I am a mathematician, and at the same time I can't resist the temptation to purchase the occasional lottery ticket. What most people miss about the lottery is that there can be utility to variance - the opposite of ennui.
Have you guys read The Lottery in Babylon
I gain happiness also from the miniscule hope of the life-altering outcome of winning the lottery.
That gain in happiness is occasionally worth the price of a lottery ticket.
But the odds are on a completely different level of impossibility in lottery that I just cant really get your end of the argument :/
If I were poorer, I suspect the happiness I gained from the lottery ticket purchases would be even greater.
If I already owned a home, on the other hand, I would value the lottery ticket hopes much lower.
Buying a lottery ticket from time to te, when the prize was big, made us live in a fantasy world between the time we bought it and when te results were announced. I think this thing - imagining a life without financial worries, lavish vacations and expensive toys, motivated me to learn more, try to launch a few startups and sacrifice my free time in order to try and achieve greatness.
Were those money well spent? Definitely yes (even though I haven't actually won the lottery)
Tbh lottery tickets can be a pretty cheap form of hope relative to other forms of gambling. Take a look at some of RobinHood's customers who are ”investing”. The odds seemed so favorable until they realized 95% of traders lose their money.
I'm not an expert, but seems to me this feeling is also the main driver leading to gambling addiction, which ultimately leads to addicts saying things like "It's not about the money, but the game itself", after having lost a ton of money.
Wonder if Yotta can lead to the same addiction, and if so if it is then solely applied for positive objectives (i.e. saving money), or lowers the barrier to entry for other gambling schemes that are less beneficial.
I own my home. It's an objectively bad investment (my tech stocks sure appreciated more than a home I bought in 2008 before the crash :) But I like the feeling that comes with owning a home.
I go out for dinner. (Well, used to). It's objectively a waste of time and money, but I still like the feeling that comes with it.
I play guitar. There's no EV attached to it (in fact, people might pay me to stop ;) but there's still an emotional payoff.
The same goes for the lottery. For some people, there's entertainment value in it, despite understanding the mathematics of it. If you've ever played poker for money - unless you're exceptionally good, you paid money to sit around a table in a smoky room. EV is negative, emotional experience is a lot of fun. (Yeah, poker isn't entirely chance, but I promise that unless you're pretty good at it and spent a lot of time learning, it's pretty much equivalent)
A lottery that doesn't have a winner sounds rotten and I don't think you'd eat rotten food from a restaurant, no matter how much you accept that inherent EV of the transaction is negative. There are many, many more words that can and have been written about the psychology of lotteries, but suffice to say, for many lottery players, it's not as simple as "I know that the EV < 1, I'm just playing for the entertainment value".
https://www.theatlantic.com/business/archive/2016/02/how-mit...
Will definitely check out The Lottery in Babylon!
Actually even then, it wouldn't make sense to hold your e-fund in a volatile asset.
- The Garden of Forking Paths - Pierre Menard, Author of the Quixote - The Lottery in Babylon - The Library of Babel - Funes the Memorious - The Secret Miracle - Three Versions of Judas - Death and the Compass
You will not regret it. :)
The way I understood the work of von Neumann and Morgenstern on game theory, there is an extensive discussion of utility and the derived ordering on preferences.
I interpret recent work on behavioral economics as building on their work to call into question the claim that one can easily estimate such a utility function for an economic agent in a manner invariant to the internal state of that agent.
This train of thought seems like it should leave laissez faire capitalism in the dust.
Is there any reasonably accessible literature on this topic, in particular the latter idea of not being able to estimate an agent’s utility function?
1. Von Neumann and Morgenstern's book (particular the sections where they develop the notion of utility) is pretty readable - https://www.goodreads.com/book/show/483055.Theory_of_Games_a...
2. The Economic Naturalist (https://www.goodreads.com/book/show/629238.The_Economic_Natu...). It is a great compilation of economic edge cases which show that the notion of utility is not so easy to capture using the standard "narrowly self-interested economic agents" world view. It requires a lot of subjective interpretation.
3. The Honest Truth about Dishonesty (https://en.wikipedia.org/wiki/The_Honest_Truth_about_Dishone...). Shows how contextually dependent utility (if it is at all quantifiable) can be.
4. The body of work around the Iterated Prisoner's Dilemma: (https://en.wikipedia.org/wiki/Prisoner%27s_dilemma#The_itera...). In particular we can see how the dynamics of simulations using rational agents diverge from the dynamics of experiments involving actual humans. This suggests that the utility assumptions used in economic analyses do not reflect whatever notion of utility that could actually apply to human behavior.
utility is neat in theory, but seems to be messy in practice. it's one thing to spell out the relationship, but another to calculate an analytic solution (from my limited mathematical experience, navier-stokes comes to mind in this regard).