurial individuals and compensating them on the basis of performance, not time served.

Rebecca Paul represents the upper bound of the range, to be sure, but her case is still instructive. As David Rice reported in the Winston-Salem Journal, Paul has been involved in three lottery start-ups in the Southeast: Florida, Georgia, and Tennessee. In her first year in the Volunteer State, she brought in a $350,000 base salary plus incentives that boost her pay over $700,000.

Paul is unapologetic. On the pay of prospective lottery directors in North Carolina, she is not an advocate of restraint. “”I would suggest not being penny wise and pound foolish,” she told members of the state’s new lottery commission. “Fifty thousand more, or $100,000 more, if it brings in $30 million, is a pretty easy decision to make.” She also reminded them that lottery tickets compete for discretionary dollars with other impulse buys in convenience stores and supermarkets, including snacks, beverages, and trinkets.

The thing is, my impulse here is to agree with Rebecca Paul. It is penny wise and pound foolish not to pay enough to attract the person most likely to maximize revenue in a billion-dollar business. That’s one justification – the sanctity of the right to contract being another – why government should butt out of private-sector decisions on executive compensation, or worker compensation for that matter.

I also must admit that, over time, running a North Carolina lottery without substantial advertising is an effort doomed to failure, or at least to mediocre “success.” Advertising is a critical means by which buyers and sellers exchange important information about what is desired, when, and at what price. Advertising also drives innovation up and prices down. Yeah, I’ve got to come out on the side of advertising – and when I say I’ve got to, I’m not kidding.

So the problem with the North Carolina lottery is not the potential for a big payday for whomever gets hired as the director. The problem is not the potential for advertising. The problem is that the lottery will be a unit of state government, where such compensation is inappropriate and aggressive advertising essentially forces the citizens of the state – forces you and me – into the role of gambling salesman.

Let’s just say I am less than wildly enthusiastic about the prospect.

Hood is president of the John Locke Foundation.