

The sad positive feedback loop of lotteries - cwan
http://scienceblogs.com/cortex/2010/05/lotteries_2.php

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MartinCron
I wish I remembered where I heard this concept, as it helped make the tendency
to purchase lottery tickets by low-income individuals more understandable:

    
    
       Buying lottery tickets is buying 'hope insurance'
    

From my own perspective, there are a few different ways in which I could
become fabulously wealthy, or at least much more financially secure than I am
now. I could create or work for a hugely successful company. I could make a
killing in real estate. I could win second place in a beauty contest. Lots of
different things.

I try my best not to be materialistic, but there are times when I see
beautiful homes or fancy cars or $650 Prada shoes and I think "I could so
totally enjoy that someday". There's at least a little bit of hope that I
could, someday.

There are lots of people out there who, without the ability to buy lottery
tickets, would feel they have no possible way to become fabulously wealthy
(even if that feeling isn't strictly correct). For these people, there's no
sense of hope for breaking out of where they are, and the absence of hope is
very painful. Spending a few dollars a week on lottery tickets to keep that
hope alive becomes a sort of rational purchase. People aren't actuarial
robots.

I'm not saying that I think that buying lottery tickets are a good idea, or
that government-run lotteries aren't a form of abusive regressive taxation,
but the conclusion of the linked article that people are still poor because
they keep on buying lottery tickets is naive and condescending.

~~~
MikeCapone
'Hope insurance' makes a lot of sense. The question we should ask is, do
lottery ticket buyers get their money's worth?

If it makes them feel more hopeful and happier, it might be worth the price,
even if they never win anything substantial.

But if it becomes an addiction that ruins their lives, then it's pretty
obvious that they aren't getting more than they put in.

~~~
borism
I don't think lotteries are ruining a lot of lives the same way casinos do.
One's lottery spending is pretty limited.

~~~
patio11
You could buy your child a netbook -- or a shelf of real books -- for the
average yearly lottery expenditure in Chicago's poorest neighborhoods. Or you
could save the money and use it as a cushion against cash shocks, preventing
you from having to go to payday lenders, which are another unsavory business
which exists to keep people poor and stupid.

See:
[http://www.chicagoreporter.com/index.php/c/Cover_Stories/d/I...](http://www.chicagoreporter.com/index.php/c/Cover_Stories/d/Illinois_Lottery:_The_Poor_Play_More)

~~~
MikeCapone
Indeed, or simply go get a couple of personal finance books at the library and
turn your life around. Too bad that few people actually do simple things that
could improve their situation... If the money wasn't spent on lottery tickets,
I'm not sure it would be spent on much better things.

------
MartinCron
In the This American Life episode #329, there's a great interview with a
person who buys up lottery winners' annuities for (discounted) lump sums.
After seeing what happens to the lives of so many "instant millionaire"
lottery winners, he starts seeing winning the lottery as a horrible curse
instead of as a wonderful blessing.

[http://www.thisamericanlife.org/radio-
archives/episode/329/N...](http://www.thisamericanlife.org/radio-
archives/episode/329/Nice-Work-If-You-Can-Get-It)

The interviewee, Ed Ugel, wrote a book on the subject:
<http://www.edwardugel.com/money-for-nothing.html>

~~~
aristus
I used to work for a company that did this. Rather, they had moved on to
advising people who did this. Cashflow brokering is sometimes a sensible
business for actual businesses, eg you have $1M in firm orders and need some
cash today to fill them.

But I feel the same way as that guy about most lottery winners. Being rich
really is a habit of mind that you can't learn overnight.

------
grellas
I remember when California first instituted its lottery and, upon hearing that
1/3 of the proceeds would go toward financing education (the political
justification for the system), 1/3 would go toward administrative expenses,
and 1/3 would go toward paying off winners, I immediately envisioned a poker
game with six guys being told that a stranger would be taking away two-thirds
of every pot for each hand they played and thought, "what a sucker game that
is."

In his autobiography, Malcolm X spoke of the numbers-game racket that so
decimated Harlem in his day. They used to call this exploitation. Now they
call its modern counterpart enlightened public policy. Pretty sad.

~~~
noilly
"I picked strawberries, and though I can't recall what I got per crate for
picking, I remember that after working hard all one day, I wound up with about
a dollar, which was a whole lot of money in those times. I was so hungry, I
didn't know what to do. I was walking away toward town with visions of buying
something good to eat, and this older white boy I knew, Richard Dixon, came up
and asked me if I wanted to match nickels. He had plenty of change for my
dollar. In about a half hour, he had all the change back, including my dollar,
and instead of going to town to buy something, I went home with nothing, and I
was bitter. But that was nothing compared to what I felt when I found out
later that he had cheated. There is a way that you can catch and hold the
nickel and make it come up the way you want. This was my first lesson about
gambling: if you see somebody winning all the time, he isn't gambling, he's
cheating."

------
patio11
See also: <http://www.taxfoundation.org/news/show/1126.html>

There are plenty of stupid governmental policies, but few as _maliciously_
stupid as lotteries, where the government spends hundreds of millions of
dollars buying advertising to encourage poor people to lose their money.

~~~
diziet
Yet can you imagine a public and political campaign to remove lotteries? Any
kind of reasoning will sound condescending, especially with the reward
structure build around infrequent but noticeable payoffs keeping the players
coming back to it.

------
lukeqsee
Lotteries are a sad story of Government policy gone awry. They prey on the
poor, uneducated. It seems they could be just a devious plot to get back the
tax refund the poor (as in sad) people get every year.

~~~
watchandwait
Yeah, the article fails to recognize that the lottery's returns are so poor
because the government has a monopoly on them. At least private sector
lotteries would have to compete on payout levels.

~~~
fh
No, they wouldn't. All that they'd compete on is _perceived_ payout. In other
words, if you have private competing lotteries, they'd optimize the heck out
of the feedback loop explained in the article, ruining people's lives even
more.

------
zokier
I buy lottery tickets occasionally (few times a year). I have few
'justifications' for that:

* The money goes to charitable purposes. So if I don't win, I have given money to charity, which is kinda nice.

* Somebody always wins (eventually). And hopefully she/he will be bit happier, at least momentarily.

* It is actually possible for me to win. Even a small chance of winning is a lot more than zero possibility.

Overall from my perspective it seems a net positive for a few dollars a year.
Of course poor people spending tens of dollars a week is quite different
matter, and bit problematic.

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davemabe
The lottery is a tax on people who are bad at math.

~~~
mynameishere
If you actually ask a lottery customer, you'll find that they have a basic
grasp of the math. I prefer to think of the lottery as a tax on people willing
to pay taxes, and that's as moral as taxation can get.

Anyway, the real motivations of the lottery customer are not as stupid as
people think. Consider:

1\. Odds of Joe Beercan getting rich through the usual methods (years of hard
work, inheritance, rock stardom): Zero. And Joe knows this better than anyone.

2\. Odds of Joe Beercan getting rich through the lottery: One in 600 billion.
He knows this is a longshot, but that it's better than nothing.

If you want even the _merest_ shot at getting rich, the lottery's not so bad.
(Though hoping for 10 blackjacks in a row is probably still better.)

------
gojomo
Good thing poor people are protected from investing in private securities
offerings, via regulation and 'accredited investor' limits, so that they can
spend more on government-issued lottery tickets.

~~~
borism
the odds are pretty similar though

