The Philadelphia Inquirer figured it out:
TL;DR scratch tickets aren't random, rather they are intentionally spaced out. The Texas lottery releases spacing info to the public. Once you have a regular lottery annuity (the first one was luck) you can spend vast sums on lottery tickets and write off your losses, so the public subsidizes your lottery purchases.
One particular gem: they said that a game returning 66.9% of the money spent on it has a "remarkable" return - that's a loss of 33.1 cents on every dollar and would quickly render anyone playing it without a mathematical advantage bankrupt. They also suggested that such a return reduced variance in the game, apparently not understanding that this return includes the top, multi-million dollar prizes. They confused hit frequency with the return of the game.
The tax incentive thing is also ridiculous. While it is true that one may deduct their losses up to the amount of their taxable winnings, if she were playing without an advantage, she would still lose and this offered no help on beating odds of 1 in 18 septillion.
Finally, they could have handed her tickets for free all day and she should have only hit what she did every quadrillion years. There are literally not enough raw materials available on our planet to produce the 18 septillion tickets that should have been necessary to hit what she did - even if mankind devoted all of its resources to the project.
The best speculative theory is that she was able to deduce an approximation of the algorithm used to distribute the tickets, but again that is only speculation. She clearly figured something out; to say that this article nailed it, however, is a serious misstatement.
This is a dubious statement, but if you believe it, don't you think it calls into question some of the "odds" that have been bandied about with no support?
This particular situation reminds me of that of racehorse owners. Most owners will lose money in racing in any particular year. They hope to make enough in good years to break even over time. If there's never a good year, the IRS might eventually drop the "hobby" ax.
This is probably the biggest problem with the steady defunding of the IRS. They can still catch shameless cheaters like the morons who don't send in their employees' payroll deductions, in no small part because no CPA will touch that shit. CPAs are usually willing to discuss write-offs, however. The expansion of the set of acceptable write-offs is inherent to any income tax system, and since it has been left unchecked it has undermined the system we have.
Though the actual scheme was hatched by Charles Marie de la Condamine, rather than Voltaire. But Voltaire is the one who got the most fame (and possibly money) out of it.
It was a quote from 'The Friends of Voltaire', and misrepresented him.
That article also gave more information on the lottery's stance on the matter:
But Paul Sternburg, the lottery’s executive director, believes they have no reason to apologize or even change the lottery's procedures -- pointing to $11.8 million in profits in 2011.
"It’s a niche game for a different audience," he told the Boston Globe. "You want to bring in as many players as possible. Some people chase a huge jackpot. Others are looking at odds."
Of course, not everybody can exploit the loophole, only people with at least $100k to invest in the endeavor. So this means that the government is giving an unfair advantage, in a game that is supposed to be random chance, to the wealthy. As soon as those who can't take advantage of the lottery figure this out, they stop playing. This means the loophole stops being effective and the rich drop out too.
The Boston Globe article implies that the MIT syndicates bought so many tickets they actually affected the distribution of the prizes in their favour
Not to mention that having even just $1000 of free cash to "invest" in a positive sum gamble already puts you in a higher income/wealth bracket than most lotteries' most loyal players.
Anyone who knew there was a way to garner the profits from the lottery, but didn't know the way, would be a fool to play.
Nope, not at all. These people are playing by the rules. The lottery officials are aware of their play; and yet don't consider it illegal. There is nothing wrong with using your superior skillset legally to make some money.
As long as people think they can get rich quick, it's a good design.
If the game has a bug that only a few players know about, it isn't fair, by definition.
Consider, for example, one of those "how many marbles are in this jar?" games. If I use my knowledge of math and physics to derive a pretty accurate estimate, it's not wrong, is it?
One lottery would ship the winning tickets roll to one zipcode. Apparntly, they printed out the winning tickets and just queued it up via whatever delivery service they use, which turned out to be deterministic. No one ever coded in randomness in regards to store delivery. Someone figured this out by noticing the same few stores produced all the winners. He then went and bought a whole bunch of tickets from those stores when a new scratch-off game appeared and won against significant odds.
Or at least that's the story he presents, which is questionable as scratch winners aren't usually publicly reported. Some think he had inside information from a friend or relative in the Lottery commission who told him about that lack of randomness in delivery.
Just like we where prohibited from gambling on the online gambling site i worked for a couple of years ago.
They told me that employees were allowed to purchase tickets. The theory was, if employees can't be trusted to buy tickets, there must be a flaw in the system. And if there's a flaw in the system, then it will be exploited whether you prohibit employees form directly purchasing tickets or not.
That obviously does not map directly to the employees of companies that print scratch-and-win tickets, of course.
prior discussions on HN:
Disclaimer: ...but I have a time machine ;-)
Thus, when the jackpot rose above this value, it became economically viable to buy up the entire "space" to guarantee a win; this would result in a profit so as long as no one else bought a winning ticket. This is what a group of individuals attempted to do in May 1992.
They were limited by the physical requirement of filling out all such possible combinations on the paper tickets, but they attempted to spread out the work by pre-filling out combinations over several months and waiting for the jackpot to rise to a large value before "deploying" the tickets.
Maybe twice that value, to account for taxes (idk Irish lottery tax rates though).
Over and over and over, some people have winning tickets, but most people have losing tickets. When a lottery is structured in the typical parimutuel way, as most lotteries are, even if you buy all the tickets available for sale in the next drawing, which takes a big investment, you can't be sure of winning a full prize individually, because other bettors may have a collision with your choice of a winning ticket number. tl;dr: A bug in one state lottery game was discovered by MIT students, who invested in exploiting the bug until the game was closed.
The fact that everyone involved apparently got what they wanted out of the situation makes that posture even more absurd.
 viz. per the article, the MIT group got a 15-20% return, the Lottery profited from the tickets the MIT group bought, and the normal lottery winners, presumably got a mildly lower EV, but were never completely deprived of their shot at the jackpot (which is the only thing they apparently care about, since if they were sensitive to EV, they wouldn't be playing the lottery without a strategy like the MIT group's).
BUMP: those downvoting. It's a serious question. The article doesn't explain the student's methods. I really don't know what they did to game the system. Is it well known?
When the jackpot reached a certain point, they'd increase the payout on the lower tier prizes (match 5, 4, 3) from ($4000, $150, $5) to something more significant.
Instead of needing to match all 6 numbers (range 1..46), you could get a good return by only trying to match a smaller set. I guess they worked out a good distribution of tickets to purchase that covered a large percentage of those possibilities. They were purchasing 300k tickets to guarantee their 15-20% ROI.
"The inspector general’s report claims that lottery officials actually bent rules to allow the group to buy hundreds of thousands of the $2 tickets, because doing so increased revenues and made the lottery even more successful."
If it isn't illegal, what's wrong with using brains to make money?
MIT students and former students did make it a practice to beat the casinos around the world. http://en.wikipedia.org/wiki/MIT_Blackjack_Team It is at least strongly controversial that they made millions by turning the tables on casinos. Unlike casinos who ask winners to keep coming back and playing as long as possible since odds are they will lose their winnings if they continue to play.
My dad had a friend who had won tens of thousands of dollars in Las Vegas. I still remember my dad talking with him in the 1980s on the phone while he was at the table. My dad told him to take the money and run. My dad's friend lost all of it in the 40 minutes and didn't listen to his advice.
For instance, other parts of the world have moral principles more in line with "don't get caught" or "don't embarrass your superiors" or "never side with anyone against The Family" than with "do no harm".
The typical American standard of morality is set so high that no one, other Americans in particular, including the very person professing that moral standard, can be reasonably expected to live up to it. Hypocrisy abounds among those with ultrahigh moral standards. Furthermore, the details of American morals are so diverse that anyone who manages to be a paragon by one person's standard may be no more than a low-life slimeball by another's.
In contrast, compliance with the letter of the law is a far more achievable standard.
If there is anyone who is at fault here, it is the mathematically incompetent person who designed the payout system for the lottery. This was, at its heart, no different from a finance quant unraveling the details of a complex derivative to discover an arbitrage opportunity for the firm. Discovery and use of the exploit corrected the artificially high margin for the state in administering the game to one more realistic for the mathematically flawed payout model.
There used to be a sign on I-10 as you approached the Biloxi, Mississippi area. It was for a casino and said something like "Our slots have 98% payout!". I have no doubt as to the veracity of such a statement, because 2% of the money that flows through slot machines is more than enough to turn a profit from them.
These lotteries are obviously a different story since you can buy as many tickets as you want.
Lottery TV commercials literally make me want to puke every time I see them. https://www.youtube.com/watch?v=yaB28DCxFQI
My question is why would taking advantage of this system for one's own gain be unethical? The administrators believe (apparently erroneously) that they have a built-in statistical advantage over anybody playing. So by the logic that the MIT students shouldn't exploit a flaw in the system even though it is legal because it is unethical, then the lottery administrators should not be able to run a lottery for the same reason.
My point being, something doesn't have to be illegal to be wrong. In this case it's mainly strange that the lottery didn't change things when they became aware of the scheme.
It's essentially a very complicated structure of IF/THEN/ELSE conditions. If it's possible to decrease its tax burden while complying with the law, that's what a corporation is supposed to do. It's not cheating to follow the rules. If one doesn't like the outcome, one should seek to change the law.
Is it moral for the mafia to use the threat of force to take a percentage of a business's income? I'd submit that it's not and I suspect that you agree with that.(I'll concede that I don't know you and can't speak for you)
Why does that same behavior become moral if/when a government does it?
Yet, one of those entities can do it legally.
I am a member of a society which has a representative government which acts on its behalf. I have used their services and therefore I owe them money. Therefore, it is legitimate for them to demand that money from me.
And both these entities can do so legally. It would be entirely legal for the mafia to use the legal system to demand money from you in the same way the government would (or that any business or organisation you used services from would). The very fact they choose not to, suggests their claim is illegitimate.
Hate to be the guy that uses a contrived example, but how about this: "I'll just come with a bunch of my worker-buddies, and we'll mow your lawn, trim your bushes and clean your pool. Every day, 7 times more than you'd like per week. Come next Monday, we'll be expecting your dues for our services. And if you don't pay up, well we'll just legally get your employer to withhold it from you. I mean, it's not like we're holding a gun to your head to make you pay, or breaking your windows or anything to intimidate you. Right?
The whole concept of government, social contract, and "the consent of the public", along with the example you used as an argument all constitute a form of circular reasoning to me. None of it derives from base, irreducible principles, so are completely arbitrary. That's why this whole "not all immoral things are illegal" argument arose, because people can't even agree on that, nor can they accept that the majority has spoken with respect to legality representing overall morals.
The base principle is that society is made up of people and those people then choose the rules for that society. If you don't like that, you can often vote to change those rules, or you can choose another society.
Most societies have fees to be a member (known as taxes) and frankly, it's a bit late to complain about these fees when you've already used the privileges of that society to make a ton of money. It's like eating at a restaurant and complaining, after you've had 6 courses, that the food is inedible and you don't want to pay.
Or you can use the rules for your own benefit.
If the rules of the aforementioned society make it possible to reduce your tax burden, it's not a moral issue if you choose to avail yourself of them.
If your tax burden can be X or Y depending on your choices and Y < X, it's not a moral shortcoming if you choose to pay Y instead of X.
Our society uses tax policy to shape behavior. We all know this. That's why student loan and mortgage interest are deductible. It's disingenuous for people to complain when they discover that tax policy is shaping behavior.
We see this from the middle-class family who donates old clothes to Goodwill or the Salvation Army instead of throwing them away all the way up through the billionaire who makes sure that he spends at least 182 days per year outside of New York.
But that has nothing to do with the original post I replied to. You've changed the topic.
Are you conceding that your argument that taxes are equivalent to a protection racket is wrong?
Of course, taxation is legal. Using the tax code to minimize one's tax liability is legal and also amoral.
Are you sure about this?
To address your direct question, it's my position that using force or the threat of force to compel someone to pay you money -that you say they owe you- is no more moral when the government does it than when the Gambinos did it. Obviously, it's legal when the government does it but the government is not a moral entity.
Try thinking more about your own arguments and how they might practically be applied.
Debt currently works that way in the vast majority of cases.
If you don't pay Comcast or Verizon (or whomever) for your internet service, they'll stop providing service to you. They'll also report you to Equifax, Trans Union and Experian so that other people will know that you can't be trusted to pay your debts and they'll require a security deposit before they'll provide you with service.
If you overdraw your bank account and close it without settling the debt, they'll report you so that other banks know about the issue and those other banks will refuse to allow you to open a new account until the original matter is resolved.
If you don't pay your Visa bill, again, they will stop extending credit to you and you'll be reported to Equifax, Trans Union and Experian. Other credit card companies will know about your history and they will refuse to extend any credit to you.
In none of those cases is force or the threat of force used to collect a debt.
EDIT: Oh, and you're misusing the term "strawman". I was asking questions about your post, not positing an argument for you.
I never advocated such a position.
It was a strawman.
We're only obliged to follow the letter of the law. If there is no law against making profits where they are beyond the reach of local taxation, there's nothing objectively wrong about it.
Even using your own reasoning, if the profit is made elsewhere, the only moral obligation is to pay the legal taxes that apply in that locale.
Yes. I don't pay any taxes to the US government, for example, because I don't use any of their services.
In no other developed country (in the sense of a competitive GDP, somewhat large and somewhat well educated population) have I seen the same disdain and mistrust for government. Why is it amoral for a government to take taxes if you are - born in a hospital funded by taxes, given vaccines and medication partly funded by taxes, drive to/from home on roads built by taxes, so on and so forth. The people who thing it's unfair they have to pay taxes - what would you prefer? Living in an "AT&T country" where every single service is "privately" owned and you'd be charged fees for it? Sounds like a dream.
Comparatively, in countries such as Sweden and Norway, everyone pays taxes (much moreso than in the good old US of A), and yet the tax agency is rated the most trusted government entity in the government. Strangely enough, this "amorality" also leads to some of the best standards of living and social mobility in the world?
Is it possible that you're conflating the definitions of immoral and amoral?
born in a hospital funded by taxes
This is an assumption. There are many private hospitals.
given vaccines and medication partly funded by taxes
Vaccines are mandated. It's circular reasoning to say that the costs of someone taking vaccines are justification for taking their money when you forced them to take the vaccine.
drive to/from home on roads built by taxes
We had roads before direct taxation. The fact that we pay for them with tax money doesn't mean that they wouldn't exist without them.
Comparatively, in countries such as Sweden and Norway, everyone pays taxes (much moreso than in the good old US of A), and yet the tax agency is rated the most trusted government entity in the government.
I don't know anything of the political situation in Sweden or Norway. Does their tax collecting branch of government ever get used as a political weapon, the way the IRS does?
if( (Cost_of_breaking_law * %_chance_of_getting_caught) < profit )
The problem is that the penalties for "corporate crime" are so low.
If the penalty for bank robbery was only 50% of the profit, no bank in America would be safe.
I see nothing morally wrong with that.
I do agree the law has nothing to do with morality, eg. war on drugs, slavery, etc.
Exactly - if the loan shark has his legs broken and is robbed of his ill-gotten fortune, how immoral is that?
Once you pay over your cash, it belongs to the lottery commission. Your chance of winning is infinitesimal to the point that you may as well spend your money on other things, like paying down your mortgage quicker or paying off your car quicker or whatever other debts you have - either way, the money is gone - unless what you're getting out of it is that period between purchase and draw - the _hope_ of the win, you're likely getting nothing out of your purchase. If you're getting your emotional high from playing rather than the hope of winning, then perhaps the $5 is a good purchase, it's hard to say; otherwise, I'd say it's better spent on something the _does_ have a financial or emotional reward.
Either way, I'm not really clear on what your point is... perhaps you can clarify.
It may not be worth the $5 even if it does give you an emotional high — perhaps especially so. I am reminded of http://lesswrong.com/lw/hl/lotteries_a_waste_of_hope/, which argues that winning the lottery is the wrong sort of hope to invest in, both financially and emotionally. I found that article's argument convincing.
Day dreaming is a means of escaping your existing reality... but if you take no action, then your day dreaming is just that. You need to take action to give any possibility of it ever becoming more than that. In this case, the $5 for the ticket is that step. Perhaps the fantasy is what you live for. Perhaps you spend your life with your head buried in romance novels, who knows, the effect is the same - you paid $5 for the book which gave you a few good hours of day dreaming, or perhaps even a number of days of escape. The lottery ticket gave you a couple of hours escape before you come back to reality. It's just a pleasant way to pass the time. You can tell just how many people have this mindset by the number of copies of Fifty Shades of Grey you saw being read on public transit after it came out.
There is nothing neither wrong nor immoral about such behaviour, just a huge portion of others (those who just play for fun or are envious) sees such activity as an act of jerkiness.
A while back I read about an early Microsoft employee who, once a year, goes to Vegas and counts cards at high stakes until they throw him out. Generally it takes about an hour, he makes several multiples of $10K, and donates it to charity.
Blackjack isn't really a party game.
...but I do like hanging out with my friends and occasionally agreed to join up. In the end, I just hung out and played low-stakes games, getting "free" drinks the whole time. Ended up spending about as much as if we'd decided to hang out at a moderately pricey bar, got tipsy, and had a good time hanging out with my friends.
I just looked at it like any other night out spending a few bucks on drinks and maybe a few more playing Megatouch or feeding the jukebox. At no point did I hold any expectations of winning loads of money.
I can't find anything morally wrong about card counting though, Blackjack is presented as a game where skill can affect the outcome, even though in absense of card counting it's a game of luck. I'm sure that a fair number of habitual players develop some kind of card-counting heuristic innately, and in that case people who really count cards (without using some kind of device) are just better players and deserve to win (although I think casinos have good reason to forbid the technique, as the alternative would be to get rid of Blackjack).
They absolutely are not. Once someone buys a lottery ticket it's no longer their money. It's the lottery commission's, or the state's, or whomever.
To say that the MIT students were taking advantage of "(largely poor) ticket buyers" is at best extraordinarily disingenuous, if not willfully disregarding several key facts.
Another alternative is to play less deep into the shoe before reshuffling. Reshuffle often enough and the house has an advantage over card counters. However, this slows down play and therefore the reduces the rate they bring in money from people who don't counting cards (or count cards poorly).
Saying something is legal is pretty much the lowest defense you can use to justify something.
>A recent report by the state’s inspector general reveals more details about the scheme, including the fact that the Massachusetts Lottery knew of the students’ ploy and for years did nothing to stop it. The inspector general’s report claims that lottery officials actually bent rules to allow the group to buy hundreds of thousands of the $2 tickets, because doing so increased revenues and made the lottery even more successful. While the students’ actions are not illegal, state treasurer Steven Grossman, who oversees the lottery, finally stopped the game this year.
If the lottery is still making money, it must come from other people who aren't winning but still playing.
I'm not sure exactly how this lottery works, but I think in other games there is no pile of cash sitting around. Instead the owner of the game insures it so that an intermediary (insurance company) pays the winner. If that's the case here the lottery commission will end up paying higher insurance premiums over the long term, but might show a short term profit.
But if you take into account all of the sources of money, there's no way the lottery commission could come out ahead on this.
That jackpot was going to be paid to someone, this group merely became that someone.
Basically, they chose the best time to buy in so that they had a higher chance of winning.
Moreover, when the jackpot grows high, more people play. It's almost certain that their ticket buying inspired other people to buy more tickets as well.
I know fairly wealthy people that still dabble on the lottery. They well aware that the odds are stacked against them and many of them can quote the statistical probability of their making (or not making) a profit on their play, but they still gamble because a). it's amusing and b). because just maybe they'll get lucky and will get a bazillion percent return on their investment - plus, the amount they spend on the lottery is totally meaningless to them.
Eventually you get to a point where the $5 (or whatever it costs) is so trivial it makes zero difference in your life, so why not, right? It's not really that much unlike Venture Capitalists. 95% of startups fail, yet they still get VCs clamoring to invest in them every year because 5% of them may pay off a windfall return. VCs are no slouches in finances; they're sharp, quick witted, ruthless hustlers, yet still they play this lottery.
I would say that the lottery is less a tax on the poor than it is a tax on those that are either ignorant to the math, aren't risk averse or are well off enough that the cost of playing the lottery is much less meaningful to their bottom line than the potential win would be.
After all, at least 1 person wins it most weeks, and every play has an equal chance of being a winner - why not you? I'll spend my $5 on ice cream, because I'd rather do something that will definitely make me feel good now than spend $5 buying a piece of paper that will most probably be garbage in a few hours and make me feel like I wasted the money - in the hope that just perhaps I'll get rich and never have to worry about anything again, supposedly; though, I guess it's no different than people supporting the Leafs, hoping every week that their team will win, only to get crushed when they lose...again. Given they're (allegedly, according to their fans) the richest team in the NHL despite consistently sucking, it would appear that hope is a trillion dollar industry, find a way to sell hope to everyone and you'll make your own windfall.
This might be obvious to everyone, but gambling expenditure is higher (as a percentage) in low-income households, and still doesn't exceed 1% of disposable income in any income group in the UK.
People with more economic power can participate in forms of gambling with a lower rake: we might call those investments.
As is everything. Your household grocery bill is higher (as a percentage) in low-income households. Everything is a higher percentage because the cost of stuff doesn't go down when you have little money. Gambling, alcoholism and drugs, medical bills, life don't cost less when you're broke, you just have to pick and choose what you buy to make ends meet.
Hope and escape are the biggest sellers on the market. When everything around you is geared towards selling "bigger is better", "newer is better", "richer is better" and you have no means to participate in that "Xer is better" society. Beauty companies sell us on "just use our makeup and it will cover all your flaws and make you look beautiful", fitness companies sell us on "just use our product and it will make you look beautiful", clothing companies "just buy our clothes, they will make you look beautiful"... The media constantly brainwash people to act that way.
Is it any wonder that people will spend out on anything that will let them hope (even if just for an hour or two) that perhaps, no matter how small the odds, they just might have a shot of "belonging" and joining those that have made it... or purchase some means of escaping from that whole system - if just for the hour or two it takes the drugs to wear off.
That's human nature. We live emotionally. We will die emotionally. No amount of math or education is going to change that. As long as the media keeps drumming its ever present beat that you need money to belong, you need stuff to belong, you need to be someone to belong, people will keep spending money on the hope of belonging... or spending money on a means of escaping from that pressure.
No. Exceptions including (from the link above):
Buns, cakes, biscuits etc. Beef (fresh, chilled or frozen) Bacon and ham Fish and fish products Milk Butter Margarine, other vegetable fats and peanut butter Fresh fruit Dried fruit and nuts Preserved fruit and fruit based products Fresh vegetables Other preserved or processed vegetables Sugar and sugar products Jams, marmalades Chocolate Other food products Cocoa and powdered chocolate Fruit and vegetable juices (inc. fruit squash) Soft drinks (inc. fizzy and ready to drink fruit drinks) Beer, lager, ciders and perry (brought home) Men's outer garments Men's under garments Women's outer garments Women's under garments Boys' outer garments (5-15) Girls' outer garments (5-15) Infants' outer garments (under 5) Children's under garments (under 16) Accessories Haberdashery and clothing hire hire/repair of furniture/furnishings Medicines, prescriptions, healthcare products etc. Purchase of new cars and vans Purchase of second hand cars or vans Purchase of motorcycles and other vehicles Spares and accessories Petrol, diesel and other motor oils Repairs and servicing Other motoring costs Rail and tube fares Bus and coach fares Other travel and transport TV, video and computers Computer software and games Equipment for sport, camping and open-air recreation Horticultural goods, garden equipment and plants Pets and pet food Sports admissions, subscriptions, leisure class fees and equipment hire Cinema, theatre and museums etc. TV, video, satellite rental, cable subscriptions and TV licences Development of film, deposit for film development, passport photos, holiday and school photos Gambling payments Diaries, address books, cards etc. Newspapers Package holidays - UK Package holidays - abroad Restaurant and café meals Alcoholic drinks (away from home) Take away meals eaten at home Other take-away and snack food Contract catering (food) and canteens Holiday in the UK Holiday abroad Room hire Hairdressing, beauty treatment Toilet paper Hair products, cosmetics and related electrical appliances Household insurances - structural, contents and appliances Medical insurance premiums Vehicle insurance including boat insurance Non-package holiday, other travel insurance Moving house Other services and professional fees Money, cash gifts given to children Cash gifts and donations7 Club instalment payments (child) and interest on credit cards
People who don't mind paying for the feeling that they have a chance to win. Their actual chance to win is far too small of course (unless you're at MIT), but the thrill they feel is real. That's what you pay for. Just like a roller coaster ride or something.
If a VC generates the same return as investments in the lottery, that VC would quickly cease operations.
A lottery win, unlikely as it is, could be the only way that poor people can change their life circumstances. What's my chance to buy a house or retire comfortably from the savings on minimum wage with no existing assets? What's my chance by spending some of my disposable income playing the lottery?
Framed this way, it's understandable. And perhaps it's preferable that the government runs it, rather than someone acting unethically. Commerce (and mafia) know they can afford to run a less fair or reliable lottery than government normally chooses to, and empirically, that's what they do.
The government should rather put in place support and security, acting to reduce systematic inequality, so that poor people don't have to resort to unfair lotteries as their only financial solace.
Meaning, on the three digit lottery drawing, the state pays 500 to 1 on a game where the odds of winning are 1000 to 1. In order to be the more attractive alternative to the state lottery, bookies pay 600 to 1.
For the small time payouts, I'd trust that the bookie's desire to keep the bets rolling in will be inducement enough to pay. They operate in small circles and word would spread quickly if a bookie refused to pay someone who had legitimately won.
I recall a certain game, run out of a certain bar, wherein the players paid $20 to select a set of numbers, to create their own "bingo card". Once the game was closed, the organizers took their 20%, the remainder was the jackpot, and then they published that amount with all player-selected combinations, without any names. The state lottery acted as the caller. Every official drawing converted uncalled numbers into called numbers, and when all numbers on someone's card had been called, they won. Any player could check whether they--or anyone else--had won as a result of the most recent drawing.
It was assumed that all players knew which of the published combinations was theirs, and they could all talk to each other. So if they got the unremarkable shopping bag full of $20 bills, and it was not the published jackpot amount, word would get around, and people would stop playing.
State lotteries typically allocate 5-10% for game management and promotion and a larger fraction for the state, for a total rake of 33-50%. Delaware, Oregon, Rhode Island, South Dakota, and West Virginia all keep more than 50% of the player bets. Massachusetts actually runs a fairer game than most.
So if you want to be a small-time bookie, you now know which five states are the most profitable to operate in--along with the six states with no lotteries that are not casino-laden Nevada: Alabama, Mississippi, Utah, Alaska, Hawaii, and Wyoming.
I don't disagree with you, but I would modify my claim of empiricism to mean "in the absence of a state lottery".
There's more than one reason the bookmaker ought to be more generous, which relate to the benefit of state backing:
you can be sure the rake is not going to be used for the public good, and
if the bookmaker takes heavy losses and bankrupts, you can't be sure you'll get your big win even after beating the odds.
See also e.g. http://www.bbc.co.uk/news/uk-england-29543448 You can be sure the casino wouldn't have cared to comment on Phil Ivey's methods until they were facing a significant net loss. Would they have returned his stake if he was unlucky enough to make a loss? Would they have bothered to sue if he had won a small amount? He suffers here also for the extent of his luck.
You'd need to look at when the lottery proceeds were first used for education and track the changes since to know which one actually happened.
Most lottery money is earmarked for education, infrastructure improvement, etc. The effect it has on any other portion of the budget notwithstanding - it's a fact that lotteries bring in substantial amounts of income.
That's not necessarily true in the first place, and what's more it depends on the appropriations rules in the jurisdiction.
Once again - what you're implying happens in all cases doesn't necessarily happen in all cases. That's literally my whole point :)
I understand what you're getting at, but a lottery is really not a great way to fund education. I'd much prefer a less regressive form of taxation.
And a couple of investigative pieces the Globe had run previously:
A fun quote from the first piece they ran:
Mark Fettig of Tennessee, one of the top 10 winners during the May rolldown week, urged the Globe not to write a story at all, saying “it would be immoral’’ to attract more people to Cash WinFall and potentially dilute the winnings of current players.
The world and economy is a system with rules and ethics, and entrepreneurs game that system within those rules and ethical bounds. Ping-pong wasn't first played with the intention of having back-spins and side-spins, but spin balls are perfectly within the written rules and are supposed to confuse and defeat your opponent.
If you want to have an edge at rock-paper-scissors, it's all about statistically analyzing and gaming your opponent, because humans are extremely bad at being uniformly random. There are tournaments for this. It's just humans being intelligent beings.
These students are gaming the lottery just the same.
Rules are rules; game and engineer the hell out of anything within those bounds, I say. Make the world an interesting place.
Lotteries are designed to take their cut from the tickets bought - some proportion of the money from tickets then goes to the prize pot. More tickets sold means more money for the lottery organisation, regardless of who buys those tickets.
So the loser in this case was the "lucky" lottery player, who would have found that, had they won, they had to share their prize with these guys.
Interesting morals on display by the author.
Further: "While the students’ actions are not illegal, state treasurer Steven Grossman, who oversees the lottery, finally stopped the game this year."
I expected the last part to say they'd filed charges against the students. Since they didn't (because their activity wasn't illegal), the state treasurer made the right decision to stop the game.
I'm not impressed by this author's writing skill.
That means that if the (global) prize becomes big enough, then for this day the lottery gives out more money that it cashed, but it's actually money they accumulated during the days there was no grand prize winner.
So in average the lottery doesn't lose money.
Lets say a lottery is set up to pay out 60% of money in over a year, but those payouts are done by 40% 9 weeks out of 10, and 240% the 10th week. If you only play the lottery on the 10th week, then your EV is +140%, even though the overall EV is still 60%.
From the article it was a version of this that happened.
The people rushing to buy tickets because of that jackpot have the same chances of winning as they would without MIT students buying tickets. They have a reduced amount of time to try and win it, since MIT winning will lower the jackpot, but they're probably better off for it by not throwing their money at the game as much.
The people really losing out are the ones who buy tickets no matter what the jackpot is, and that's only if they win after the jackpot has been lowered. They may have won more money, but if that was their concern, they shouldn't have been playing when the payout was so low.
It seems like no real harm done though: they guaranteed themselves winnings, causing the jackpot to never grow, before anyone else bought tickets against the larger jackpot. So in a sense they just stomped the game before it started, no other players got screwed out of their chance at any existing jackpot.
Grant that you can make 15-20% ROI on your 600K investment, however, you could have 95% chance to lose all of it and 5% chance to hit jackpot and win say 26 mil. Your expected value is high but no one would play 600K like that, unless you are some rogue hedge fund manager.
You might well invest it in stock market, which has better Risk-reward ratio.
It isn't like they just threw $600k at the lottery blindly hoping for a payout. This was a mathematical analysis.