Mike the Mad Biologist

Wired has a fascinating article about a statistician who figured how to beat the odds on the scratch-off lottery tickets–that is, pick cards that are more likely to produce winning combinations. And “more likely”, I mean getting it right up to 95 percent of the time.

But the article mentions only in passing the real problem with lotteries:

While approximately half of Americans buy at least one lottery ticket at some point, the vast majority of tickets are purchased by about 20 percent of the population. These high-frequency players tend to be poor and uneducated, which is why critics refer to lotteries as a regressive tax. (In a 2006 survey, 30 percent of people without a high school degree said that playing the lottery was a wealth-building strategy.) On average, households that make less than $12,400 a year spend 5 percent of their income on lotteries–a source of hope for just a few bucks a throw.

It might be a “source of hope”, but it’s a rigged and losing deal. Worse, the article presents some anecdotal evidence that organized crime is using these tickets to launder illegal profits. With a low payout, ordinarily buying tickets wouldn’t be a good deal–they would lose about half of their money. But if you can predict winners, especially in high payout games, this can actually turn a profit.

The irony is that state-run lotteries, while currently viewed as a source of revenue (the proceeds often go to school funding), were originally devised as a way to harm organized crime by destroying the numbers rackets.

Comments

#1 Jim Thomerson
February 6, 2011

Years ago, McDonald’s came out with scratch off cards. We examined them under a dissecting microscope, and found enough bubbles in the covering that we could see which panels to scratch to win. Don’t need no steenkin’ statistics.
#2 g724
February 6, 2011

A close friend of mine came up with this description of lotteries:

“Paying the math tax.”

In other words, the tax on people who have no clue about probability & statistics.
#3 Benton Jackson
February 6, 2011

It’s entirely appropriate that the money is used for education, since it’s a tax on stupid.
#4 Chris O'Donoghue
February 6, 2011

I think your history of state (whether in the US sense or international) is a little limited.

http://en.wikipedia.org/wiki/Lottery#Early_history
#5 Paul Murray
February 6, 2011

Playing lottery makes sense provided that you don’t use the absolute amount that you win as your metric for determining the payoff. Use instead the log of the amount of money that you will have *in total* if you win/lose – including your wealth right now. We use the log because people naturally thing of the “bigness” of a number once you start to work with numbers greater than fingers+toes. Ten million is better than a million, a hundred million better again by about the same amount.

This metric alters depending on how much money you have right now. That is – people with less money perceive a $10,000 win very, very differently to relatively well-off people.
#6 Joel
February 7, 2011

Technically, it’s a entirely inappropriate, because it means schools are have a financial disincentive to teach statistics.
#7 Onkel Bob
February 7, 2011

Technically, it’s a entirely inappropriate, because it means schools are have a financial disincentive to teach statistics.

You’re making an assumption that because it is taught, the audience learns. They still teach physics and history, and yet car accidents still happen (conservation of momentum and all that) and politicians are still elected (instead of being treated like Charles I and Louis XVI).

Everyone knows, (or at least should know) how HIV is spread, and yet new infections occur. A few seconds of pleasure, be it the brief physical sensation of orgasm or the anticipation of millions, has an allure capable of overcoming education.
#8 Joel
February 7, 2011

Students might not learn, but it’s easier when their school doesn’t teach.
#9 SimonG
February 7, 2011

I think that some of the odd-based criticism of people playing lotteries is a bit unfair.
I don’t do lotteries, because I recognise the odds are really bad. However, a change in my circumstances, although it hasn’t actually changed my mind yet has offerred a slightly different perspective.

People – especially poor people – don’t play the lottery because they stupidly think that the odds are actually good. They do it because the value of a large win is greater than simply the amount of money. A large win could be literally life changing, for people who perhaps can’t see any ready way out of a poor situation. They’re not looking to win £5,000,000: they want to win an entire new way of life and if the odds are bad, they’re still greater than zero.
#10 porno
February 8, 2011

Students might not learn, but it’s easier when their school doesn’t teach.
#11 Joel
February 8, 2011

Cripes, did that spambot just copy my comment text? It’s not up to this though: http://xkcd.com/810/
#12 Dunc
February 8, 2011

People – especially poor people – don’t play the lottery because they stupidly think that the odds are actually good. They do it because the value of a large win is greater than simply the amount of money.

You may have something there, but I think the real reason is more fundamental and hinted at in the quote: a lottery ticket allows you to hope. It may be brief, but as a moment of relief from the endless, omnipresent, grinding futility, with no possible end in sight, which is most people’s day-to-day experience of poverty, it’s priceless. People need a little hope every now and then.

I’ve given up getting upset about people playing lotteries. These days, I get upset that lotteries are quite literally the only ray of hope for so many people.
#13 Wow
February 8, 2011

Same deal with cigarettes and alcohol.

When your life is in the crapper, you want anything to change your world, even drugs.

A basic problem is that in a capitalist system when you have no money you have no options and when you have money, you don’t need options to make more.

Add to that inheritance where someone who has earned nothing gets all their parents dosh to build from (see Paris Hilton), ensuring

a) money is hoarded by the rich

b) the privilege of connection is added to with the privilege of hoarded wealth generating its own wealth

you’re destined to have a richer upper class and a poorer everyone else.

100% inheritance tax. If you want your children to have the benefits of your wealth and position, DO IT WHILE YOU’RE ALIVE.

With the added benefit of not giving your relatives a reason to off you for the inheritance (which problem seems to be endemic if people claiming that copyright ending at the death of the author is a license to commit murder).

With 100% inheritance tax, it’s not worth hoarding money you’ll never spend, so you’ll move it around and make it work.

Moving money around gives the government a chance to wet its beak and so income and state taxes will drop. Lower state taxes usually mean lower sales tax, making your money more spendable.

Help your kids while you’re alive. 100% inheritance tax. If your kids can’t make it on their own without a huge offload of money with all the advantages you are able to give them, then inheritance just ruins the meritocracy you are trying to build.