Why We Keep Playing the Lottery
nautil.us
nautil.us
Hooray, we're figuring out all of the tricks to push people into "thinking myopically" and buying what we want them to buy.
Here are the triggers; here's how people make mistakes in buying decisions, and how to exploit that. Here's how to frame your sell (Get them to focus on loss! Remind them of their poverty!), here's how to get them to buy more tickets instead of just one.
Lottery tickets aren't too bad; they're harmless for most people buying them, there's a fun little kick of "what if...?", but (as the article points out) as revenue for the state, they are a regressive tax; poor people pay a much larger percentage of their income into lottery schemes than people who are better off, and of course some of them pay enough to really harm themselves, going for the "Hail Mary" solution to their money woes but just bleeding themselves slowly instead.
Winning isn't actually a positive result, either -- the article doesn't get into stats on attempted suicide, etc. for lottery winners, but they're not good.
Is there anyone out there using this kind of research to actually help people? Or to let people who're just playing a fun game, play it; but still protect the people who are grabbing at a false life preserver?
They'd have to sort it carefully enough that it wouldn't be a loophole for abuse (e.g., if you win, could you be hired by a major corporation who will somehow funnel their entire worldwide revenue though you?), and to be sure a Zuck-level taxpayer doesn't win it, but then that'd be a huge motivation for people who do pay taxes to get their paperwork together in time.
Of course, simplifying US tax law would be even better -- "filing your tax" return could be trivial for most people, but it isn't -- but that's proved a hard nut to crack.
http://www.kornferryinstitute.com/briefings-magazine/summer-...
"Swedish National Society for Road Safety created a “speed camera lottery” in Stockholm. At select traffic spots, drivers would see a digital display of their speed, as measured by radar, and a camera would snap a picture of their license plate. If they were over the speed limit, they got a ticket in the mail. However, drivers who were at or under the limit were automatically entered into a lottery to win money at the end of each month. The amount of money depended on the speeders – their fines went into the prize fund. The results were impressive. Over three days (24,857 cars photographed), the average car’s drive-by speed went down from 32 kilometers an hour to 25 – a 22 percent reduction."
http://en.wikipedia.org/wiki/Nudge_(book)
There are savings accounts structured as lotteries which have been shown to shift expenditure from lotteries to savings:
http://marginalrevolution.com/marginalrevolution/2014/09/cra...
Indeed. My favorite quote on the subject "Lotteries are a tax on the uneducated to pay for education" (I do not recall the source)
“It’s not an investment. It’s entertainment. For a very small amount of money you might change your life. For $2 you can spend the day dreaming about what you would do with half a billion dollars—half a billion dollars!”
You're not making a bet with negative expected value, you're purchasing an entertaining daydream to help you through your miserable day.
If someone established a reality TV version of something like The Millionaire [http://en.wikipedia.org/wiki/The_Millionaire_(TV_series)] then I bet people would start having that sort of daydream. Perhaps such a show would even lead to a decline in lottery ticket purchases, since the get-rich daydream would be available from another source.
In your scenario there would be a passive trigger that would dull the entertainment affect.
I wouldn't discount the little piece of paper with numbers on it.
So it could be signalling that you're not "puttin on airs" by acting superior to those around you who play. Or it could be signalling that you legitimately like to belong to the group around you who play. Or it could be simply signalling that you don't take yourself (or $2) that seriously.
edit: http://www.scribd.com/doc/14945786/Lottery-Demographics
The negative expected value in dollars is enough by itself, but the "how happy will I be?" calculations are even more depressingly bad. The utility of money is usually measured on a log scale, because your first thousand dollars does a lot more for your happiness than your first ten thousand. By that measure going from ten thousand dollars in the bank to ten million wouldn't make you a thousand times happier, it would make you twice as happy. At least until you get used to it (see: Hedonic treadmill [1]). There's a surprising number of bankruptcies caused by lottery winniners, too [1]. Also the whole stressed friendship thing.
So... yeah, playing the lottery gets you negative respect from me and I think that's justified.
1: http://en.wikipedia.org/wiki/Hedonic_treadmill 2: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324845##
I think it's more likely the latter, though I don't personally see the entertainment value of playing the lottery. I wouldn't lose respect for someone for having a hobby I don't share or understand, though.
And I'm tired of people telling me that it's irrational to play the lottery, it isn't.
That's a funny way to put it. Exchanging money for entertainment has been a common and accepted practice for a very long time. Technically, when you buy something you lose the money, but it's weird to highlight the losing part over the buying part.
Pro-tip: When a telemarketer calls saying "We've got a great offer to save you money on your snarfleblarg bills!" just tell them you enjoy you enjoy spending as much money as possible on your snarfleblarg. It goes so far off their script that i've never had one of them provide a decent response to it. At which point you hang up.
I'm curious if the stereotypical old person wasn't spending a day a month at the casino, would they be drinking more? Sitting around not talking to anyone? Abusing drugs?
We also need to consider the reality of the situation... Is the lotto makin s material impact. People have vices... Sports betting is illegal in most places in the United States, but sports betting is pervasive.
Of course, there are worse things in life than being irrational, and a variety of human beings' irrational instincts form incredibly useful heuristics for long-term value maximization (on both individual and societal levels) which might otherwise be difficult to attain, given the limitations of the rational brain: love, patriotism, et cetera.
It sounds like the unpredictability of the results is something you value, perhaps because it's exciting. That's a pretty irrational thing to value, but not intrinsically harmful in small doses; people put down money for plenty of ridiculous forms of entertainment.
But you could own up to it. :b
It's not irrational if you're playing for fun.
The $10 that I spent on PowerBall tickets provided me with much more enjoyment than the $10 that I spent to see The Blair Witch Project.
It can be irrational if you're playing for fun!
I think there's some kind of a mistaken association between irrationality and "goodness" - like anything irrational is not good. That is what you are trying to argue against!
I fully concede that some people play because they think they're going to win. They had a dream or some charlatan has convinced them that this is their lucky day to play. That kind of thinking is not rational.
People like me, exchange money for entertainment. It's no different than paying to see a movie or to listen to a streaming music service.
It's entertainment, not investment and it's not irrational.
Actually, economists assume that most people are not pursuing to maximize money, but to maximize their utility function instead. Granted, they also assume that most people are risk-averse as opposed to risk-loving, i.e. most would not risk 1 for a 50% chance of winning 2.0001. On the other hand, the economics of the lottery are such that the amount you pay (even if you play every day for your whole life) is quite negligible compared to all the money you will earn during your life; if you win, you will practically maximize the utility of a few very important things in life (earning more, and working less). I think it's rational to play the lottery.
But since you're a human being, I'm fairly confident that your utility function is sublinear (has a shallower slope the more you have). Playing for variance doesn't make sense in this case.
http://lesswrong.com/lw/hm/new_improved_lottery/
In fact, as mentioned, why not just keep an eye out for winning lottery tickets on the ground? Because you have an ~epsilon chance of getting a winning lottery ticket, and you also have an ~epsilon chance of finding a winning lottery ticket on the ground.
I get that. When I play poker for 5 hours and come out even at the end of the night or slightly behind, I consider it worthwhile because I had fun for 5 hours.
In lottery, we pay to increase the variance of the money we win.
They state in the article: You will have to plunk down your $2 at least 86 million times. Williams...could have simply said the odds of winning ... were 1 in 175 million
It might cost you > $172MM, but aren't the odds 1 in 86 million? Or am I being obtuse?
> To get your chance of winning down to a coin toss, or 50 percent
If it takes 86 million tickets to get a 50% chance of winning, the odds per ticket must be somewhat worse than 1 in 86 million.
When I hear that people act irrationally when it comes to probability, I feel like it should be replaced with the assertion that people tend to act irrationally when they have not been trained to think methodically in a particular situation or because of circumstances rely on primitive approximations. The first assertion sounds like an immutable property of human nature, when it is more of a cultural and educational issue.
If I'm picking something to eat, however, there's definitely an emotional component in addition to the nutrition. I won't just optimize for nutrition. Maybe I'm just the same as the lottery ticket people, but I have different priorities. An emotional attachment to making rational decisions maybe. If that's the case, could a person override irrational emotions with more powerful emotional impulses toward rationality? It would come back to a cultural issue in that case.
If you are not reading a formal thesis, you should not interpret statements formally. Doing so will only lead to a lifetime of frustration. The author probably agrees with you. The vast majority of the audience probably understands that the author is simply being brief and does not have the "audience attention span" budget to more formally describe the assertion that you take issue with.
My interpretation of the author's intent with the statement "humans can't handle large numbers" is "Large numbers of humans have been presented with large numbers of problems involving large numbers. In practice, the vast majority of them fail. Thus, humanity at large does not handle large numbers well." I.e. "humans" refers to the current mass of humanity, not the theoretical possibilities of an individual.
For a second there I thought the article was about one of the below:
- Starbucks
- BMW
- A diamond ring
- iPhone
I don't really understand the point of this article. Is he trying to expose the "morons" who play the lottery for being just that? Maybe the $2 or so bucks means nothing to people playing. Maybe the excitement of the lead-up to the drawing and the checking of the numbers is more fun than $2 in my pocket. You can barely even buy a soda with $2 now.
If those jackpots swell over $200M, betting $1 to win against 1:175M odds is a good bet. If I could bet $1 to win $15 and I had a 1 in 10 chance of winning, I'd do it every time.
In the end, the lottery funds go towards the city/state, and usually education. It's a fun form of charity.
What am I missing here? $2x86 million gives me a 50% chance of getting $590 million? 172 < 295!
- you also have to account for the highly likely probability that the jackpot will be split between multiple winners.
- even after that accounting, lotteries do sometimes have an expected value higher than the ticket price. The expected value of purchasing N tickets for the N lotteries that led up to and include the big lottery is still the standard 40-50%, but the N-1 previous paid out much less than expected, so the one with the big jackpot pays out more than expected.
* sharing the winning number with someone else
* do you buy every single ticket or enough to "virtually guarantee" a win? (and the fewer tickets you buy, the more risky it becomes)
* the logistics of purchasing that many tickets
Anyway. I'd love to see someone make a go of doing this "professionally", but when you have 172 million or more, the incentive isn't really there anymore.
Normally lottery tickets aren't tax deductible because of the 'reasonable expectation' test.
I guess it's not fun for the regular players (who are the bread and butter of the lotteries) if a syndicate swoops in and takes the massive jackpots when the odds are in their favour.
http://www.forbes.com/sites/joshbarro/2012/03/30/can-you-eve...
mentions Virginia put limits in place after a syndicate won a jackpot after buying almost all the tickets.
With lottery is the same, I pay to increase the variance of the money we win.
Another reason we keep paying for insurance even with bad expected values (e.g., title insurance) is because we have no choice about the matter. If I want a mortgage, I need title insurance, even though only a small fraction of the premiums are actually paid out as claims.
Even in the case of you making six figures a year, 100,000 dollars, a $2 million dollar win is still 20 years of your life earnings all at once.
It doesn't matter that the chances are 1 to 175 million, because someone did win, that's all that counts. The only guaranteed result is not to play, that will ensure that you do not win 100% of the time.
Not quite true; every time you don't play you win $1. If you don't play often enough, that can really add up.
"The lottery is a tax on the innumerate"
// pessimistic mode off