Thursday, October 15, 2009

Why the Lottery Sucks

It's generally assumed that most people value money and want to have as much of it as possible. They'll pick up a quarter or a dime off the sidewalk, they'll buy in bulk to save a few bucks, they won't throw their money into a hole for no reason. Yet, perplexingly, a great many of them play the lottery.

Statistically speaking, no one ever wins the lottery. As with any game where players bet against a "house," the players are all at a significant disadvantage. Casinos are not built to give people money; state lotteries are established because the state needs money and can get it through a rigged game of chance easier than it can through straightforward taxes. (When the mob had lotteries, it was called "numbers running" and was illegal.) And the lottery is definitely rigged against the players, make no mistake.

Let's take the multi-state Mega Millions lottery for example, which you can play for a dollar. Your chance of winning the jackpot is roughly 1 in 176 million. To win $250,000, your chances are 1 in 4 million. These are not good odds. You are literally more likely to be hit be lightning than win the lottery, by several orders of magnitude. It's much more likely that a meteor will hit Earth than it is that you will win the lottery. It's more likely that meaningful health care reform will be passed in our lifetime. It's more likely that a rich uncle you never knew you had will be killed by a simultaneous meteor/lightning strike and leave you his fortune. You are not going to win the lottery.

Yes, some people do hit the jackpot every now and then. This doesn't mean that it was a good idea for them to play. This somewhat bizarre line of reason comes from a concept in gambling theory called Estimated Value, or EV, which evaluates decisions based on the cumulative impact of making the same decision hundreds or thousands of times. Good decisions have "positive EV" and bad ones are said to have "negative EV."

For instance, driving to work at 5 miles above the speed limit a positive EV--you'll get to work faster with no serious risk to yourself or others. But driving 50 miles above the speed limit has a negative EV, even if doing it once got you to work even faster, because sooner or later you'll cause an accident or get pulled over. (Actually, considering the damage cars do to the environment, driving a car at all probably has negative EV, but that's another post.) Minting pennies, for the United States, has a negative EV. The important thing is that EV is evaluated independently of outcome. If you get drunk and have unprotected sex with a stranger and nothing bad comes of it, that doesn't mean you made good decisions that night. Similarly, just because you won the lottery, it doesn't mean it was a good idea, EV-wise, to play.

In George Orwell's 1984 the government lottery is a way to keep the lower classes distracted from the day-to-day misery that is their lives and to keep them dreaming of riches they could win. I don't think the Mega Millions is that consciously manipulative, but there's no denying it's played mainly by poorer people and does tend to market itself as a fantasy. ("Dare to Dream" was one recent slogan.) People don't calculate odds when they play the lottery--what they're really buying is the chance to believe that a heaven on Earth is theirs if they get really, really lucky. It's a religion without the inconvenience of a God who commands you to do things.

But that sounds like a fairly lousy religion to me. If you think of the lottery the way people want you to think of the lottery--as a dream, as the idea that blind luck will lift you out of your life and make you rich, which will make you happy--then you're going to lose money. If you think of the lottery in terms of the money you lose every year by playing, it seems less appetizing. Playing the Mega Millions every chance you get (twice a week) costs you about $100 dollars a year. For a hundred bucks, you could buy some books or movies and let them pull you out of your life for a little while. Or you could have a wildly extravagant dinner, or buy some really good weed and smoke it all at once. Or you could take that money, go to your nearest Indian casino, find a roulette wheel, and bet it all on a random number. That way, at least you'd be getting better odds.

1 comment:

  1. The lottery is funny money it creates no wealth nor does enhance the society on a whole. If it cost zero to run and everybody won and money went to students it would be a great idea. But it takes brain power to run that could be doing something of real value to society and the looser far out weight the winners and as for education where in the Constitution does it say we have to give everyone a cheap education. ahhhhhh NO Where