At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
This week's fight at the Hemingways has been about whether to buy a Megamillions ticket. My view is that Lotto is a tax on people who don't understand statistics. His view is, and I quote, "Come on! It's over $500 million! I had an uncle who won the lottery once."
It will not surprise you that my background is in math and his is in wishful thinking. (I kid because I love. And also because he is literally right about everything ... except this.)
I come from a long line of fighting about gambling. See, my dad is a pastor and really sees no moral value in gambling. My mom views it like others might view any other entertainment expense. You might spend $100 a year on going to movies. When she's in Vegas, she plays a roll of quarters on the slots and stops when she runs out of money or time.
But I'm curious if we reach a point where the risk of reward makes the purchase of a ticket more reasonable. Scientific American says "No Matter How Huge, Mega Millions Jackpot Will Always Be a Bad Bet."
The prize is so high it exceeds the number of possible number combinations on a ticket, which is about 176 million. (In other words, the chance that any particular ticket is a winner is about 176 million to one.) The math seems to imply that a $1 ticket has an expected value of $500 million divided by 176 million, or nearly $3. Yet a closer look at the math reveals that the Mega Millions jackpot is a bad bet no matter how large the prize. ...
Certainly, the threat of having to split is there, but does that really make it a bad bet—especially when the jackpot is so very high? According to the mathematicians, yes. As the number of tickets sold goes up, the chance that more than one person will share in the jackpot does as well, according to a well-known mathematical function called a binomial distribution. When Emory University mathematicians Skip Garibaldi and Aaron Abrams worked through the equations, they found that lotteries are generally a terrible bet—Mega Millions and Powerball particularly so. (I encourage you to take a look at their paper “Finding good bets in the lottery, and why you shouldn’t take them,” which was published in the American Mathematical Monthly in 2010.)
Even in the case of the current drawing, which offers a jackpot so large that Garibaldi and Abrams show how it should only occur on average every 22 years, the number of tickets that go out is correspondingly large. “I ran the numbers last night,” Garibaldi told me over the phone. “You can tell by the amount they estimate the jackpot to be what they estimate the ticket sales to be.” Based on the current jackpot, an estimated 380 million tickets have been sold this week. The estimated return on an investment of this week’s Mega Millions drawing? Negative 19 percent, per his calculations.
I wonder if there's a simply way to figure out when the estimated return on investment is not negative. Either way, considering the economic situation of our family and our country, I think our "win the lotto" retirement plan might be the best bet we have.
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Comments:
Jul '11
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Casey, I just love the reference. I personally would start a super PAC and make all the commercials I could right now.
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
I'm in.
Although, I'd be remiss if I didn't also add: If you're not a Ricochet member and you're reading this, first become a member. Then buy a lottery ticket. You'll find that membership in Ricochet is a sure thing.
Dec '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Rob Long: I'm in.
Although, I'd be remiss if I didn't also add: If you're not a Ricochet member and you're reading this, first become a member. Then buy a lottery ticket. You'll find that membership in Ricochet is a sure thing. · 2 minutes ago
Oh, be remiss already.
Feb '12
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Two things are true about the lottery:
That said, any expediture beyond $1 is even more of a waste than the first $. Still, I like to get a ticket when the jackpot grows to today's staggeringly high levels. Kinda fun to daydream about how wonderful, and likely ruinous, that kind of money would be like.
Dec '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
I rarely gamble. When I do, I try to limit it to things over which I have at least some degree of influence or advantage -- so no lotto for me.
That said, I can see buying lotto tickets despite the poor odds. In addition to the entertainment aspect -- which I don't share, but acknowledge -- the disproportionate impact on one's lifestyle between winning and losing is worth considering. A few dollars lost isn't going to change one's lifestyle, while a multi-million dollar windfall certainly would. That's not enough incentive for me to ignore the math, but I can see how it would be for many.
Mar '11
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Tommy De Seno: I'm with Mark Hemingway on buyting some tix. It's because I do love gambling that I know the lottery is a bad bet.
However, for half a billion dollars, I'll pony up a couple of bucks so I can spend today daydreaming.
Gambling is best when it is fun - and this kind of daydreaming is fun! · 58 minutes ago
Fun is a valid reason to spend your money. I don't understand this kind of fun, but hey, whatever floats your boat.
Now, for the people that are buying them with real hopes of winning? OK, then it's a tax on stupidity.
Think of all of the money in banks that could have been earning interest had people saved it instead of blowing it on hopes of "breaking big". Lottos attract a certain kind of mindset, and it's no coincidence that so many lotto winners have ended up broke and busted years after their big win.
Feb '12
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
It is also surprising how so few people seem to understand that picking 1-2-3-4-5-6-7 is just as likely to win as any other combinations.
Aug '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Douglas
Fun is a valid reason to spend your money. I don't understandthiskind of fun, but hey, whatever floats your boat.
Now, for the people that are buying them withrealhopes of winning? OK,thenit's a tax on stupidity.
Douglas, you put it so well.
Jul '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
I find it ironic that people who kick and fuss about government taxes being too high willingly hand over even more of their money to that government on an ill-advised get rich quick scheme that preys on the ignorance of the innumerate and the poor.
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Darn you, now I have to go back to the liquor store and get those numbers too.
Aug '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Well, I see no moral value in playing the free version of Bejeweled for five minutes. But that doesn't make it a bad thing either.
Incidentally, if you make more than $12 an hour, that 5 minutes "wasted" on a browser game added up to $1 worth of your time, which you invested in an activity with absolutely zero odds of paying you back in money. (If you make only the bare minimum wage, you can play for 8 minutes 15 seconds before using $1 of your time.)
Therefore, if we're ignoring the positive returns of entertainment value, buying a $1 lottery ticket at extremely long odds is a better idea than relaxing with a casual game. Everyone, delete those Angry Birds files, head down to your local gas station counter to spend your resources wisely!
Aug '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Hey, at least lotto tickets are voluntary. Taxes are coerced.
Jul '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Midget Faded Rattlesnake
Hey, at least lotto tickets are voluntary. Taxes are coerced. · 16 minutes ago
Just because someone's stupid does not mean we should encourage the government to take advantage of it.
Feb '11
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Well, there's that age-old saying about the lottery:
Someone's going to win, and it won't be you.
Mar '11
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Tommy De Seno
Darn you, now I have to go back to the liquor store and get those numbers too. · 25 minutes ago
Riiiiight.... for the numbers....
Oct '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Two observations:
Your husband's uncle won the lottery. What are the odds of two people in an extended family hitting the jackpot?
You claim (admit?) that this is the only thing your husband is wrong about?! That man hit the jackpot when he married you, Mollie.
Edited on March 30, 2012 at 8:20pmMar '11
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
I was once goaded by a girl I knew into buying a lottery ticket, so I got 1-2-3-4-5-6.
She derided me for wasting my money on "silly numbers that can't ever win".
Edited on March 30, 2012 at 10:54pmRe: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Mollie Hemingway, Ed.
Does this mean that my plan to borrow $175,711,536 and play every possible combination won't guarantee me a profit? Rats.
Edited on March 30, 2012 at 8:21pmFeb '12
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Severely Ltd.: Two observations:
Your husband's uncle won the lottery. What are the odds of two people in a extended family hitting the jackpot?
The same 1:176E6. The odds are are a characteristic of the ticket, not who bought it.
Oct '10
Re: At $540 Million, Is Lotto Still A Tax On People Who Don't Get Math?
Insurance is gambling. Does Mollie buy insurance?
Think of a lottery ticket as a $1 insurance premium that pays out half a billion dollars in the event that you're eaten by a shark while being struck by lightning. Not bloody likely, but it only costs you $1 to cover the contingency.
That's exactly what the lottery is, only winning doesn't also require that you die a bizarre and horrible death.
Edited on March 30, 2012 at 8:37pm