Is Playing the Lottery Worth the Risk?

[Danger]

I wagered that I would have a high chance of breaking it because of the unique way I was going to use it

Apprenticing for "Mythbusters"...?

 

[DaveC426913]

What I mean is, the chance of winning is basically the same, whether you buy a ticket or not. That people get sucked into thinking "But it could be me this week!" is a sad sign that most people really, really don't understand statistics.

No, it is a sign that people do understand statistics.

This

the chance of winning is basically the same, whether you buy a ticket or not.

is a sign of someone who is bad at math.

...thinking that almost zero is basically zero.

 

[Academic]

The chance of winning is closer to zero than the cost of losing is.

 

[Academic]

Apprenticing for "Mythbusters"...?

Heh, not quite. I did end up breaking the TV by the way, just months before the warranty expired. I got a check for more than I paid for the TV and turned my Tube into an LCD. I really won out on that one.

 

[DaveC426913]

To all you folks who think that "almost zero" might as well be "zero":

I guess in addition to not buying lottery tickets, you also don't wear a helmet when cycling. Or take a life preserver in a boat. Or install smoke alarms.

Hm. I wonder if there is an acceptable cost to (ensure/avoid) a circumstance - even though, for the majority of us, it will never come to pass in our lifetime. But we pay the cost anyway because the (benefit/detriment) is so great that we decide the cost is worth it...

 

[Academic]

Ha, dude - your the one who is claiming that the cost of a lottery ticket is effectively zero. It goes both ways. ;)

 

[bp_psy]

The chance of winning is closer to zero than the cost of losing is.

What exactly is the relevance of this comparison?

 

[Academic]

To decide whether to play the lottery or not, of course. Its the same kind of analysis we do throughout our lives in a variety of settings.

 

[bp_psy]

To decide whether to play the lottery or not, of course. Its the same kind of analysis we do throughout our lives in a variety of settings.

When you are buying a lottery ticket you are buy the very unlikely probability of winning. Once the ticket is in your pocket the transaction is over. You do not actually lose anything since you just bought something. If you do not win nothing the product you payed for was delivered. In the end the decision to play is determined by your desire to buy that product or not. I do not play but I know some people that play every week. Their attitude is along those lines.

 

[Danger]

...thinking that almost zero is basically zero.

Close enough as makes no difference to the vast majority. It's a losing proposition.
I'm going to avoid the lottery situation, because I'm not an expert and there are variables that are up to the consumer.
I do, however, have a limited amount of expertise regarding VLT's. My primary job at two of the bars was maintaining the machines and doing the accounting for them, and the same for the change machines. I'll stick with the last one for now. At that time, the population of my town was around 8,000; it's about double that now. I had 3 VLT's under my control. Two other bars in town have 8 machines each, one has another 3, my previous employer has 6, and I think that Boston Pizza has half a dozen or so as well. The one that I worked at was somewhat remotely located and not tremendously popular. Even at that, I was forwarding well over $100,000 per week to the Alberta Gaming Commission. During that same typical week, I paid out perhaps $5,000 to the "winnners".
Whenever I was down in Vegas to play pool, I spent most of my free time playing nickel slots, and only in the "loose corner" of the Riviera or a couple of similar machines in other establishments such as Barbary Coast. Those are set for a 97% payback rate. I could sit all day with a $2.00 roll of nickels, and get all of the free Scotch, beer, Margueritas, etc. that I could handle (and I have a huge capacity) while doing it. An entire day and night of entertainment for $2.00. (Okay, tack on another $20 for gratuities; I always tipped at least $1.00 for each drink delivery.)
Conversely, the VLT's owned by the Alberta Government offer something on the order of a 73% payback. That statistic, along with other machine perameters, is adjustable at any time through the real-time data link that is maintained between the machines and the Gaming Commission. (And in case anyone with nefarious intent is reading this, I hasten to point out that any interruption of that data link immediately locks the terminals down. No cheating that way.)

 

[leroyjenkens]

No, then the odds would be in my favor. The chance gets weighted by the jackpot, so if the cost of the ticket is a dollar and the jackpot is more than a dollar then with 50/50 chance the odds are in my favor.

So you would say that winning $1.01 would be in your favor to spend a dollar on a 50/50 chance?
Well, what if that $1.01 was turned into 300 million? When would the odds be in your favor to spend a dollar? Well, if 50/50 odds are worth the risk of 1 dollar to win 1.01 dollars, then 1/200,000,000 odds should be worth the risk of a dollar to win 300 million dollars.

 

[Jack21222]

And I don't get that "emotional itch" either. To me, it's like buring money for pleasure...I don't see where the pleasure comes from. Yes I understand some people get entertainment out of it, but I absolutely don't get it. But that's no big surprise to me, I'm out of step with a lot of stuff in mainstream culture.

Human brains (along with many other mammals) can easily be taken advantage of by a variable ratio reward schedule. I'm not a neuroscientist so I don't know the exact mechanism behind it, but we go crazy when something rewards us on a variable ratio schedule.

If you've never felt the emotional pull of the variable ratio reward schedule, consider yourself lucky. There's almost a physical feeling of illness to not "press the lever" (or buy the ticket, in this case, or fight a boss in a MMORPG for another example). Buying that lottery ticket relieves that sick feeling and promotes "what-if" daydreaming.

Of course, I can get addicted to things easily. That's why I've never had a sip of alcohol, I'm afraid of getting addicted. As a teenager, I was addicted to a MMORPG. I also believe I have a gambling addiction of sorts, but I do that in moderation.

Again, I don't think it has anything to do with being bad at math, no more than a heroin user is necessarily "bad at biology."

So you would say that winning $1.01 would be in your favor to spend a dollar on a 50/50 chance?
Well, what if that $1.01 was turned into 300 million? When would the odds be in your favor to spend a dollar? Well, if 50/50 odds are worth the risk of 1 dollar to win 1.01 dollars, then 1/200,000,000 odds should be worth the risk of a dollar to win 300 million dollars.

You're not factoring in taxes. The Maryland lottery has a game called Multi-Match whose tickets actually had a positive expected value once the jackpot got above a certain point, but once taxes were factored in, the EV went negative. Yes, I bought a few tickets anyway.

 

[Office_Shredder]

So you would say that winning $1.01 would be in your favor to spend a dollar on a 50/50 chance?
Well, what if that $1.01 was turned into 300 million? When would the odds be in your favor to spend a dollar? Well, if 50/50 odds are worth the risk of 1 dollar to win 1.01 dollars, then 1/200,000,000 odds should be worth the risk of a dollar to win 300 million dollars.

Leroy, when he says the odds are in my favor, he's talking about the expected gain on a ticket vs the cost of the ticket. You're making a mountain out of a molehill that you yourself dug

You're not factoring in taxes. The Maryland lottery has a game called Multi-Match whose tickets actually had a positive expected value once the jackpot got above a certain point, but once taxes were factored in, the EV went negative. Yes, I bought a few tickets anyway.

Clever, but doesn't the state lottery agency have to break even on its own? I thought that was the standard set up.

 

[Jimmy Snyder]

I guess in addition to not buying lottery tickets, you also don't wear a helmet when cycling. Or take a life preserver in a boat. Or install smoke alarms.

Surely there is a difference between increasing risk and reducing risk.

 

[lisab]

Human brains (along with many other mammals) can easily be taken advantage of by a variable ratio reward schedule. I'm not a neuroscientist so I don't know the exact mechanism behind it, but we go crazy when something rewards us on a variable ratio schedule.

If you've never felt the emotional pull of the variable ratio reward schedule, consider yourself lucky. There's almost a physical feeling of illness to not "press the lever" (or buy the ticket, in this case, or fight a boss in a MMORPG for another example). Buying that lottery ticket relieves that sick feeling and promotes "what-if" daydreaming.

Of course, I can get addicted to things easily. That's why I've never had a sip of alcohol, I'm afraid of getting addicted. As a teenager, I was addicted to a MMORPG. I also believe I have a gambling addiction of sorts, but I do that in moderation.

Again, I don't think it has anything to do with being bad at math, no more than a heroin user is necessarily "bad at biology."

Hmm, that brings to mind something I read a long time ago about the 'Pavlov's dog' experiments (conditioned response). You know, the whole ring-a-bell-and-salivate thing. Supposedly, if during the training you ring the bell and occasionally *don't* give the reward, the response is learned quicker than if the reward is given every time. So maybe it's the repeated losing that keeps bringing them back to buy more tickets haha.

I think my strong aversion to any sort of gambling is pretty easily explained...there was a time in my life that I was very poor. I still have my brain somewhat calibrated to that 'value of a dollar' scale, even though my fortunes have changed significantly. So like I said, I can't imagine getting pleasure from playing a game that I'm all but sure to lose.

 

[lisab]

No, it is a sign that people do understand statistics.

This
is a sign of someone who is bad at math.

...thinking that almost zero is basically zero.

OK so when I part with my dollar and get my ticket, my chance of winning is aaaaaalmost zero. Once I look at the numbers, ok then it's exactly zero.

Sounds fun, where can I sign up .

 

[BobG]

To all you folks who think that "almost zero" might as well be "zero":

I guess in addition to not buying lottery tickets, you also don't wear a helmet when cycling. Or take a life preserver in a boat. Or install smoke alarms.

Hm. I wonder if there is an acceptable cost to (ensure/avoid) a circumstance - even though, for the majority of us, it will never come to pass in our lifetime. But we pay the cost anyway because the (benefit/detriment) is so great that we decide the cost is worth it...

Surely there is a difference between increasing risk and reducing risk.

Moneywise, it's the same. In a class I teach, I always get asked why we don't deorbit all satellites after we're done with them. It takes the same amount of energy to deorbit a satellite as it did to put it into orbit in the first place. Only the sign has changed. The only difference is you fire the thrusters in the opposite direction.

Granted, it's hard to put an arbitrary value on a human life. I consider my own life to be very valuable, so helmets and life preservers are a good investment.

I imagine my ex would buy me a helmet and a life preserver (I pay her alimony). I'd probably decide she could buy her own if she wanted one (I pay her alimony). Everyone values a particular person's life differently based on their own criteria.

But insurance is always a bad deal mathematically. The average person always pays out more in premiums than they collect - especially if they focus on the cost of the premiums more than the clauses about receiving benefits. None the less, buying things like car insurance, home insurance, health insurance, etc is usually a smart choice.

But people do tend to put more emphasis on avoiding risk than on achieving gain.

 

[DaveC426913]

Surely there is a difference between increasing risk and reducing risk.

The way I worded it, you can see that it's the same argument.

We pay a small amount of money, knowing that, despite the high likelihood of the event not occurring, it is still worth it, just in case it does occur.

The vast majority of us will ride our bikes every day for the rest of our lives, and never find the helmet making itself useful. Yet we pay the money. Same with life jackets and smoke detectors.

Why?

Because "almost zero" is most definitely not the same as "zero" when the stakes are high.

 

[DaveC426913]

OK so when I part with my dollar and get my ticket, my chance of winning is aaaaaalmost zero. Once I look at the numbers, ok then it's exactly zero.

Sounds fun, where can I sign up .

See my comment about bicycle helmets, life jackets and smoke alarms.

 

[Jimmy Snyder]

But insurance is always a bad deal mathematically.

The point of insurance is not to maximize profit. It is to minimize risk.

 

[Office_Shredder]

All these calculations early in the thread for how much money you really waste on a lottery ticket don't take into account that some of the money spent on lottery tickets goes back into making the prize pool larger. I pick Maryland here only because I found this first on their website

http://www.mdlottery.com/benefits.html

60.3% of the money brought in by revenue was spent on prizes to players, so you're really losing 40 cents on each ticket that you buy on average

New Jersey lottery:
http://www.state.nj.us/lottery/money/4-0_where_money_goes.htm

57% goes back as prizes, so again we see you only lose about 40 cents on each ticket you buy.

The point of insurance is not to maximize profit. It is to minimize risk.

All the arguments against the lottery is that on average you lose money buying a ticket. On average, you lose money buying insurance. So either you accept insurance is a raw deal, or you accept that the single argument: "it doesn't earn you money on average" is a bad one.

Insurance exists because large swings in our money supply hurt a lot more than small ones. Why can't lottery tickets work the same way? A small change in my money supply is not noticeable; a large one is

 

[Jimmy Snyder]

All the arguments against the lottery is that on average you lose money buying a ticket. On average, you lose money buying insurance.

When you buy insurance, you reduce risk that exists. When you gamble, you create risk where there was none.

 

[Danger]

Human brains (along with many other mammals) can easily be taken advantage of by a variable ratio reward schedule. I'm not a neuroscientist so I don't know the exact mechanism behind it, but we go crazy when something rewards us on a variable ratio schedule.

If you've never felt the emotional pull of the variable ratio reward schedule, consider yourself lucky. There's almost a physical feeling of illness to not "press the lever" (or buy the ticket, in this case, or fight a boss in a MMORPG for another example). Buying that lottery ticket relieves that sick feeling and promotes "what-if" daydreaming.

Of course, I can get addicted to things easily. That's why I've never had a sip of alcohol, I'm afraid of getting addicted. As a teenager, I was addicted to a MMORPG. I also believe I have a gambling addiction of sorts, but I do that in moderation.

Again, I don't think it has anything to do with being bad at math, no more than a heroin user is necessarily "bad at biology."
You're not factoring in taxes. The Maryland lottery has a game called Multi-Match whose tickets actually had a positive expected value once the jackpot got above a certain point, but once taxes were factored in, the EV went negative. Yes, I bought a few tickets anyway.

Very nice post, Shredder. I'm an alcoholic, and can't seem to quit smoking even though said smoking allows me only a few months to live. Gambling is governed by the same section of the brain (the "addiction centre" in the hippocampus, hypothalamus, amygdala, or whatever; sorry, but I'm not a neuroscientist either) as my problems are. What non-gamblers and recreational gamblers don't seem to understand is that an addicted gambler gets a blast of endorphins while placing a wager. The thrill is not in winning; it's in placing the bet and awaiting the outcome.
As for the tax thing... (There are no smilies to express my feelings... )
All lotteries that I know of in Canada are tax-free in that the winner(s) aren't susceptible to income tax resultant of the lottery. What nobody seems to understand is that the lottery itself is a tax. The government owns the gambling devices, and the house always wins. We have enough of that crap already. We have to pay GST (Goods and Services Tax) on tobacco and alcohol products, even though over 90% of the price of the originals is already tax. How the hell can you legitimately tax a tax?

 

[DaveC426913]

In a class I teach, I always get asked why we don't deorbit all satellites after we're done with them. It takes the same amount of energy to deorbit a satellite as it did to put it into orbit in the first place. Only the sign has changed. The only difference is you fire the thrusters in the opposite direction.

What?? This is not true.

To deorbit a satellite, all you have to do is make a very small adjustment to its orbit; the atmo will do the rest.

What you're describing is how much energy it would take to bring the entire satellite plus all its discarded bits back to the launchpad with a final velocity of zero (gentle, powered touchdown, not even using parachutes) - which is an outrageous idea.

omg, I hope you don't teach science.

 

[DaveC426913]

All these calculations early in the thread for how much money you really waste on a lottery ticket don't take into account that some of the money spent on lottery tickets goes back into making the prize pool larger. I pick Maryland here only because I found this first on their website

http://www.mdlottery.com/benefits.html

60.3% of the money brought in by revenue was spent on prizes to players, so you're really losing 40 cents on each ticket that you buy on average

Sorry. This is completely illogical.

I may buy a ticket for a dollar, but I don't get that 60 cents back! Sure, technically someone is, but it's not me.

 

[Office_Shredder]

Sorry. This is completely illogical.

I may buy a ticket for a dollar, but I don't get that 60 cents back! Sure, technically someone is, but it's not me.

I never said you would get 60 cents back. But for example on the first page you see people saying that the expected gain on a lottery ticket is -70 or 80 cents and that's not true

Also Danger, that's not my post

 

[Danger]

Also Danger, that's not my post

Oops...
My apologies to both you and Jack. That's what I get for trying to watch STTNG, drink copious amounts of beer, and respond to threads all at the same time.
I stand chastized, but I'm damned well going to finish this beer anyhow.

 

[BoomBoom]

I started many years ago buying just one ticket for each drawing using the same numbers everytime. Over that period of time, I've won almost as much as I have paid in (most of which came in a 5 out of 6 winner for $1,000).

I feel like since I am using the same numbers, that I am now compelled to keep playing, because my worst nightmare at this point would be to NOT buy a ticket and then see my numbers come up!

 

[Danger]

I feel like since I am using the same numbers, that I am now compelled to keep playing, because my worst nightmare at this point would be to NOT buy a ticket and then see my numbers come up!

And we now witness the birth of a new addict.

That's how this **** works; it's insidious. Back to the VLT's here, or the slots in Vegas: You would not believe the number of people of my acquaintance who don't understand how the machines work. I've seen some idiot plop $500 into a terminal, walk away due to lack of money, and then get irritated when the next person to sit down at the same machine hit big. "That's mine!", they inevitably wail. "If I'd put in another Looney, I would have won that!" (Yeah... and if a bullfrog had wings, it wouldn't bump its *** so much. ) It doesn't matter a damn what has transpired before; every single card draw, handle pull, keno pick, or whatever ends up the same way, as a number that is spit out by the on-board computer, and has the same odds of winning as if it was the first time. The machines have 2 pseudorandom number generators running in tandem. At the exact microsecond that you close the switch by pulling a handle, touching a screen, or whatever, the microprocessors poll themselves and decide upon a verdict as to what should result to the gambler. I could come along after you've lost $1,000 and win $1,000 with the push of a single button. The machine is not 'due' to hit any more than it was the last time. Addicted gamblers can't suborn themselves to that reality; they have to try because they feel that it is their right to win. They figure that a machine that has been dry for a couple of days is overdue for a huge payout. It doesn't work that way.

 

[leroyjenkens]

I started many years ago buying just one ticket for each drawing using the same numbers everytime. Over that period of time, I've won almost as much as I have paid in (most of which came in a 5 out of 6 winner for $1,000).

I feel like since I am using the same numbers, that I am now compelled to keep playing, because my worst nightmare at this point would be to NOT buy a ticket and then see my numbers come up!

That seems to be the most common lottery story. An incredible number of people, who play the same numbers each week, had their numbers come up the one week they didn't play.