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Just because nothing else in someone’s life has that high an Expected Value, doesn’t mean lotteries as they exist aren’t negative-sum games for their players (i

by derefr 6y ago

Just because nothing else in someone’s life has that high an Expected Value, doesn’t mean lotteries as they exist aren’t negative-sum games for their players (i.e. the system wins and the players as a group lose.) Just like private casinos. (People incorrectly see lotteries as different from casinos — they think casinos are high-margin while lotteries are effectively zero-margin.) There are zero-margin lotteries, but we don’t call them lotteries; we call them in-turn crowdfunding. (IIRC there’s a traditional system of charity somewhere in the world built around having groups that pool funds and then donate the pool each month to one member.)

beaconstudios 6y ago
people buy lottery tickets for many reasons; positive EV is not one of them. Saying people who play the lottery are morons because their activity doesn't fit your definition of smart just makes you ignorant, not them stupid.
- derefr 6y ago
  > people buy lottery tickets for many reasons; positive EV is not one of them I’m sorry, but you likely haven’t talked to many people who buy lottery tickets. I’ve worked in debt relief — I’ve talked to a lot of such people. A majority truly do expect to win small amounts (e.g. ~$1000) over time that offset their losses. This expectation is subconscious, built mostly from saliency bias: the infrequent wins loom larger in their memory than the frequent losses, so they don’t actually feel like they’re losing money over time. When you sit them down and “budget” for playing the lottery — help them add up how much they’ll spend and how much they’ll gain over a year — they usually quit playing. They’ve usually just literally never done that. Yes, economists prattle on about how playing the lottery can be a rational decision, giving people hope, dopamine hits, etc. But there are lots of available options for non-profitable sources of hope and dopamine hits! Lotteries are a bad choice even among those options. Economists are doing the evo-psych thing here, working backward from what they see to make a prediction of how it could have evolved, rather than actually doing the experiment.
  - beaconstudios 6y ago
    then your circles are different from mine. My family play the lottery, not expecting to win over time but just for the fun of it. You're falling into the availability bias from being over-exposed to gambling addicts, who are a small fraction of the lottery-ticket-buying population. > Yes, economists prattle on about how playing the lottery can be a rational decision, giving people hope, dopamine hits, etc. But there are lots of available options for non-profitable sources of hope and dopamine hits! Economists are infamous for leaning on examples that only apply to homo economicus. They are prone to a special kind of reductive "rationality" that only cares about optimal game-theoretic decisions; most people don't fit that model. You are falling into that same thought pattern; people aren't going around looking for cost/benefit-optimised sources of dopamine.
    - derefr 6y ago
      99.99999% of the revenue of any large public lottery comes from people in poverty (not because more of them play the lottery — the ratio of people in lower economic brackets who play the lottery, to people in upper economic brackets, is only roughly 2:1 — but because the people in poverty who do play the lottery, buy more lottery tickets per capita, play the lottery more consistently, and play multiple lotteries if available. People playing “for fun” don’t tend to do any of these things.) These people play the lottery not exactly because they’re addicted, but because the hypothetical maximum reward, if obtained, would bring them out of poverty, and this fact excites them (i.e. gives a dopamine hit when they think about it), so they actually try to act in a Homo Economicus sense, trying to intuitively maximize the likelihood of this happening by buying as many lottery tickets as they can (while still not actually doing the math to see whether their extra spending them is getting them appreciably closer to winning.) In the best case, these people are rationally ignoring the likelihood ratios (and thus the actual EV) of winning any given amount in the lottery, because they want to hold onto the hope that buying a lottery ticket generates for them: the hope of suddenly being able to afford things. In most cases, though, these people just didn’t get a very good education, and don’t know how to “just do the math” required to realize that the deal is bad, and that they’d end up with more money (usually far more) by putting each dollar they spend on lottery tickets into a savings account. Educating this group — when you can get through their stubbornness about it and actually get them to pay attention to what you’re saying — actually changes their mind about playing the lottery, and they tend to stop permanently. (A light goes out of their eyes when they “get it”, though; it’s like watching someone realize that Santa Claus doesn’t exist. I advise people to only bother with this kind of education if they’re prepared to then go on and explain savings and compound interest and what equivalent investments to their lottery-ticket spend would be getting them. That usually perks them right up.) Lotteries would not, and could not, exist without there being a large number of these people.
LudwigNagasena 6y ago
1. It has nothing to do with being zero-margin. Utility and money are different things, that’s why I said to learn economics. 2. Learning math doesn’t seem like an efficient method of coping with an addiction.

by derefr 6y ago

beaconstudios 6y ago

people buy lottery tickets for many reasons; positive EV is not one of them. Saying people who play the lottery are morons because their activity doesn't fit your definition of smart just makes you ignorant, not them stupid.

derefr 6y ago
> people buy lottery tickets for many reasons; positive EV is not one of them I’m sorry, but you likely haven’t talked to many people who buy lottery tickets. I’ve worked in debt relief — I’ve talked to a lot of such people. A majority truly do expect to win small amounts (e.g. ~$1000) over time that offset their losses. This expectation is subconscious, built mostly from saliency bias: the infrequent wins loom larger in their memory than the frequent losses, so they don’t actually feel like they’re losing money over time. When you sit them down and “budget” for playing the lottery — help them add up how much they’ll spend and how much they’ll gain over a year — they usually quit playing. They’ve usually just literally never done that. Yes, economists prattle on about how playing the lottery can be a rational decision, giving people hope, dopamine hits, etc. But there are lots of available options for non-profitable sources of hope and dopamine hits! Lotteries are a bad choice even among those options. Economists are doing the evo-psych thing here, working backward from what they see to make a prediction of how it could have evolved, rather than actually doing the experiment.
- beaconstudios 6y ago
  then your circles are different from mine. My family play the lottery, not expecting to win over time but just for the fun of it. You're falling into the availability bias from being over-exposed to gambling addicts, who are a small fraction of the lottery-ticket-buying population. > Yes, economists prattle on about how playing the lottery can be a rational decision, giving people hope, dopamine hits, etc. But there are lots of available options for non-profitable sources of hope and dopamine hits! Economists are infamous for leaning on examples that only apply to homo economicus. They are prone to a special kind of reductive "rationality" that only cares about optimal game-theoretic decisions; most people don't fit that model. You are falling into that same thought pattern; people aren't going around looking for cost/benefit-optimised sources of dopamine.
  - derefr 6y ago
    99.99999% of the revenue of any large public lottery comes from people in poverty (not because more of them play the lottery — the ratio of people in lower economic brackets who play the lottery, to people in upper economic brackets, is only roughly 2:1 — but because the people in poverty who do play the lottery, buy more lottery tickets per capita, play the lottery more consistently, and play multiple lotteries if available. People playing “for fun” don’t tend to do any of these things.) These people play the lottery not exactly because they’re addicted, but because the hypothetical maximum reward, if obtained, would bring them out of poverty, and this fact excites them (i.e. gives a dopamine hit when they think about it), so they actually try to act in a Homo Economicus sense, trying to intuitively maximize the likelihood of this happening by buying as many lottery tickets as they can (while still not actually doing the math to see whether their extra spending them is getting them appreciably closer to winning.) In the best case, these people are rationally ignoring the likelihood ratios (and thus the actual EV) of winning any given amount in the lottery, because they want to hold onto the hope that buying a lottery ticket generates for them: the hope of suddenly being able to afford things. In most cases, though, these people just didn’t get a very good education, and don’t know how to “just do the math” required to realize that the deal is bad, and that they’d end up with more money (usually far more) by putting each dollar they spend on lottery tickets into a savings account. Educating this group — when you can get through their stubbornness about it and actually get them to pay attention to what you’re saying — actually changes their mind about playing the lottery, and they tend to stop permanently. (A light goes out of their eyes when they “get it”, though; it’s like watching someone realize that Santa Claus doesn’t exist. I advise people to only bother with this kind of education if they’re prepared to then go on and explain savings and compound interest and what equivalent investments to their lottery-ticket spend would be getting them. That usually perks them right up.) Lotteries would not, and could not, exist without there being a large number of these people.

LudwigNagasena 6y ago

1. It has nothing to do with being zero-margin. Utility and money are different things, that’s why I said to learn economics. 2. Learning math doesn’t seem like an efficient method of coping with an addiction.