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Neil Irwin writes at the NYT that financially literate people like to complain that buying lottery tickets is among the silliest decisions a person could make but there are a couple of dimensions that these tut-tutted warnings miss, perhaps fueled by a class divide between those who commonly buy lottery tickets and those who choose to throw away money on other things like expensive wine or mansions. According to Irwin, as long as you think about the purchase of lottery tickets the right way — purely a consumption good, not an investment — it can be a completely rational decision. "Fantasizing about what you would do if you suddenly encountered great wealth is fun, and it is more fun if there some chance, however minuscule, that it could happen," says Irwin. "The $2 price for a ticket is a relatively small one to pay for the enjoyment of thinking through how you might organize your life differently if you had all those millions."
Right now the Multi-State Lottery Association estimates the chances of winning the grand prize at about 1 in 175 million, and the cash value of the prize at $337.8 million. The simplest math points to that $2 ticket having an expected value of about $1.93 so while you are still throwing away money when buying a lottery ticket, you are throwing away less in strictly economic terms when you buy into an unusually large Powerball jackpot. "I am the type of financial decision-maker who tracks bond and currency markets and builds elaborate spreadsheets to simulate outcomes of various retirement savings strategies," says Irwin. "I can easily afford to spend a few dollars on a Powerball ticket. Time to head to the convenience store and do just that."
(Score: 5, Insightful) by bob_super on Friday February 13 2015, @01:22AM
It's more than just a tax, according to the people who built a massive city in the desert.
Whether it's an escape from reality, the need to see the other side of the ocean, or all these things that don't fit mathematical logic, humans have these "what if/why not me" cravings. Lotteries are a cheap legal way to open the pressure relief valve on reality and its unfairness.
As a side-effect, many people who believe they will eventually win the lottery are nice enough to view economic policy as if they were already rich.
TMYK: if you live in the US, the odds of the Megamillion are similar to the Powerball. Powerball costs twice as much ($2 vs $1). Considering that both grand prizes are instant-retirement events ($40M and up vs $12M and up), you've got to be amazingly greedy to pay twice as much for each chance.
(Score: 3, Interesting) by TheLink on Friday February 13 2015, @03:03AM
If you're some poor person stuck in some minimum wage job, your odds of ending up with > $100 million are about as close to zero if not closer. Now if you started your own business there's a higher chance of you becoming a millionaire or multimillionaire but the odds of getting >$100 million are still low plus the effort involved is much higher. There are also other risks involved- there are lots of people with failed businesses, not many sell books or give interviews on how they failed and failed again and still haven't succeeded[1].
There are people who won the "genetic lottery" and have the energy and endurance to work 2 or more jobs and NOT die/break (to build up capital etc), and have other things right, but for the rest - what really are their odds of going from burger flipper to having hundreds of millions?
So if you're poor and wanted to be merely normal "rich" don't bother with lottery tickets - maybe try to invest what little you earn. But if you want to be swimming in hundreds of millions of dollars within your lifetime, buying a powerball ticket is a rational decision (especially when the jackpot gets big).
[1] As for those "success" advice, I'm sure you've seen some that say "don't give up", whereas others that say "know when to cut your losses", some say "focus on one thing" others say "run multiple businesses, don't be a one legged stool". There are valid points behind the different ideas, but you have to figure out which are applicable for the scenarios you're in.
(Score: 3, Insightful) by linuxrocks123 on Friday February 13 2015, @07:21AM
If you are intelligent and born in a developed country, and even some developing countries, you have a good chance at a middle-class lifestyle if you do well in schools. Even in the US, where college is very expensive relative to many other places, there are scholarships, Pell Grants, and, in some states, programs such as HOPE [gacollege411.org], which, together, can make college a real possibility.
If, on the other hand, you are less intelligent, there are a variety of blue-collar jobs which pay quite a bit of money and do not require a college degree. These take some research to find, but are not a secret. [forbes.com] (Note: please do your own research before planning your life based on a single magazine article.)
Finally, if you think you need tens to hundreds of millions of dollars to be happy in life, you are likely incorrect, and will likely be unhappy even after winning the lottery. You probably should seek psychological counseling and determine what the real cause of your unhappiness is. There are many stories [forbes.com] about lottery winners who actually end up wishing -- in all seriousness -- that they hadn't won the lottery. The people who think they need millions of dollars to be happy are probably the same ones with so little emotional maturity that they let having a truckload of cash dropped in their laps ruin their lives.
They are probably also the same people who don't really understand odds well enough to realize that playing the lottery is not an "investment". They are probably the kind of people who let the temptation of the lottery lead to gambling addiction. They need help from the state, and, instead, the state takes advantage of their disorder. There are people right now taking out payday loans to buy lottery tickets. There is nothing rational about what they are doing.
If you want to be swimming in hundreds of millions of dollars within your lifetime, that's an okay fantasy to have sometimes. But it should remain a fantasy, and not a life goal, and indulging the fantasy by actually buying lottery tickets might be a sign that you need to take a serious look at your life and figure out what's making you prefer that fantasy to real life. At least, if I noticed myself doing something that irrational, I'd want to at least sit down and think about why.
(Score: 1, Insightful) by Anonymous Coward on Friday February 13 2015, @08:32AM
Real great insight and rational thinking there by you ;).
(Score: 0) by Anonymous Coward on Friday February 13 2015, @03:30PM
When that $2 is worth about 15 minutes of work time?
$2 can get you: 12 eggs, two loafs of bread, a box of cereal, 13 bananas, three cans of corn, or three pounds of potatoes. I am lucky enough to have done well enough in the genetic lottery for intelligence that I can realize this. I know others are not as fortunate and I feel bad for them.
(Score: 2) by Freeman on Friday February 13 2015, @05:14PM
If you catch a sale, you can get 6 pounds of Potatoes or more, but that's usually a seasonal thing.
Joshua 1:9 "Be strong and of a good courage; be not afraid, neither be thou dismayed: for the Lord thy God is with thee"
(Score: 1) by Anonymous Coward on Friday February 13 2015, @07:38PM
Also, discount vegetables and fruit that are about to expire. I didn't mention those or sales because the poor often do not reliably have the luxury of waiting to take advantage of those offers. Bus fares also add up if you try to get things at different stores.
(Score: 1) by calzone on Tuesday February 17 2015, @05:14AM
Where are you finding any loaf of bread for $2? Let alone 2 of them? Let alone bread actually worth eating that won't destroy your health?
Time to leave Soylent News [soylentnews.org]
(Score: 4, Touché) by c0lo on Friday February 13 2015, @09:01AM
Yea, yea... Look, I promise that's the first thing I'm gonna do after I win the lottery.
(large grin)
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 0) by Anonymous Coward on Friday February 13 2015, @08:43PM
Bullshit, it can be a very successful investment strategy. [youtube.com]
(Score: 2) by TheLink on Saturday February 14 2015, @08:22AM
They are probably also the same people who don't really understand odds well enough to realize that playing the lottery is not an "investment".
Then there are a lot of other people don't realize that it actually becomes an investment when the jackpot goes past a certain amount, and the conditions and terms are favourable.
See: http://www.businessinsider.com/heres-when-math-says-you-should-start-to-care-about-powerball-2013-9?IR=T& [businessinsider.com]
Of course if more people realize this and start buying, the higher the jackpot will have to be.
See also:
http://www.independent.co.uk/news/how-to-make-a-killing-on-the-lottery-1322272.html [independent.co.uk]
http://www.nytimes.com/1992/02/25/us/group-invests-5-million-to-hedge-bets-in-lottery.html?pagewanted=all [nytimes.com]
http://www.forbes.com/sites/joshbarro/2012/03/30/can-you-ever-guarantee-a-mega-millions-win/ [forbes.com]