12 ms·
I am a statistician and I buy lottery tickets
- nirgle 14y agoI love this argument. It gets juicy quick. Sugary, like cake. When they tell you "you can't win if you don't play", and you say, "nonsense, I can find a dropped lottery ticket on the ground that turns out to be the big one" and they say "really?? what are the chances of that happening?". Black forest, cherry on top. Just wonderful.
- deleted 14y ago[deleted]
- FelixP 14y agoSome vaguely interesting statistical analysis, but here's the money quote at the end (TL;DR)- "So why do I still buy lottery tickets? <b>Definitely not for the expected monetary return on investment.</b> I think of it as a discretionary entertainment spend. I get literally hours of enjoyment from fantasizing what I’d do if I won."
- chii 14y ago"I get literally hours of enjoyment from fantasizing what I’d do if I won" funny, thats exactly what i do too!
- commieneko 14y agoInterestingly, I can fantasize about winning the lottery and spending all that lovely, lovely money too. All without buying a lottery ticket.
- libria 14y agoI believe the author is trying to convey that even a remote possibility of winning fuels his fantasy. It is impossible to win without buying a lottery ticket.
- eridius 14y agoOn the other hand, someone could walk up to you on the street and hand you a briefcase full of $10M. It's not out of the realm of probability.
- redthrowaway 14y ago>It's not out of the realm of probability. It's entirely out of the realm of probability, although just slightly within that of possibility.
- discodave 14y agoJust like winning the lottery.
- eridius 14y agoWhat's the difference? It's not probable, but it has a non-zero probability. The realms of probability and possibility are the same.
- doe88 14y agoBased on past outcomes has it already happened? never heard of. Whereas despite its rareness there nevertheless are lottery winners.
- larrydag 14y agoMaybe not $10M but it has happened. http://www.pressherald.com/news/Secret-Santa-drops-100-bills-at-food-pantry.html http://www.pressherald.com/news/Secret-Santa-drops-100-bills...
- vetler 14y agoYou're assuming that there is actually someone walking around out there with a briefcase full of $10M that he or she intends to give to someone. At least with the lottery you know that someone is actually getting a lot of money.
- JoeAltmaier 14y agoMy buddy says he's expecting the winning lottery ticket to blow into his hat. About the same chance of winning as if he bought one.
- ja27 14y agoBut your odds of winning increase dramatically when you go from holding zero tickets to one.
- brlewis 14y agoNot so. Your odds of winning are immeasureably different. What's the difference between an empty glass and one that's 0.000006% full of water?
- FootballMuse 14y agoInfinitely more...
- larrydag 14y agoI find it odd that the writer spent 99% of article refuting their own argument.
- tytso 14y agoI really like Colin McMillen's comments on this matter: https://plus.google.com/107814003053721091970/posts/6sPpxMo6JTM https://plus.google.com/107814003053721091970/posts/6sPpxMo6... Some choice quotes from his Google+ post: "The lottery is not a tax on people who are bad at math. It's trading a little bit of expected-value for a lot of variance." "There are many other cases in real life where mean/variance tradeoffs arise, and there are perfectly plausible objective functions under which it makes sense to follow a policy that doesn't maximize expected value. The obvious example is insurance, where you pay a small bit of money each year to reduce the chance that you end up suddenly needing to pay a lot of money. Same with forming or joining a startup; on average you'll make less money than if you take a "normal" job, but there's some small chance that you'll have just joined the next Apple or Google and you'll end up rich.... "
- haberman 14y agoYeah, when you think about it the lottery and insurance are surprisingly similar ideas, though a bit in reverse. Getting in an accident and winning the lottery are both unlikely. By buying insurance you remove the small chance of a large loss. By playing the lottery you create the small chance of a large win. Both reduce your expected value, and doing both even more so. If you buy both, your variance is still high but in the positive direction.
- batista 14y ago>Yeah, when you think about it the lottery and insurance are surprisingly similar ideas, though a bit in reverse. Getting in an accident and winning the lottery are both unlikely. Getting into an accident is far more likely. And everyone has health issues sooner or later, so the probability of that is 1.
- JoeAltmaier 14y agoIn fact, I've heard it said you are 7 times more likely to be hit by lightening, than to win the lottery. But I can't see how that could be: I've seen lottery winners, and on average they don't look toasted at all!
- theoa 14y agoIt's posts and comments like these where I so miss the down vote click. There's not even a hint of irony. It's all about the 'entertainment' value. Am I seeing a remake of the book/movie 'Hunger Games'? "Oh Nigel, do kindly pass me two of your Entertainment cards. You'll get a treat if you do..."
- andrewfelix 14y agoI was initially confused and annoyed by the author's lack of justification. But I enjoyed his conclusion, that there's an 'entertainment' value attached to the purchase.
- fukumimi 14y agoPoor statistics on the chance of winning aside, there is one reason for me to spend $1-$2 a week on tickets: Having a ticket ensures you have a chance of winning, while not having one ensures none at all. Losing the $50-$100 per year isn't too big of a deal for me, especially for the entertainment value.
- Drbble 14y agoIf you bet on sports with your friends, you get the same entertainment for lower cost.
- dagw 14y agoOnly if you enjoy sports. Also very few sports bets pay out a million times the money. Even a bet like France beating Canada in the ice hockey world championship only pays 33 times the money, and the prospect of winning $66 on a $2 bet is hardly exciting.
- philwelch 14y agoSports become far more enjoyable when you bet on them.
- markokocic 14y agoBut winning those $66 while your friend just lost $2, (or the other way round) could be fun ;)
- jacobr 14y agoI buy one or two lottery tickets every year. This gives me a non-zero chance of winning, with negligible cost. Going from zero to non-zero chance is a more important step than the one from almost-zero to still-almost-zero chance that buying 1 ticket a week would give me, at least psychologically.
- penetrator 14y agolet's not forget about the real tax from winning and the payment. govt always wants his share and the lottery won't pay in lump sum.
- philwelch 14y agoAmerican lotteries give the option of paying in a lump sum.
- kondro 14y agoIn Australia there is no tax on winnings from any form of gambling and all Australian lotteries (like this one) pay in one lump sum 14 days after the draw. Not that the Government doesn't take their cut, it's just already been factored into the advertised prizes.
- epo 14y agoUK lottery prizes are not taxed and are paid in a lump sum.
- planetguy 14y agoI've always wondered about that aspect of US law. If lottery winnings are taxed, does that mean lottery tickets are tax-deductible?
- dhugiaskmak 14y agoYou can deduct gambling losses up to the amount of gambling winnings (if any), yes.
- galfarragem 14y agoIn Portuguese stockmarket, if you have 1 winner stock and dozens of looser stocks, you still pay tax from the winner one..
- subtenante 14y agoThis is all bad probabilities if you don't take into account the fact that you repeatedly buy tickets. I'd like to see a more detailed study counting the probability of never winning when playing systematically for 20 years, for example. But nevertheless. Yes, the lottery is a tax for the poor. And if you expect your life to change for the better by winning a big bag of money (that you will have taken to the other suckers who lost, minus the organiser's fee), then you just need to reconsider what makes a happy life. You should also consider how many people get isolated after they have won, not knowing how to deal with such a change, such a "responsibility", such a social pressure from family and friends after they have won. I'd never play the lottery not because of the ridiculously low chances of winning (I also am a statistician), but because what I would win would change nothing to my human condition. I prefer reading Epictetus instead. It's cheaper and the effect lasts longer.
- Locke1689 14y agoIt is most certainly a tax on the poor and undereducated. The level of cognitive dissonance required to believe that there is not a massive information asymmetry at hand is simply staggering. Yes, some people are perfectly able to calculate the probability of winning the lottery and know that they should gain enjoyment just from playing, not from the belief that they'll win. These are not the people who are victims. The victims are the high school dropouts who don't understand that their chances of getting hit by lightning while simultaneously getting hit by a bus while crossing the street are still better than winning the lottery. Many, if not most, of these people don't really have the discretionary spending ability to lose hundreds of dollars a month on merely dreaming of winning the lottery. But somehow we pretend everything's fine.
- Stratoscope 14y ago> their chances of getting hit by lightning while simultaneously getting hit by a bus while crossing the street are still better than winning the lottery While I agree with you in philosophy, I wonder if that is the best example. I don't think I've ever seen a news report of someone getting hit by lightning and a bus at the same time, but people do seem to win the lottery on a fairly regular basis. This suggests that winning the lottery may be the more likely of the two.
- penetrator 14y ago'The decision of whether to buy a lottery ticket shouldn’t be based on the probability of winning, or the expected return of a ticket, but on the entertainment value that comes from imagining a different life.' sounds like college, s/entertainment/networking
- paulhodge 14y agoIf you're analyzing lotteries, one thing you have to think about is the diminishing utility of money. ( http://en.wikipedia.org/wiki/Diminishing_marginal_utility http://en.wikipedia.org/wiki/Diminishing_marginal_utility ). Your first dollar is a lot more useful than your millionth dollar. Or another way, having a million dollars is not a million times as useful as having one dollar - it's a lot less useful than that. This makes a lottery a pretty bad investment even when the expected-returns are in your favor. Not to mention all those stories of people who win the lottery and then lose all their friends out of jealousy. But that's harder to analyze.
- nsomaru 14y agoOne might argue that a friend lost thus was no friend at all.
- deleted 14y ago[deleted]
- TamDenholm 14y agoWhile having a million dollars isnt a million times as useful as having 1 dollar, it is monumentally more useful than having a million 1 dollar bills that cannot be combined. So i'd still rather have a million dollars in a lump sum than a million 1 dollar bills that i can only use one at a time.
- Tichy 14y agoIt seems to me that if you already have, say, 100000$, then that utility changes completely. Losing 1$ would be meaningless for you, whereas gaining 1 million dollars would be a huge improvement.
- aneth 14y agoYou may be able to increase your expected value by choosing numbers that are less popular. It would be interesting to research the psychology behind number selection and choose combinations less likely to have a multi-payoff outcome.
- thedufer 14y agoInterestingly, this means that common "lucky" numbers are actually unlucky, to a degree inversely proportional to their perceived luckiness across the population.
- ufo 14y agoI remember hearing a story once about six people that shared a lottery prize because they used a number from a fortune cookie.
- thedufer 14y agoSix people? Try 3,100 when the number 7-7-7-7 came up. Source: http://articles.nydailynews.com/2010-04-02/news/27060744_1_lottery-winners-number-seven http://articles.nydailynews.com/2010-04-02/news/27060744_1_l...
- mukaiji 14y agoIt might be an urban myth, but it's still funny: The only weekend when casinos did not make a profit, in the entire history of Las Vegas, was when the annual U.S. statisticians conference was organized in Las Vegas :)
- dalke 14y agoThe variation I heard was the the American Chemical Society (ACS) held their 1997 meeting in Vegas. The casinos didn't make enough money from the 13,000+ people who were there, and don't want the chemists back. Checking now, there hasn't been an ACS national meeting there since then, and the schedule, which goes up to 2019, doesn't show any future meetings there. For what it's worth, neither does the American Statistical Association.
- planetguy 14y agoThe version I heard is that the American Physical Society is banned from Vegas.
- dalke 14y agolol. Mine was told to me by a chemist. Did a physicist tell you the APS version? Looking at the APS calendar, they also have no upcoming meetings in Vegas.
- planetguy 14y agoI am a physicist, so yes. It's just one of these rumours that goes around. But hey, next year we get to go to the fascinating city of... Baltimore! Again. Then... Denver! Again.
- drzaiusapelord 14y agoI don't see how this makes sense. The casino's odds are always not in favor of the players, so the more the merrier from the casino's POV. Even if you're a card counting wiz, the margins are pretty poor and you're easily caught. I imagine the real problem would be crowding your casino with people who just showed up for the buffet but refused to gamble.
- deleted 14y ago[deleted]
- vacri 14y agoSimple evidence that gambling (rather than just lotto) is a tax on poor people - check out where the gaming/'slot' machines are. Last time they ran the map in the paper, the venues were heavily clustered in the poorer northern and western suburbs of Melbourne, with another cluster down in Frankston. Then of course there's the simple point that less money comes out of lotto than goes in, simply to pay for overheads and profit of the gaming company (as with all gambling) plus a bit of tax on the ticket. The ticket sale simply can't be a zero-sum game; less has to make it back to the winners than was paid in the first place. That being said, I also pay the idiot tax every month or two, and for the same reasons as the author - entertainment.
- jkn 14y agoBy this line of reasoning, anything that is more popular among poor people is a tax on them? People pay to gamble to get something in return (entertainment as you say) and that makes it not a tax. It is quite natural that the gaming company makes a profit on that, just like, say, a movie theater company. There is certainly some truth in the vision of the poor guy being a more vulnerable gambling victim but I would not generalize that to non-addicts. Gambling vs. other kinds of entertainment is a matter of personal preference. Actually gambling is quite popular among rich people, in the form of financial speculation...
- astine 14y agoBy this line of reasoning, anything that is more popular among poor people is a tax on them? The argument is that gambling houses are taking advantage of people's poor education to bilk them out of money. In principle, everyone in developed nations should know that gambling is a poor investment, but it takes good financial sense to really understand that. People with good financial sense usually aren't very poor.
- ssharp 14y agoAt low income levels, taxation is generally low. We've tended to avoid flat income taxes because they impact those with low-incomes more than high-incomes because poor people spend a higher percentage of their money than rich people. So when you look at how poor people spend money, the rational economist would never advocate spending the money on the lottery. The utility is low, and even if the expected value is positive, the variance makes it a bad idea. Poor people would be better off spending money on things with greater returns. The problem is that poor people don't spend their money on things with greater returns. They spend far too much of their money on lottery, and it's probably combination of psychological factors and financial illiteracy. I could be off on this, but I remember a statistic showing that there isn't much deviation on how much money any random household spends on the lottery. So a household with $100,000 in incomes spends as much on the lotter as a household with $20,000 in income. The result is that the lottery has become a regressive tax.
- codehotter 14y agoIn the book "Thinking fast and slow" by Daniel Kahneman, it is claimed that there is a growing body of evidence that we really have two brain systems. A fast one, which uses heuristics to quickly approximate the answer, and a slow one, capable of deliberate and rational thought. He argues that the fast brain system is really responsible for a lot of our cognitive biases. For example, our fast brain does not really understand probability. It only knows three categories: either something is impossible, it is possible, or it is a certainty. A lot of human behaviour with regards to probability can be explained by this simple assumption. Why do people buy lottery tickets? For their intuition, it moves an impossibility into a possibility. The fast brain system that fuels their intuition does not care what the actual probability is and does not understand anyway.
- disgruntledphd2 14y agoWhile I deeply respect Daniel Kahneman's work, please note that his two system "theory" is pretty awful. He uses it as a justification for some strange results, and made no effort to test it. Now, there is some evidence that humans have numerous different reasoning systems, but this is a complicated and controversial area, and we have no idea how many, its somewhere between 1 and n, where n could range from 0 to at least 10.
- knowtheory 14y agoAmused at the claim that 1 & 1/4 million is 'just over [...] a million" I tend not to think of an added 1/4th as "just over" but perhaps that's a difference in perception.
- tdubhro1 14y agoLotteries are a tax on people who are desperate, not ignorant. Even if you understand the math, your utility function changes so that you're willing to trade a small expected loss for the long shot chance of solving all your problems. I don't buy the idea that swathes of lottery players really think they're making a value bet. Just because they respond with anecdotal evidence when you confront them with the true odds, doesn't mean they're really arguing the facts, they're just protecting their hopes.
- JoachimSchipper 14y agoThis is a really interesting idea. Do you have any evidence, anecdotal or otherwise?
- tdubhro1 14y agoA good starting point for more rigorous evidence: http://stoppredatorygambling.org/category/research-center/lotteries-who-really-plays/ http://stoppredatorygambling.org/category/research-center/lo... I've been interested in the topic for a long time as I have a relative who spends most of his income on lottery tickets. Any time I can, I ask people who play the lottery why they do it. Most of them spend a tiny amount and it's something they have a little bit of fun with their workmates or family, these are the "normals". But about 20% of the players account for 80% of the ticket revenue, these are the people playing out of desperation because they are in a poverty trap and they have no other way out. They are foregoing essentials to pay for the lottery tickets, so if they didn't play, they wouldn't accrue the money they "saved". These people are often on the brink: depressed, panicked and alone. A lottery ticket is a temporary "self medication" with which they can temporarily quiet their anxieties, until of course, they need the next hit.
- gfodor 14y agothanks for the link. I have never spent much time thinking about the ethics of the lottery and this was quite stunning.
- hypervisor 14y agoIt reminds me of this http://www.wired.com/magazine/2011/01/ff_lottery/all/1 http://www.wired.com/magazine/2011/01/ff_lottery/all/1
- mmahemoff 14y agoFor me, the opposite. I thought from the title it was going to be about gaming the lottery, but it's a matter of fact analysis and doesn't go into using strategies like picking under-loved numbers to overcome the odds.
- dalke 14y agoThe first rejoinder which came to mind is: "I am a lung cancer doctor and I smoke cigarettes." :)
- markokocic 14y agoLottery, as a form of innocent betting, can really provide a lot of fun for a small price. I would be bored to death to watch a soccer game, but when I bet 1€ on it, it suddenly becomes 2 hours of fun. And I don't expect to "win the ticket", cause I already got more than I paid for. Looking at everything from the profit/cost point of view can lead to a very boring life, for most of the people.
- scott_s 14y agoOddly, his real reasons for why he plays the lottery has nothing to do with probability and statistics, and is in the last two paragraphs. I feel the essay would have been better serveed if he had started with that, then said "But, given that, let's still explore what the actual expected return on investment is for the fun of it."
- RockyMcNuts 14y agoPer the Kelly Criterion, unless you have a big bankroll, the minimum bet is an overbet, which turns it into a losing strategy. Suppose you have $100,000, and repeatedly bet .001% of your net worth on a single ticket in the lottery at 100,000,000:1 with a 2x EV (disregarding that you can’t bet more or less than the price of a ticket). You do it 2,000,000 times, and then you hit the jackpot – pretty lucky since the odds are 100,000,000 to 1, right? But by the time you hit the jackpot, your bankroll has been so depleted that winning 200m x your bet, you only get back to 41% of your original net worth – because you overbet! A longer discussion (by me) of why only millionaires should play Powerball - http://blog.streeteye.com/blog/2011/11/why-only-millionaires-should-play-powerball/ http://blog.streeteye.com/blog/2011/11/why-only-millionaires...
- frankydp 14y agoI have always had a hard time equating ROI on any windfall probability. I view lottery systems as a windfall system in that the chance of winning is zero and the expense of playing is trivial, so any investment has no expectation of return it only allows for the possibility of windfall. The $1600 investment over 30 years would not have noticeably increased or decreased my QoL so it is not a lose in my mind, only a technicality.
- sammyo 14y agoBest entertainment value ever: When one of the big jackpots was making the news I bought one as much to head off the conversation of why not than anything, but it triggered these incredible technocolor daydreams! I was not bored on the subway for days. Diminishing returns though, since then the occasional ticket never had the same internal result.
- sammyo 14y agoOh that's funny, I went and actually read the article and his conclusion is exactly this point.
- squozzer 14y ago- If you're so poor that paying 1 USD is a hardship, then you shouldn't play the lottery. Otherwise, where's the harm? - The argument, "the lottery is a tax on poor / stupid people" is valid but useless when talking about small amounts of money. - The difference(s) between winning the lottery and someone just giving you millions of dollars? - 1) You know where the money came from; 2) The person just giving away the millions isn't receiving payment for giving away the money.
- colomon 14y agoI always wonder about these calculations. According to http://www.michiganlottery.com/where_the_money_goes http://www.michiganlottery.com/where_the_money_goes out of every $1 players spend on the Michign lottery, $.58 goes to player prizes. Assuming they're actually counting that correctly, doesn't that mean the expected monetary return (to you, of course it's nice that you're donating to the school system) of $1 spent on the lottery has to be $.58?
- philwelch 14y agoThat's over the course of the whole run; accordingly the average expected value of $1 spent on the Michigan lottery would be $.58 if you bought a ticket for every game every week. But you don't do that. Some weeks the jackpot is higher so you buy a ticket, some weeks you don't. When the jackpot is higher, the EV for that week rises, but since the lottery itself plays every week it doesn't matter so much to them.
- colomon 14y agoBut when the jackpot is bigger, more people buy tickets, too, which makes the EV for that week go down. It's not at all clear to me which effect is bigger. (Indeed, I wonder if your best bet is to buy the first week the jackpot rolls over, but not when it has rolled over multiple times.) At any rate, if the expected return over long periods is $.58 for $1, I sure wouldn't expect it to even get close to $1 on the best weeks.
- icc97 14y agoIt makes perfect sense to simply purchase 1 lottery ticket. Takes your chances from 45,379,619:0 to 45,379,619:1, for a negligible cost. Beyond that your time is wasted, statistician or not.
- sopooneo 14y agoIf aside from entertainment value it makes sense to buy one ticket,then it makes sense to buy two. And three and four. But in fact aside from entertainment value it does not make sense to buy one, because that change from 45,379,619:0 to 45,379,619:1 on a windfall is accompanied by a change from 1:1 to 0:1 chance on keeping your original dollar. And in the vast bulk of lottery scenarios, it all multiplies out to a negative expected return.
- icc97 14y agoIts increasingly lower returns for each dollar, thus I don't see the point of anything above the minimum. The expected return may be negative (further hence the minimum investment) but its negligible.
- robomartin 14y agoSaying that the lottery is a tax on poor people is like saying that buying a bottle of Coke is a tax on poor people. Both of these events are completely voluntary. No government agency was involved in making you spend the money. You are not obligated to do it. And, if you choose not to spend the money you are not violating any laws. It is not a tax. That's the most ridiculous idea I've ever heard. One could argue that spending money on a lottery ticket is actually better for you than spending the same amount of money on a soft drink. One gives you hope and entertainment and might have other positive "feel good" side-effects. The other fills you with sugar (high fructose corn syrup) and is not good for anything at all.
- mturmon 14y agoThe government is involved in making you spend the money, because they advertise the lottery. This advertising presumably motivates citizens who would not ordinarily buy tickets, to buy tickets. They are not forcing you, of course, but they certainly are encouraging you.
- robomartin 14y agoOh, please. You are not obligated by law to buy lottery tickets, therefore, it cannot, by any stretch of the imagination, be called a tax. Period. They can advertise all they want. You can still say "no". In fact, you can stand in front of a government lottery official, extend your arm out, point a finger at them and laugh out hysterically while loudly proclaiming that you will not buy their tickets. Try telling the IRS that you will not pay taxes because, well, you don't want to.