We find that lottery tax windfalls finance higher state-government expenditures on supplemental security income that increase consumption, but only during bust periods. Wealth transfers from lottery winners to low income households enable fiscal policy to stabilize consumption during bust periods.

How should countries defend against committed terrorists who attack until defeated? We identify a fundamental non-convexity--one only needs to defeat the terrorist once. Consequently, provided a country values targets similarly, it should conceal defenses and allocate defense resources randomly.