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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: 2) by Joe Desertrat on Friday February 13 2015, @08:02PM

    by Joe Desertrat (2454) on Friday February 13 2015, @08:02PM (#144724)

    That's the other illogical, funny part of the lottery: When people fantasize about so much money they would get (like, 100$ million) and discover how much would they have to pay in taxes (like, 40$ million), they get all incensed about how much taxes they would have to pay instead of keeping their fantasies with the real value of the prize (60$ million after taxes).

    I'm a millionaire! Suddenly I have an opinion on the capital gains tax.

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  • (Score: 1) by monster on Monday February 16 2015, @07:32AM

    by monster (1260) on Monday February 16 2015, @07:32AM (#145532) Journal

    I'm daydreaming about becoming a millionaire! Suddenly I have an opinion on the capital gains tax.