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posted by janrinok on Thursday February 12 2015, @11:58PM   Printer-friendly
from the if-it-feels-good... dept.

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."

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  • (Score: 0) by Anonymous Coward on Friday February 13 2015, @03:43AM

    by Anonymous Coward on Friday February 13 2015, @03:43AM (#144479)

    The odds are deliberately obfuscated but they are published.

    Powerball is a good one to teach people how odds work. It says on the website 1 in 31.85. What does that mean to most people? Nothing. As they do not understand the mathematical term 'in'. I teach people what it means is if you buy 100 tickets you will probably (not always) win about 3 times or 1 out of every 32 tries. Those 3 times will probably be the lowest prize. The cost is 200 dollars and you get back 12 dollars on average.

    Use that method to teach people. As it also demonstrates you do not improve your odds by buying extra tickets. []

    I buy one every few months because its a bit of mindless fun. But even the infinitesimal possibility is possible. It is a wildly easy way to gamble for a low amount (usually 1-2 dollars depending on which one is bigger). 2 dollars means very little to me anymore. The odds stink (~3%). But the closest place to gamble with better odds is about a 5 hour drive away...

  • (Score: 2) by c0lo on Friday February 13 2015, @09:12AM

    by c0lo (156) Subscriber Badge on Friday February 13 2015, @09:12AM (#144538) Journal

    But the closest place to gamble with better odds is about a 5 hour drive away...

    Well, you can always set up a stock trading account online.

    • (Score: 0) by Anonymous Coward on Friday February 13 2015, @04:15PM

      by Anonymous Coward on Friday February 13 2015, @04:15PM (#144640)

      I did :)

      Up ~400k on 150k investment because I do not gamble I pick companies and mutual funds that make money and have low or reasonable debt for what they do :)

      Gambling is gambling. Picking long term stocks takes research. Gambling the math on average never works in your favor. With stocks you can see ahead of time which will have a yield and on average you can do better. You will have losers and winners. For example staying away from oil may have cost me tons of opportunity but it is a purely manipulated market (as Saudi Arabia has shown) meaning you are at the whim of some .01%er.