Is the Lottery for fools?

[tsg]

I disagree. I don't think you need to believe in luck at all to obtain entertainment value from playing the lottery.

I agree. I get great entertainment value out of standing in line and ordering "1 2 3 4 5 6" just to hear people tell me that my numbers will never come up. My response is usually "and yours will?"

 

[Moochie]

I've played the Lottery before, and many people I know and like play the Lottery.

But anyway, from a skeptical point of view, is the lottery idiotic? And especially the way people play it?

I'll let you know when I win the big one.

M.

 

[Ladewig]

The way a lottery works is that an amount is stripped from a pool of money for running costs and good causes and the rest is redistributed unevenly.

Insurance is exactly the same except the cause is not so good.

Before I could agree with that statement, I would need to know something about the size of the insurance premiums and the possibility of payout. I would agree that lotto is like insurance in the example of an insurance policy that costs $ 1.00 per month and pays out $100,000,000 if you get hit by lightning.

 

[Ed]

I just want to note that when they have videos of the happy winners they all seem to be missing teeth.

 

[Ed]

I'll let you know when I win the big one.

M.

Ralph Kramden as an avatar, how apropriate.

 

[Mr. Scott]

Someone once called lotteries a "tax on stupid people." I enjoy the quote but it's not so simple.

Advertisements for most any kind of gambling only show winners and imply to everyone that they will be winners too. The less analytical viewers pick up the message of hope and waste their money.

Gambling has a powerful affect on behavior -- "random reinforcement" in behaviorism science. If you reward someone for a behavior (gambling) only sometimes and not predictably, the behavior is much more strongly reinforced than if it is always rewarded.

I tested this theory on my cat. She started to swat the bag of food right before I fed her, as I lowered it from atop the refrigerator. I thought it was neat and decided to encourage her. I fed her ONLY if she swatted the bag first. She continued to swat the bag, but with less and less enthusiasm as time went on until she barely touched it. Then I decided to try "random reinforcement" and fed her only sometimes after she swatted the bag. In a few days, she was frantically swatting it as hard as she could.

This is the way lotteries (and casinos), large and small, grip people and keep them addicted. It's counterintuitive, but people are generally more obsessed with pulling the slot handle if they win only sometimes.

The idea that you can "beat the odds" with ping pong balls you have no control over is sheer, unadulterated woo.

I guess the lottery is a tax on woo.

 

[Interesting Ian]

I agree. I get great entertainment value out of standing in line and ordering "1 2 3 4 5 6" just to hear people tell me that my numbers will never come up. My response is usually "and yours will?"

Yes. For some reason people think that widely separated numbers are more likely to come up than 6 numbers in a row.

In principle, without a lucky dip, and with countless millions of years of playing, one could exploit peoples' lack of understanding here to make a sure profit (at least on the uk lottery before the lucky dip).

 

[LW]

The fact that it is possible to win the lottery doesn't mean that playing the lottery is not a woo activity.

If you don't believe in luck (woo concept), I hope you'll agree that the expected return from playing the lottery is less than the investment. Someone buying lottery tickets as an investment is either a woo or a fool.

In decision theory an action is rational if it maximizes the expected utility of the outcome. Your analysis is valid only if you assume that money has linear utility: that is, the utility of having 10x amount of money is 10 times the utility of having x amount of money.

Practical experiments have shown that this is not the case [*]. People tend to have a S-shaped curved where in the beginning there is very little difference in utility of having $1 or $2, followed by an almost linear segment where doubling the amount doubles the utility until it at some point tapers out and there is practically no difference in utility of having $10 million and $100 million.

So, it is possible that the expected utility of having a 1:15 000 000 chance of winning 2 million Euros exceeds the expected utility of not spending 80 cents to buy a lottery ticket, even for a completely rational person (Figures from the Finnish national lotto since those are the ones that I know).

[*] My source is Russel&Norvig's Artifical Intelligence that has references to the original studies but I seem to have misplaced the book so I can't give them just now.

 

[Almo]

The way a lottery works is that an amount is stripped from a pool of money for running costs and good causes and the rest is redistributed unevenly.

Insurance is exactly the same except the cause is not so good.

I presume those above criticising the lottery also eschew (voluntary) insurance.

NOT the same as insurance. You take out insurance on things that are MUCH more likely to happen than the teeny little chance you will win the lottery. Like crashing your car, dying, or having your house broken into, etc.

 

[Lothian]

Before I could agree with that statement, I would need to know something about the size of the insurance premiums and the possibility of payout. I would agree that lotto is like insurance in the example of an insurance policy that costs $ 1.00 per month and pays out $100,000,000 if you get hit by lightning.

Insurance companies pay people to make sure that the payout times the possibility of payout is less than the premiums.

Unfortuantly for some Lloyds names some people are better at working it out than others.

 

[Interesting Ian]

The idea that you can "beat the odds" with ping pong balls you have no control over is sheer, unadulterated woo.

I guess the lottery is a tax on woo.

As I have argued, not always.

I'm not sure there is a correlation between whether one is a believer or not in paranormal phenomena and their understanding of whether a lottery constitutes good value.

 

[Roboramma]

LW you made my point about a million times better than I did.

 

[Mojo]

No, that's like arguing that you cannot win on www.betfair.com because the owners take off 5% in commission off all winnings. All this implies is that the average punter loses (average as in mean). But in fact only 90% of punters lose in the long run. 10% of punters are up in the long run.

But there's a difference there. Punters who bet in a bookie's or similar establisment are betting on non-random events. Some horses, or football teams or whatever, are better than others. It is possible by studying the form and conditions to make predictions about which horses or football teams are more likely to win than their odds suggest. I know someone who does this: he's retired, and spends most of his time figuring out what to bet on, as far as I can tell. He makes a very modest profit.

There is no way to predict which balls will come up on the lottery. It is random. The only way to try to maximise your winnings is to try and pick combinations of numbers that other people haven't picked (but remember that other people are also doing this).

Oh, you could also try buying your ticket at the last minute, thus reducing your chances of dying between buying the ticket and being able to collect any winnings...

 

[EGarrett]

I would love to see the government monopoly on the lottery end, but I fear that the private lottery runners would get filthy rich so quick that they'd have to shut it down. After all, if you run a nationwide 50/50 drawing (everyone throws in a dollar, the lottery-people split the money earned 50/50 with the winner), it's sort of like a giant pyramid scheme.

I agree. I get great entertainment value out of standing in line and ordering "1 2 3 4 5 6" just to hear people tell me that my numbers will never come up. My response is usually "and yours will?"

Realizing that 123456 had as much chance of coming up as any other number was the main reason I stopped ever bothering with it...

Then I decided to try "random reinforcement" and fed her only sometimes after she swatted the bag. In a few days, she was frantically swatting it as hard as she could.

Maybe the cat thought that it depended on how hard she scratched the bag? After all, in the wild, getting food out of a victim is largely dependent on how hard you rip it apart...

We had a dog in our apartment in college, and she learned to push the door to my room open. After awhile I got tired of her making a mess in my space, so I started closing it all the way. She would whimper outside and started shoving herself against it as hard as she could. I think animals instinctively know that if doing something gets a result, then stops getting the result, they just need to do it harder. I don't think that counts as random reinforcement...

But now that I think about it, animals will return to a spot where they sometimes find prey, even when they don't always get it. Perhaps a little of both?

This is the way lotteries (and casinos), large and small, grip people and keep them addicted. It's counterintuitive, but people are generally more obsessed with pulling the slot handle if they win only sometimes.

I just can't bring myself to gamble on random-drawing casino games. My parents used to give me money to throw in slot machines sometimes and I just never had the desire. It seems like I realized from the beginning that I'd rather have $.25 now then throw it away with the chance of getting nothing back. Same for roulette. If you play online casino games that are accurate, you SEE that it's carefully designed to slowly bleed your money away. And the games mislead you in every way possible (never mentioning your loss, only loudly announcing your tiny payout). How could you do it?!

(takes breath)

The only gambling I enjoy is Poker. At least that game has an element of skill, and is against other people and not the ultimately unbeatable house.

In principle, without a lucky dip, and with countless millions of years of playing, one could exploit peoples' lack of understanding here to make a sure profit (at least on the uk lottery before the lucky dip).

Ian, for the sake of us Americans, could you explain what a "Lucky Dip" is?

 

[EGarrett]

As I have argued, not always.

I'm not sure there is a correlation between whether one is a believer or not in paranormal phenomena and their understanding of whether a lottery constitutes good value.

But, if you believe in an all-powerful deity, couldn't people rationalize that HE is the one who decides who wins, and not random chance? I can't think of any religious person who won the lottery (or any other great feat of luck) and didn't immediately praise the lord...

 

[Lothian]

NOT the same as insurance. You take out insurance on things that are MUCH more likely to happen than the teeny little chance you will win the lottery. Like crashing your car, dying, or having your house broken into, etc.

The chances of a(ny) win on the uk lottery is one in 54. So with two draws a week the chances are you will win every year. However you would not expect your examples or a washing machine to break in the first year.

Crashing your car is probably similar to getting 4 numbers out of 6.
Gettting a lottery jackpot is similar to the chances of dying in a car crash with the person who just robbed your house.

 

[tsg]

From an investment/gambling perspective, the lottery is a bad bet. The expected value is negative until the jackpot is larger than the odds, and then many more people play increasing the chance of splitting the pot (including partial matches which come out of the jackpot).

"Hope" is a different thing, but most people think their chances of winning are significantly greater than they are. In the New Jersey Pick 6 (49 numbers), for example, you would have to spend over $4000 a week from the time you were 18 until you were 80 to expect to hit the jackpot once. Of course you can always hope that a previously unknown rich relative will die leaving you all their money and that doesn't cost you anything. It might even be more likely.

Whether that is idiotic, or even foolish, is a different question. If a person is spending more than they can afford playing the lottery, I think it qualifies. Any entertainment value, in my opinion at least, comes from believing there is any significant chance of winning. Is that idiotic? I don't think so. It is certainly a misundertanding of the odds, possibly bordering on "woo", but I wouldn't go so far to call it idiotic. There are certainly dumber things people can do with their money.

Of course, as I said in another post, I get a great deal of pleasure buying "dumb"[1] numbers just to mess with the other people buying lottery tickets.

[1] For example, 1-2-3-4-5-6 and the winners from the previous game (this one is only effective if they're posted prominently at the machine).

 

[Lothian]

Ian, for the sake of us Americans, could you explain what a "Lucky Dip" is?

Lucky dip is where the computer assigns you 6 random numbers.

There is evidence that many players stick to numbers less than 31 so if you picked numbers higher than 31 you were more likely to be a unique winner, as opposed to having to share the jackpot.

If you can manage to pick rarely selected combinations your average wings will be higher although the frequency of winning naturally does not change, and I doubt that the expected value will exceed the stake

 

[Interesting Ian]

But there's a difference there. Punters who bet in a bookie's or similar establisment are betting on non-random events. Some horses, or football teams or whatever, are better than others.

No they are random. I don't know whether you're referring to normal football or American football, but let me talk about normal football.

We know that on average (mean) the respective number of times the home team wins is 45.7%, a draw 27.6% and an away win 26.6%. We also know the average score is 1.51 -- 1.11.

Now this means that given a sufficiently large number of diifferent teams all playing each other over a sufficiently large number of times, then the number of times there will be a home win, draw, away win will be 45.7% -- 27.6% -- 26.6% of the time with an average score of 1.51 -- 1.11.

But this is exactly the same as saying the chance of each of the numbers of a tossed dice coming up is 16.7% (i.e 1/6th).

Now for each match you can obtain the odds which the bookies reckon is the real chance of each of the respective teams winning and by how many goals (although you need to take into account their over-round). For example the bookies reckon that tonight's match between QPR and Coventry is 44.5% -- 29.1% -- 26.5%. But this may not be the true probability, but merely the bookies estimation of the true probability. People like the guy you know might be able to estimate the true probability more closely than the bookies. Maybe the true probability is 50 -- 30 -- 20. But whatever, it is still a random event.

It is possible by studying the form and conditions to make predictions about which horses or football teams are more likely to win than their odds suggest. I know someone who does this: he's retired, and spends most of his time figuring out what to bet on, as far as I can tell. He makes a very modest profit.

Yes it is possible. It is what I have been attempting to do by betting on correct scores in the England premiership since the start of this season. I'm down by £4.26 having bet £1128.31 which have lost, and £1124.05 which have won (of course without the commission I would be £51 up). So it's not working so far although it seems to me I have, on occasions, been extraordinarily unlucky. I was thinking about starting to bet on the asian handicap in football as well as there is only 1% taken in commission.

But I digress. Let's suppose for the sake of argument that the bookies always accurately gives the correct probability. Thus in the bookies you would necessarily lose in the long run.

But this is not necessarily so in a betting exchange such as betfair. It's p2p betting. The guys who run the site simply take a 5% cut of all winnings. Particular individuals can put up odds which someone else can accept. Lets say you want to back an outcome as opposed to laying it. You can ensure a profit by only putting up odds whcih exceed the true odds. If another punter accepts those odds then in the long run you are guaranteed a profit. Of course it might the case that no one will accept your odds. But, as in the lottery, you're relying upon other peoples' misunderstanding of what represents good value (or you're relying upon the notion that people don't particular care whether a bet represents good value, they're doing it for the thrill of the bet).

 

[Almo]

One interesting problem people have is "Anticipatory Regret." This happens to people who play the same numbers every week. If their numbers ever came up, they'd know it. So they feel the need to buy the ticket each week, because they can imagine how they would feel if their numbers came up and they hadn't bought a ticket that week.