4 ms·
That's why I consider the lottery not a "math tax" but an "economics tax". Your reasoning seems reasonable to someone that doesn't think about it too hard. But
by cynicalkane 16y ago
That's why I consider the lottery not a "math tax" but an "economics tax". Your reasoning seems reasonable to someone that doesn't think about it too hard. But if a $1 lottery ticket gives you, say, a 1/10,000,000 chance to win $2.5 million... well, you need having $2.5 million to be ten million times better than having one dollar to make it a good bet.
I have no idea why anyone would consider this a rational decision, but gamblers do not typically gamble because they are rational.
There's also the effects of decreasing marginal utility, and the problems that someone poor with personal finance will have when faced with a lottery jackpot. I don't need to get into those to support my argument, but those effects are pretty big.
- sosuke 16y agoI'd say that any player of these lotteries would say, without hesitation, that $2.5 million dollars in the bank is ten million times better or more than $1 dollar in the bank. You aren't really playing with numbers when you play the lottery, there is a lot more going on in the mind of the player than the odds.
- cynicalkane 16y agoYou're right, but my point is that it's not rational to act against your interests, even if you think you're acting for them. Thinking it's worth it to play the lottery is almost certainly irrational except for individuals with a very strange utility curve...
- nostrademons 16y agoThe utility curve doesn't have to be all that strange - it just has to be a step function, where $1 yields no additional increase in utility yet $2.5M yields an additional increase. There is pretty significant evidence that people's utility functions are in fact step functions - how many folks will just dump change into a tipjar, or refrain from picking up coins on the sidewalk?