So, I had thought I had done a post on lottery math, wherein I demonstrated that lotteries were stupid mostly. But I seem not to have, or at least I can't find it. That's a shame, because while almost always, the math works out that the lottery is unwise (maybe the Mega-Millions lottery is +EV when Jackpot > $200M, but not much lower, and may have to hit $300M before it gets clearly +$EV)
On the other hand, there are 2 other ideas that should be brought in here.
Some folks say that lotteries are not actually games about winning. What you're buying with a lottery ticket is the dream of millions. Since we naturally suck at probabilistic math, we think there's a real chance (as opposed to a pretend [infinitessimal, but pretend sounds so much better] chance) of winning big. This illusion allows many happy dreams that are purchased with the $1 ticket. Thus, one should not treat Lotteries as probabilistic mistakes...one should just not be so silly as to think that $EV is what's being bought.
The other idea is thtat there are discontinuous utility values for $. 1 dollar is worth ... a cup of coffee at 7-11. A lottery win ($100K/Month for 30 years) means you NEVER have to work again in your life. The incommensurable values people would say: It is worth MORE than $300M cups of coffee to never have to work again. Indeed...no quantity of cups of coffee, cars, houses, etc. could make up for that. So people place the lottery win in a different category. In math terms: (-1 Coffee x 99.99999999999%) + (Not working again * 0.00000000001%) is positive in a way that winning $50000 isn't.
The theory doesn't hold up well under investigation, but it's a nice think.
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2 comments:
I buy a $1 ticket perhaps once a year, if I go into a convenience store that shows a jackpot over $100 million. I think the "buying the dream" reason is the applicable and best reason for this sort of buying. (Of course, spending significant sums on lottery tickets is irrational regardless of what it does for one's dreams.)
I don't mean I spend a lot of time in some fantasy where I win -- it's not monetary pornography. I mean I give it enough thought that it helps put me in touch with what I "really" want. For example, if I won $100 million, I think I would move a couple towns over into a more expensive house in a more expensive town (allowing shorter commutes, but not larger or fancier house), but I know I have no desire to leave the basically exurban college town area (Northern Berkshires) I moved to 3 years ago, to go back to the suburbs of Boston. I might found a prep school (ending any dilemma about where to send my children after the 9th grade). I don't know I would be aware of these desires if I didn't have a plausible scenario like the lottery for how I would suddenly have so much economic freedom, and perhaps I would be less satisfied with where I am. (I know that I don't feel deprived living where I do, and not founding a prep school.)
DW,
Thanks for coming by, and for the first-hand on the topic. It's nice to see that my quick thinks are not entirely bogus.
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