# Do you feel lucky, punk?August 13, 2012 5:46 AM   Subscribe

Thanks for this. I shall use it in my probability classes when I talk about the lottery.

I'll also show it to my brother who recently decided to quit smoking (yay) but has said he will put all the money he would have spent on cigarettes toward lottery tickets (ugh).
posted by King Bee at 5:49 AM on August 13, 2012 [1 favorite]

You win a dollar every time you don't play the lottery.
posted by I'm Doing the Dishes at 5:53 AM on August 13, 2012 [28 favorites]

Make sure you also point out the expected value math. The expected value of a Powerball ticket is greater than a dollar when the jackpot is somewhere around \$250M, so it's not a totally illogical proposition at that point. Self-link where I did a bunch of the inflation math to figure that out. Although this guy does some calculations involving large numbers of tickets sold (improving the odds of multiple winners) and comes to the conclusion that it might be never >\$1.
posted by Plutor at 5:54 AM on August 13, 2012 [11 favorites]

Wow, that's really cool.
posted by ThePinkSuperhero at 5:56 AM on August 13, 2012 [1 favorite]

Here's the thing about this "the odds are stacked against you" argument with regards to playing the lottery...People who play the lottery know the odds are astronomical. They really do! But, it is also true that you will never win anything if you never play. And it's that slim, slim, slim possibility that they might win something that keeps them playing.

In a culture that uses wealth as the primary measure of a person's worth, it's not surprising that lotteries are so damned popular.
posted by Thorzdad at 5:57 AM on August 13, 2012 [6 favorites]

Also, being wealthy is awesome.
posted by nathancaswell at 5:58 AM on August 13, 2012 [1 favorite]

Hey, you've got to be in it to win [nothing from] it!
posted by Pope Guilty at 5:58 AM on August 13, 2012

I won \$100! It only took me 27.9 years!
posted by Dr-Baa at 6:00 AM on August 13, 2012 [2 favorites]

Huh. Surprisingly, the return on regular play is down about 93-94%, but the return on the Power Play is only down about 88-89%. I wouldn't have thought it would make a difference, but it's about a 5% boost.

But yeah, two tickets a week for fifty years is only 5,200 tickets. That's not half as many as you'd need before it would be reasonable to expect a hit on the \$100 prize.
posted by valkyryn at 6:02 AM on August 13, 2012

Eh, I'm perfectly comfortable buying a Mega Millions ticket every once in a while (not Powerball since it became \$2) even though I know I'll never win. The \$6 or whatever I spend a year on it is well worth the time I spend daydreaming about winning. Though I do love people I've never met smugly pointing out how bad at math I am.
posted by ghharr at 6:04 AM on August 13, 2012 [24 favorites]

Ah, I get it. Tickets are now \$2 instead of \$1, but the Power Play is still only an extra \$1. So you're spending 50% more, but you're doubling your payout on the prizes you do win.

I hadn't realized they'd upped the ticket price. Doubling your payout to double your winnings is zero sum, but 50% more for 100% more is a net gain.
posted by valkyryn at 6:04 AM on August 13, 2012 [1 favorite]

I've never played the lottery, apart from a few scratch tickets that were christmas presents from friends. According to the simulator, if I bought a ticket a week for five years, I'd be up 8.5 billion dollars.

posted by Slap*Happy at 6:04 AM on August 13, 2012 [10 favorites]

I've pointed out to my son that if you play the lottery, your chances aren't materially improved by actually buying a ticket.

So when I DO buy a ticket, it's just for the entertainment of fantasizing what we'd do with the money if we win.

(Let's see... currently we'd fund the "Man Conquers Space" movie that's been under development for the last decade or so, pay off the house, massively renovate the house, push money to various charities and kickstarter projects, and take a long trip around the US to see various frivolous things. And put a lot of money away in the highest return investments possible...)

We get a lot of (s)mileage per dollar spent.
posted by JB71 at 6:05 AM on August 13, 2012 [5 favorites]

I thought statistically speaking you're just as likely to find the winning ticket as to buy the winning ticket.

Hey, some people delude themselves they're going to win the lottery I delude myself that I understand the profound futility of my life. You say tomato I say tomato and as long as we both stay away from sharp objects it's all peachy.
posted by fullerine at 6:08 AM on August 13, 2012 [1 favorite]

In Canada, there is a law that at least 51% of money collected in lottery ticket sales must go back into the prize pool. So the expected value of a ticket is always at least half what you paid for it. My aunt played 6 tickets a week (at \$1 each) for most of her life and won \$10,000 once and \$100 at least a few times that I can remember.
posted by 256 at 6:08 AM on August 13, 2012

Oddly enough, I'd just like to win the forty mil on the simulator.
posted by cashman at 6:09 AM on August 13, 2012 [2 favorites]

In 50 years, I won \$2,174. Go me. It only cost \$15,600!
posted by wierdo at 6:11 AM on August 13, 2012

nathancaswell: "Also, being wealthy is awesome."

I wouldn't know. ::sniff::
posted by Splunge at 6:13 AM on August 13, 2012 [2 favorites]

Indeed, Plutor! I couldn't have planned it better earlier this year when the Mega Millions jackpot was up to 640 million dollars. The expected value of a single ticket in that drawing was \$2.85 (that's including the negative 1 dollar you get when you just flat out lose, of course). The numbers and payouts are a little different than they are in this powerball simulation, but I'm sure the expected value of a ticket is frequently above \$1 in this game also.

My main problem with the lottery is that wealthy folks don't generally buy lottery tickets. People who don't have a lot of money do, and the whole thing strikes me as a bit predatory.

However, lots of people spend lots of money on all sorts of kinds of entertainment. If you're viewing the lottery as something like that, it's not as unreasonable for someone to plunk down a few bucks a week on some tickets.
posted by King Bee at 6:13 AM on August 13, 2012 [1 favorite]

I found a loophole in the simulator that'll help you win big. I'll share it with you for \$100.
posted by orme at 6:14 AM on August 13, 2012 [14 favorites]

In other news if you saved \$2 a week at 6% interest you'd have over \$30k in 50 years.
posted by ian1977 at 6:14 AM on August 13, 2012

Confirms my belief that the lottery is just a tax on those with poor math skills.
posted by tommasz at 6:15 AM on August 13, 2012 [2 favorites]

Someone do a Starbucks simulator, where you buy 2 coffees a day for as long as you like and it shows you what you've spent on that.
posted by hippybear at 6:16 AM on August 13, 2012 [6 favorites]

Someone do a Starbucks simulator, where you buy 2 coffees a day for as long as you like and it shows you what you've spent on that.

Here you go!
posted by ghharr at 6:18 AM on August 13, 2012 [5 favorites]

wealthy folks don't generally buy lottery tickets

I completely believe this is true, but I'd love to see a cite that backs this up somehow.
posted by cashman at 6:19 AM on August 13, 2012

Obviously the problem isn't the odds, it's our lifespan. I could be 99.99% sure of a multi-million dollar jackpot win in my life if I could live long enough.
posted by blue_beetle at 6:23 AM on August 13, 2012 [1 favorite]

I'm going to refer this simulator to people who cannot understand middle class support of republicans.
posted by any major dude at 6:24 AM on August 13, 2012 [5 favorites]

Us Brits would suck at the Olympics if it weren't for people playing the lottery.
posted by afx237vi at 6:25 AM on August 13, 2012

I think that the most interesting part of this (for me, at least) is watching how my odds of winning certain prizes match up with the "actual" odds.

Also, I've done some Nonscientific Experimentation and determined that your return is approximately the same if you play the same set of numbers every week instead of picking the random play. (I figured this would be the case, but it's nice to see it Verified By (Not-Really) Science.)
posted by naturalog at 6:26 AM on August 13, 2012

cashman, here is one, and the thesis mentioned in that article ain't bad either.
posted by King Bee at 6:27 AM on August 13, 2012 [1 favorite]

Using the expected value to justify a purchase seems to say that winning \$600 million is significantly better than winning \$50 million. But to me as a punter, both of those amounts would have the exact same effect on my life: a shit-ton.

Unless you're buying a ludicrous amount (in which case you're already rich), I feel it's kind of farcical to believe the jackpot going above a positive EV threshold will make any difference to anything. I'm sure the alternative universe version of you that wins will get right on working out a way to spread their winnings across all dimensions of reality.
posted by rollick at 6:27 AM on August 13, 2012 [2 favorites]

This assumes the marginal value of hope and participation in a game is zero.

Of course, if you're addicted and it's fucking up your life, the marginal value of this crap is LESS than zero.

However, the point about long odds games is not just to make statistically appropriate choices; it's participation in something with a chance of a huge outcome, and the emotional response of that, even for a little bit of time.

If people play the lottery occasionaly for a few genuinely disposable income bucks, then I see nothing wrong with it. (What's the statistical return on a pint of beer? A chocolate bar?* etc).

i) Also: the idea that one could find a winning ticket vs buying a winning ticket being equal odds is laughable!

ii) * Awaiting snark for this comment

posted by lalochezia at 6:30 AM on August 13, 2012 [3 favorites]

Here you go!
posted by ghharr at 6:18 AM on August 13 [+] [!]

Thanks, that was depressing.

But now I have a great idea for app: "By yourself a coffee". Each time you get a hankering for a cup of coffee, you fire up the app and punch the big green button. \$3.50 is transferred from your checking to your savings account automatically.

Then you go make yourself a cup of coffee.
posted by device55 at 6:30 AM on August 13, 2012 [11 favorites]

I feel it's kind of farcical to believe the jackpot going above a positive EV threshold will make any difference to anything.

No doubt. Here's another game with a really high expected value.

I'm going to start flipping a coin. Once it comes up tails, we determine the payout. If it comes up tails on the first flip, you get 2 dollars. If it comes up tails on the second flip, you get 4 dollars. Third, 8 dollars, fourth, 16 dollars, and so on. The expected payout is

2*(1/2) + 4*(1/4) + 8*(1/8) + ...

So, the expected winnings in this game are infinite. So you should play no matter what the price of admission is!

These (and other examples) are also helpful to get students to stop thinking that "expected value" or "expected winnings" mean something on the order of "what I should expect to get".
posted by King Bee at 6:37 AM on August 13, 2012 [6 favorites]

I always thought that lotteries jumped the proverbial shark when the New York Lottery started using the slogan "Hey, You Never Know" in the early 2000s. Imagine anyone else using that kind of tagline.
"Walmart -- We Might Have Lower Prices, I Guess"
"FedEx -- On Time-Ish"
"Coca-Cola -- Different From The Other Brown Sugar Waters, We're Told"
posted by Etrigan at 6:41 AM on August 13, 2012 [20 favorites]

The \$6 or whatever I spend a year on it is well worth the time I spend daydreaming about winning

This.

You lose money going to Disneyland too. If you get enough entertainment in return, what's to complain?
posted by Egg Shen at 6:42 AM on August 13, 2012 [3 favorites]

If people play the lottery occasionaly for a few genuinely disposable income bucks, then I see nothing wrong with it. (What's the statistical return on a pint of beer? A chocolate bar?* etc).

Well, at a basal level, a pint of beer and/or chocolate bar contain calories that provide the body fuel in addition to the momentary rush of endorphins one gets from consuming it. It may alleviate hunger, even temporarily.

It's also assumed that the marginal rate of utility that you get from buying a ticket is constant, otherwise it becomes less of good deal over time. Most people assume that beer and chocolate bars have this (i.e., the 12th is worthless to you because you don't want to consume any more) but those people buying 10 or more tickets at a time need to get a return other than return on the 10th ticket that they didn't get on the 9th in order for the transaction to be rationally worthwhile. I don't think that the same "daydream" about the big prize gets any more...awesome...because you have 10 tickets and not 9.
posted by Rodrigo Lamaitre at 6:44 AM on August 13, 2012 [1 favorite]

800 years in and I'll I've done is lost 155 thousand bucks. I'm wasting my immortality, it would seem.
posted by Uppity Pigeon #2 at 6:46 AM on August 13, 2012 [5 favorites]

I'm wasting my immortality, it would seem.

But surely that was \$155k worth of daydreaming that helped stave off the doldrums through the years. :P
posted by ian1977 at 6:51 AM on August 13, 2012 [3 favorites]

Let this simulator (with power play, whatever that is) run while I fixed and ate breakfast. First 10 or so years, the return hovered at 11 or 12 cents per dollar. However, around 30 or 40 years, that raised to 13 cents on the dollar and continued through to 70 years, when I stopped it.
posted by msbrauer at 6:54 AM on August 13, 2012

After exactly 80 years, I hit a \$10,000 win that put me at a cumulative loss of about \$5000 and a return on my \$1 of nearly \$0.40.

That's almost exactly the same as my 401K when I worked at Time Warner. For two years.
posted by etc. at 7:03 AM on August 13, 2012 [2 favorites]

So, is the simulator rigged so that nobody playing it ever actually wins \$250million? Or even \$1million?

Because people do win. It's always against the odds that it will happen to a specific individual, but that there are big winners isn't against the odds at all.
posted by hippybear at 7:05 AM on August 13, 2012

In other news if you saved \$2 a week at 6% interest you'd have over \$30k in 50 years.

And if you can find an investment that will reliably pay 6%, year-over-year, for fifty years, you can make a lot more than that selling it to other people.
posted by valkyryn at 7:08 AM on August 13, 2012 [15 favorites]

The problem with just calculating the EV based on the jackpot size (even factoring in inflation) is that when the jackpot gets really high, they sell a lot more tickets and the chance of having to split a jackpot becomes non-negligible. So I don't think it can ever be as simple as "if the jackpot is greater than \$X, it's positive EV"
posted by jcreigh at 7:10 AM on August 13, 2012 [1 favorite]

Great post. I was surprised the simulated results weren't worse, actually. I put in 20 years and got a return of \$0.06 per dollar.
posted by odinsdream at 7:11 AM on August 13, 2012

I dislike the smug expression that the lottery is a tax on people who are bad at math. The lottery is about psychology, not math. It would be far more accurate to call the lottery a tax on hope. However, that's a lot more depressing, so people parrot the pithier line that makes them feel superior.
posted by gilrain at 7:12 AM on August 13, 2012 [21 favorites]

I've pointed out to my son that if you play the lottery, your chances aren't materially improved by actually buying a ticket.

This came home to me back in the 90s before New York was a member of the nearest big multi-state powerball pool and you had to go to Connecticut if you wanted to buy a ticket. At some point the jackpot got very high and there were they usual news stories about people lining up to buy tickets at the gas stations nearest the New York/Connecticut border. A professor of mine pointed out that New Yorkers who decided to make that trip were far, far more likely to die in a traffic accident on the way than to actually win the jackpot.
posted by The Bellman at 7:14 AM on August 13, 2012 [4 favorites]

I've just hit the birth of Christ or so, and I'm only down \$390K!
posted by Pope Guilty at 7:14 AM on August 13, 2012 [1 favorite]

Stop bashing the lottery people. Its the only route to social mobility we have left here in the US.
posted by Garm at 7:22 AM on August 13, 2012 [14 favorites]

It's always against the odds that it will happen to a specific individual, but that there are big winners isn't against the odds at all.

True, but when something like 1.4 billion tickets are bought in a single drawing, you're going to have some winners. In fact, in that mega millions drawing I referenced above, it was actually unlikely that there were only 3 winners, so much so that the blogger believes the number of tickets sold was overestimated.

However, that's a lot more depressing, so people parrot the pithier line that makes them feel superior.

I don't "feel superior" to people who play the lottery. As I said above, people spend money on all kinds of entertainment. However, it is unequivocally the case that human beings are somehow hardwired to not understand probability, and as such they are frequently taken advantage of in many situations. (In particular, we suck at conditional probability, and this does have disastrous consequences [PDF link].)

If the lottery were only about psychology and not math, you wouldn't have any hope that you will win. It is about math. No one walks around thinking they will be struck by lightning this year, because that is very unlikely to happen. However, it is something like 625 times as likely that they will get struck by lightning than they will win the jackpot.

Although, I suppose that's really a point in favor of the psychology side. We believe that good, albeit unlikely, things will happen to us while all the bad, more likely things will not.
posted by King Bee at 7:26 AM on August 13, 2012

I was surprised the simulated results weren't worse, actually. I put in 20 years and got a return of \$0.06 per dollar.

That's a little misleading. The "return" isn't \$0.06, it's a loss of \$0.94. Took me a minute to figure that out. Losing 94% of your investment is a pretty damn terrible return.
posted by valkyryn at 7:29 AM on August 13, 2012 [2 favorites]

In other news if you saved \$2 a week at 6% interest you'd have over \$30k in 50 years.

Not only an investment that will pay 6% for 50 years, but also one that will allow you to add \$2 a week?
posted by snorkmaiden at 7:31 AM on August 13, 2012 [3 favorites]

But I have a system!
posted by mazola at 7:33 AM on August 13, 2012

It would be far more accurate to call the lottery a tax on hope. However, that's a lot more depressing, so people parrot the pithier line that makes them feel superior.

Whoa now. I'm definitely changing my line.
posted by odinsdream at 7:35 AM on August 13, 2012 [1 favorite]

King Bee, at least one reason we are so bad at probability is because our species is wired for hope, or optimism. If it were truly more about math than psychology, nobody would play. You can say, they play because they are bad at probability, or you can say they play because we are really good at hope as a species.

They might be two ways to say the same thing, in the end, but the latter is more compassionate and, I would argue, closer to the truth.
posted by gilrain at 7:35 AM on August 13, 2012

That's a little misleading. The "return" isn't \$0.06, it's a loss of \$0.94.

Oh. That makes much more sense then.
posted by odinsdream at 7:36 AM on August 13, 2012

My wife and I play the loto6 here, when we can remember to buy tickets. We know we won't win, but as mentioned before, the what if, the daydream factor is worth it. I realize that time when I won ¥12000 was not only a fluke, but also came well after I'd spent nearly three times that amount. At the same time, it felt great, and that moment of anticipation before turning in a ticket is honestly worth the money spent, even if I know it's not going to amount to anything.
posted by Ghidorah at 7:36 AM on August 13, 2012

This is a category error. I mean, you could do this with chocolate bars or sodas. Part of the fun is having the dream each week that blah blah more likely you could get hit by a stampeding herd of dodos blah blah you might strike it big.* That's what you're buying.

The real cynicism of the lottery isn't that 999,999,999 people won't hit the jackpot but that the one that does probably isn't going to be any happier.

Writes the man who got the first four numbers pulled from the first every UK lottery draw and earnt the princely sum of £50, although 2009's £2k win was pretty sweet.
posted by MuffinMan at 7:42 AM on August 13, 2012 [2 favorites]

It seems like the loss is not as great if you choose your own numbers as opposed to Quick Pick. I ran two simulators for about 50 years - Quick Pick had a \$0.11 return, my own numbers had a \$0.14 return.
posted by Lucinda at 7:43 AM on August 13, 2012

I want the same thing, but for scratchers, and also it figures in the rate-in-dollars on the low class feeling of happiness one derives from playing scratchers.
posted by codacorolla at 7:44 AM on August 13, 2012

I don't think that the same "daydream" about the big prize gets any more...awesome...because you have 10 tickets and not 9.

This is true. That is why, on the few occasions when I've bought tickets - always for unusually large jackpots - I've purchased only a single ticket.

I figure that whatever Entity is in charge of dispensing miraculous degrees of luck would only be annoyed by hectoring them with the purchase of multiple tickets.
posted by Egg Shen at 7:47 AM on August 13, 2012 [1 favorite]

Oh come on! If it's all fake anyway, why can't they just jigger the odds and let me be fake rich just once?

What's the harm in that?
posted by Naberius at 7:51 AM on August 13, 2012 [2 favorites]

ian1977: "In other news if you saved \$2 a week at 6% interest you'd have over \$30k in 50 years."

Who's paying 6% interest?
posted by symbioid at 7:53 AM on August 13, 2012 [3 favorites]

Also.
posted by MuffinMan at 7:54 AM on August 13, 2012

Our office plays when the pot gets big. I view the \$2 I throw into as a form of insurance. If the office pool ever does win, I do not want to be the only one left in the department.
posted by fings at 7:55 AM on August 13, 2012 [4 favorites]

If the office pool ever does win, I do not want to be the only one left in the department.

Oh, heck yes. Even the owners at my employer pitch in to the office pool for precisely that reason. Returning to an empty office because you were too cheap to throw \$2 at the problem would be unbearably depressing.
posted by valkyryn at 8:02 AM on August 13, 2012 [1 favorite]

This might be a good way to teach evolution. The secret ingredient is time.
posted by mazola at 8:05 AM on August 13, 2012

If the office pool ever does win, I do not want to be the only one left in the department.

Yes, but in this case, you are not buying a lottery ticket. You are buying an insurance policy that pays out if the office pool wins a lottery. You are spending \$2 to mitigate that risk, expecting fully to lose the \$2.
posted by eriko at 8:06 AM on August 13, 2012 [4 favorites]

The \$6 or whatever I spend a year on it is well worth the time I spend daydreaming about winning.

Don't tell the lotto people, but I've figured out how to daydream about winning without actually buying a ticket.

(lifehacker post?)
posted by ODiV at 8:12 AM on August 13, 2012 [1 favorite]

That's a little misleading. The "return" isn't \$0.06, it's a loss of \$0.94.

Clearly the takeaway is that I need to run a lottery, so that I can be on the flipside of this equation.
posted by Nonsteroidal Anti-Inflammatory Drug at 8:14 AM on August 13, 2012

When I finally win my \$40,000,000 after 10,000 years it will only be worth about \$3.50, adjusted for inflation.

:(
posted by mazola at 8:34 AM on August 13, 2012 [1 favorite]

Clearly the takeaway is that I need to run a lottery, so that I can be on the flipside of this equation.

Click here to see Nonsteroidal Anti-Inflammatory Drug's one weird tip to winning at the lottery!!!

Step 1: Start a lottery.
Step 2: Wait.

posted by jaduncan at 8:35 AM on August 13, 2012 [1 favorite]

You lose money going to Disneyland too. If you get enough entertainment in return, what's to complain?

It's an often repeated statistic here in Oregon that 90% of the Oregon Lottery's profits come from less than 10% of players. These special 10% of players will typically spend over \$500/year on lottery tickets. It probably isn't much of a shock that they are those with bad socioeconomic outlooks as well, i.e. they are precisely the people who shouldn't be pissing away \$500+/year on lottery tickets.
posted by Mister Fabulous at 8:42 AM on August 13, 2012

Who's paying 6% interest?

The stock market averages around 5-6% over the long run. It's highly variable, but 50 years is a long time to average out losses.

Also, if you have debt at >6% interest, you can pay that down for a guaranteed >6% return.
posted by miyabo at 8:43 AM on August 13, 2012

Who's paying 6% interest?

The stock market averages around 5-6% over the long run. It's highly variable, but 50 years is a long time to average out losses.

This page says long term (25+ years) returns average 9 - 10%.
posted by rocket88 at 8:48 AM on August 13, 2012 [1 favorite]

The real cynicism of the lottery isn't that 999,999,999 people won't hit the jackpot but that the one that does probably isn't going to be any happier.

I disagree. Lotteries typically are a funding tool for social programs (education, seniors, mass transit) that voters and their elected leaders are often reluctant to underwrite. Essentially we’ve rationalized the legalization of a vice (gambling) as a means of good, even as we transfer the burden for funding those programs to the very people who can least afford it.

That, I believe, is the very definition of cynicism.

And it gets worse. All this nonsense about "daydreaming" is perfectly handy if you can afford it. But it's a twisted society that sells "hope" by systematically siphoning money from poor people.

As usual, our friend, Orwell was on top of things: The Lottery, with its weekly pay-out of enormous prizes, was the one public event to which the proles paid serious attention. It was probable that there were some millions of proles for whom the Lottery was the principal if not the only reason for remaining alive. It was their delight, their folly, their anodyne, their intellectual stimulant. Where the Lottery was concerned, even people who could barely read and write seemed capable of intricate calculations and staggering feats of memory. There was a whole tribe of men who made a living simply by selling systems, forecasts, and lucky amulets.
posted by sixpack at 8:48 AM on August 13, 2012 [4 favorites]

King Bee: "However, lots of people spend lots of money on all sorts of kinds of entertainment. If you're viewing the lottery as something like that, it's not as unreasonable for someone to plunk down a few bucks a week on some tickets."

Someone should make a "Watching Cable Television" simulator, where you spend \$89 and 100 hours every month of your life, and your chances of winning some of that money back is zero-in-a-million so you end up doing even worse than the people who buy lottery tickets and at least have a little bit of hope in their life.
posted by Plutor at 8:58 AM on August 13, 2012 [7 favorites]

This page says long term (25+ years) returns average 9 - 10%.

Moneychimp.com is my usual source for these things. 5-6% is a good estimate after inflation for the stock market as a whole. There are certainly sectors, and time periods, that have done way better than that, but it's hard to translate that into general investment advice.
posted by miyabo at 9:01 AM on August 13, 2012

The latest Lottery Insights magazine.
posted by cashman at 9:05 AM on August 13, 2012

The surprising thing to me about the lottery is how bad its payouts are, relative to other forms of gambling.

If you treat all forms of chance games as equal, you'd be better served saving that \$2/week lotto ticket purchase up, and playing Vegas slots with it. At least their payouts are typically in the 75-95% range (legal minimum is 75% IIRC). Or roulette, which is 94.7%.

In terms of house edge, state-run lotteries are among the harshest to players, which is ironic given their accessibility. They are clearly -- compared to casinos, which exist in a competitive environment and try to entice players with payouts -- uncompetitive, and are able to take players for staggeringly high percentages by virtue of being the only game that you can play while buying a quart of milk and a few gallons of gas down at the corner market.

Perhaps to players this is balanced out by the amount of time it takes to "play" a lottery ticket: days can go by between the ticket purchase and knowing you've lost, during which time you are free to fantasize about the big win. In a casino, you might have only seconds per game, and will burn through your C-note in at most a few hours rather than a year.

But still, it seems suspiciously like another way in which the poor and un-savvy are fleeced, even relative to other gamblers.
posted by Kadin2048 at 9:08 AM on August 13, 2012

gilrain: I dislike the smug expression that the lottery is a tax on people who are bad at math. The lottery is about psychology, not math. It would be far more accurate to call the lottery a tax on hope. However, that's a lot more depressing, so people parrot the pithier line that makes them feel superior.

One study showed that people who felt poor were more likely to play. "[P]articipants were more likely to purchase lottery tickets when they were primed to perceive that their own income was low relative to an implicit standard."

And the counter was that participants who felt less poor were less likely to play, or at least less likely to buy as many tickets.

Also, I've read that some poor people buy expensive things because they feel they'll always be poor, so why not enjoy some luxuries?

One solution is to add a lottery-feature to savings accounts, which is great, until the lotteries regulators think such programs should be treated as lotteries, and try to shut them down, as National Lotteries Board did in South Africa.
posted by filthy light thief at 9:12 AM on August 13, 2012 [1 favorite]

Lotteries typically are a funding tool for social programs (education, seniors, mass transit) that voters and their elected leaders are often reluctant to underwrite. Essentially we’ve rationalized the legalization of a vice (gambling) as a means of good, even as we transfer the burden for funding those programs to the very people who can least afford it.

Much as we saw during Prohibition and continue to see during the War on Drugs, people are going to indulge their vices. Gambling was a huge moneymaker for organized crime, and remains so in places that don't have legalized gambling. Regulating the lottery and casinos provides significantly better control.
posted by Etrigan at 9:12 AM on August 13, 2012 [1 favorite]

Regulating the lottery and casinos provides significantly better control.

I'll concede that point, but that only underscores the inherent dearth of progressivism in government promotion of the lottery.
posted by sixpack at 9:20 AM on August 13, 2012

There's no point railing at people to stop playing the lottery. If people truly grasped statistics, everyone would be too scared to drive, and no one would be afraid of flying.
posted by ErikaB at 9:38 AM on August 13, 2012 [2 favorites]

A friend's father used to have six numbers taped to the bottom of the TV - family's birthdays mainly, I think, like a real lottery player. When the lotto results were read out on the news he'd check them and prove to the daughter that they'd never win. Those numbers were up there for years, I'm pretty sure he never "missed" a big prize.

Our office plays when the pot gets big. I view the \$2 I throw into as a form of insurance. If the office pool ever does win, I do not want to be the only one left in the department.

Yeah, me too and I think a lot of people think the same way. Personally I love to gamble but on horses or sports, the lottery is just a lot less .... fun.
posted by jamesonandwater at 9:54 AM on August 13, 2012

A friend's father used to have six numbers taped to the bottom of the TV -family's birthdays mainly, I think, like a real lottery player. When the lotto results were read out on the news he'd check them and prove to the daughter that they'd never win. Those numbers were up there for years, I'm pretty sure he never "missed" a big prize.

Your poor friend. Her father was a total and insufferable prick.
posted by item at 10:05 AM on August 13, 2012 [3 favorites]

All this nonsense about "daydreaming" is perfectly handy if you can afford it. But it's a twisted society that sells "hope" by systematically siphoning money from poor people.

I reject the assumption that poor people are less capable than affluent people of deciding how to spend their money.

Or if you prefer, I decline to get into the "regulating other people's lives for their own good" business - as I dislike the company I would be forced to keep.
posted by Egg Shen at 10:27 AM on August 13, 2012 [1 favorite]

Ah yes. The lovely lottery, which here in Texas was touted as the salvation for public education funding . Evidently, *nobody* in Texas plays the lottery, because public school funding has been gutted in recent years.
posted by PuppyCat at 10:27 AM on August 13, 2012

Garm: "Stop bashing the lottery people. Its the only route to social mobility we have left here in the US."

What a cynic you are. There's always drug dealing, armed robbery, insurance fraud... You have no imagination.
posted by Splunge at 10:36 AM on August 13, 2012 [2 favorites]

Huh. I keep winning the \$40,000,000 within a year every time. I must just be better than y'all.
posted by The World Famous at 10:42 AM on August 13, 2012 [1 favorite]

Oddly enough, I'd just like to win the forty mil on the simulator.

I would be kind of pissed off if I won forty mil on the simulator.

Which isn't going to happen but still.
posted by louche mustachio at 10:45 AM on August 13, 2012

Oh man, I'm now addicted to the online Powerball simulator. Is that even a thing?
posted by Mister_A at 10:51 AM on August 13, 2012 [3 favorites]

All I know is I'm not wasting all my luck on this simulation. Suckers!
posted by graventy at 10:53 AM on August 13, 2012 [1 favorite]

Haha! This thing confirms I have shit luck, 22 years and didn't even get a \$100 payout yet.
posted by Mister_A at 11:16 AM on August 13, 2012

Our office plays when the pot gets big. I view the \$2 I throw into as a form of insurance. If the office pool ever does win, I do not want to be the only one left in the department.

An office pool at another company in our building once won a large prize. I was discussing this with a colleague on the elevator when it stopped on their floor and the women who was getting off turned, looked at us with a sour face, and said, "I work with them."

posted by samhyland at 11:21 AM on August 13, 2012

Hah! It only took 5446.1 years for me to win \$2,000,000, and now I'm \$650,000 up. Now I need to close this or I'll actually spend the next 5,446 years tracking my fictional lottery winnings.
posted by Copronymus at 11:47 AM on August 13, 2012 [1 favorite]

The people who don't play the lottery unless it's above \$XM kind of perplex me.

"Yeah, anything under \$20 Million isn't really worth my time."
posted by ODiV at 11:48 AM on August 13, 2012

The World Famous: Huh. I keep winning the \$40,000,000 within a year every time. I must just be better than y'all.
Nah, just more bootstrappy.
posted by IAmBroom at 12:02 PM on August 13, 2012

The people who don't play the lottery unless it's above \$XM kind of perplex me.

"Yeah, anything under \$20 Million isn't really worth my time."

This isn't really why people say that. Caveat: it's never a good idea to play the lottery. But there are situations where it's more rational than others, or in other words, you're getting better value for your money. This article explains it pretty well.

In the simplest scenario...

Let's start with the simplest case. Imagine that you are the only person buying a Mega Millions ticket. A ticket costs \$1, and the probability of winning the jackpot is 1 in 175,711,536. Therefore, if the jackpot is expected to yield exactly \$175,711,536, then your \$1 ticket has an expected value of \$1 -- it's an even-money proposition, albeit one with very high variance. To simplify the calculations, assume for now that the jackpot is the only prize; we'll consider the relatively small effect of the smaller prizes in a moment. I'm also assuming there are no intangible benefits to playing, such as the thrill you get from watching the draw.
But it's never the simplest case, since you're not getting the whole payout, and also you're more likely to be splitting jackpots to matching tickets once the total gets more and more enticing for other players. The simplest scenario also ignores the value of non-jackpot wins.

The chart on the site points out (and this is for a 1 dollar ticket - the curve is probably worse for a 2 dollar ticket like MM) that the closest it gets to rational is around 400 million.

It's sort of like Pot Odds in poker.
posted by codacorolla at 12:28 PM on August 13, 2012

It's sort of like Pot Odds in poker.

Or Poker Odds in pot.
posted by item at 1:46 PM on August 13, 2012

I finally won \$40K after 1023 years:

Spent: \$319,194
Won: \$83,922
Profit: \$-235,272
For every dollar I gave them, they gave me: \$0.26
posted by maxwelton at 2:14 PM on August 13, 2012

Okay, now someone build one for Cash Win Fall.
posted by fragmede at 2:27 PM on August 13, 2012

The lottery here in the UK has a similar system. They buy a ticket for you every week and they only email you if you win something. So basically you are paying a quid a week to not receive an email. I think there is some sort of anti-spam solution in there.
posted by like_neon at 1:41 AM on August 14, 2012 [1 favorite]

In Ireland, the government offers Prize Bonds as a way of gambling without losing capital (except to inflation). The only people I know to own any exclusively received them as gifts from their grandparents.
posted by rollick at 2:05 AM on August 14, 2012

I've played now 30,000 years of simulated Powerball Lottery, and this is what I have to report:
Games played: 3,119,995 (2 tickets each week for 30,000.0 years)
Money Spent: \$9,359,985
Money Won: \$1,363,790
Net Loss: \$7,996,195
Return on \$: \$0.15
I have yet to win either of the top two prizes. Results are even worse than I imagined they would be.
posted by Daddy-O at 1:15 PM on August 14, 2012

One of my childhood friends' parents recorded the lottery numbers every week. It was like some weird hobby they had. They'd write it down then enter it into a spreadsheet and print it out on this giant dot matrix ream. I don't even think they really analyzed it, they were just collecting data for some other person to one day discover. They were like the Tycho Brahe of lottery numbers.
posted by nathancaswell at 5:43 AM on August 15, 2012 [2 favorites]

ODiV: "[P]eople who don't play the lottery unless it's above \$XM kind of perplex me."

Yes indeed.
posted by wierdo at 6:21 AM on August 15, 2012 [1 favorite]

I've played now 75,724.9 years of simulated Powerball Lottery, and this is what I have to report:
Games played: 7,875,391 (2 tickets each week for 75,724.9 years)
Money Spent: \$23,626,173
Money Won: \$43,719,636
Net Profit: \$20,093,463
Return on \$: \$1.85

I finally won the top prize (\$40,000,000) but I have yet to win the second best prize of \$2,000,000. According to the odds, I probably should have won that one at least 26,000 years ago.

I'm not sure when my big pretend jackpot hit, but it was some time after 69,000 years of play when I last checked it. Will I start playing the lottery with real money now? No. The odds say there should be 1 winning ticket out of every 175,223,510 tickets sold (that's one jackpot ticket every 1,684,841 years at the rate of 2 tickets per week.) I won in fewer than 7,875,391 attempts or 75,724 years.
posted by Daddy-O at 6:50 PM on August 15, 2012

How To Lose \$100,000,000(PDF)
For certain guys, winning the lottery can be just about the worst thing to ever happened. You might as well hand them a grenade. Plenty of winners have blown their dough in a post-payoff delirium, but noone has done it quite like Big Jack.
posted by the man of twists and turns at 12:50 AM on August 17, 2012

gilrain: "the lottery is a tax on people who are bad at math. It would be far more accurate to call the lottery a tax on hope. "

Preach it, brother! Sounds exactly right to me.
posted by InsertNiftyNameHere at 1:50 AM on August 17, 2012

For certain guys, winning the lottery can be just about the worst thing to ever happened. You might as well hand them a grenade. Plenty of winners have blown their dough in a post-payoff delirium, but noone has done it quite like Big Jack.

Heh. Is it wrong that I like this guy much more than someone who invested it all sensibly? I'd even buy him a beer.
posted by jaduncan at 4:28 AM on August 17, 2012

Ironically, the simulator site is blocked at my company:

Restricted Category: Gambling
URL attempted: http://justwebware.com/powerball/powerball.html
posted by sarah_pdx at 4:22 PM on September 6, 2012

Think of your best friend in first grade. Pick up the phone and dial a number picked out of your head. If that best friend from first grade answers the phone, then you've won the lottery.
posted by StickyCarpet at 11:15 PM on September 6, 2012

« Older Polygonal Portraiture   |   19th Century Prostitution Newer »