Cornell University Economics Professor David Just, one of America’s top researchers into state lotteries, wrote a persuasive op-ed for CNN about who play the lottery and why. The link is below. Here is an excerpt:
“Those in poverty or near poverty not only are more likely to play the lottery than those with greater means, they also spend a larger percent of their money on average on these games of chance.
Some have argued that this may not be such a bad thing if the poor basically play the lottery as a cheap form of entertainment.
However, when we look for the telltale signs of entertainment behavior, they are absent.
We don’t see evidence that changes in the availability or price of other entertainment, movies for example, lead to changes in lotto purchases.
Rather, we find there are big jumps in lottery purchases when the poverty rate increases, when unemployment increases, or when people enroll on welfare.
Lottery playing among the poor is a Hail Mary investment strategy —a small ray of hope among the hopeless.
But this false hope is, by design, an attempt to lure the emotional decision -maker. Recent changes in the Mega Millions lottery have reduced the chances of winning in order to increase the size of the jackpot.
By changing the range of the six possible numbers drawn — from between 1 and 56 to between 1 and 75 –the already improbable odds of 1 in 176 million have diminished to a virtually impossible 1 in 259 million. Fewer big winners means larger jackpots, more hype and more
players. And more money for the lotteries.
Such changes have occurred as the lottery commissions have become expert in swindling players out of their money. Humans aren’t particularly good at dealing with risks and gambles. We tend to believe that rare events are more common than they truly are.
Moreover, we don’t discern between small changes in very low probabilities. Thus, few will have noticed that the odds of winning the lottery reduced from 0.000000006 to 0.000000004 for any given ticket. But our eyes are drawn to the steadily increasing prizes — prizes that are now designed to
eventually exceed $1 billion. Such astronomical amounts draw in even those who consider themselves very prudent.
Approximately one third of lottery winners will declare bankruptcy. This happens primarily because new winners are so unfamiliar with the magnitude of the money they have won, that they simply overestimate the purchasing power. How could I ever need to budget when I have several hundred million in the bank?
The overwhelming majority of lottery winners don’t believe they are better off for having won. One study finds that recent lottery winners have lower levels of happiness than do those who have recently become quadriplegic.”
2013 The big swindle- In lotteries, the poor are the biggest losers
