who’s in?
I’ll buy $20 worth of quick picks.
How is this legal? This is basically government-sponsored gambling on a large scale. If there was a “lottery” structured product, it would probably be banned under some weird Dodd-Frank rule. Why don’t the customers need to sign a “risks and disclosures” document? Why doesn’t the government have to disclose “mid market” on lottery tickets?
Lottery - Tax on dumb people.
That’s going to ruin someone’s life.
Purely as an act of selflessness, I’ll volunteer to take the jackpot. The CFA has prepared me to receive hundreds of millions of dollars overnight.
Uhhh it supports education. Do you not like kids and/or learning?
I agree generally, but at some point the pot is so large that it makes sense to buy $5 or whatever “just in case” even though you know you won’t win. I wouldn’t do that for $20, 50 or 100 million, but at half a billion, sure, I’m in.
So, lottery is the only way to raise tax revenue? And besides, there is no such thing as a tax to support education only. It all goes to the same place.
The fact is that they are using hype to sell an overvalued financial instrument to retail customers. This is the opposite of policy towards for-profit financial institutions. I support a “tax on stupid people”, and my comment above is a bit more serious than my real attitude towards lotteries. However, we have to realize that this is pretty hypocritical behavior on the government’s part.
^^ that’s my thought exactly. $20 has basically no utility for me (no, I’m not sending any of you $20), but the utility of a lump sum of $300MM is pretty high. Perhaps CFAI will revoke my charter for saying this, but at somepoint the expected return and the probabilities don’t matter anymore.
But your payout will be zero, not $300 million… If you think otherwise, that is just being deluded. If not, prove it by getting a non-zero lottery payout.
I don’t think the feds get a piece of the lottery sales, they only get theirs on the backend via income taxes. Each state decides what they do with their cut of Powerball and MegaMillions, but even the states that dedicate the proceeds to a particular “cause” just reduce funding from the general fund by that amount so it’s basically the same.
I fully expect it to be $0, but there is some small chance that it could be $300MM. Again, I realize it is a “bad” investment, but I don’t view it as an investment and what’s $20? I’m sure people who invested in Facebook on day one wished they had purchased lottery tickets instead.
That still does not make it rational to buy lottery tickets. 0.00000001% chance is not the same as 1% chance, although people don’t often differentiate the two. There are studies on this - people tend to overvalue really small probabilities just because they are not zero.
This. At $5, I have an incredibly small chance to permanently and dramatically transform my life even if I know that chance is effectively zero. I would only do that at some absurdly high level of payout, like $300 million pre-tax or above. It essentially costs me nothing to roll the dice once ($5 is like, one trip over the golden gate bridge – not a hugely relevant amount of money to me).
Ohai, I’ve gotten non-zero payouts several times playing powerball when the pot gets huge. 9 ways to WIN!
Anyhoo. People that keep going on about a tax on dumb people just want to show off how thrifty they are in my mind. I play at Vegas once a year. I plan to lose money, it’s a good time, my net utility is positive while I’m there, negative on the flight home, and positive again when I look back on the lack of memories and grin.
So what, spend $2 (TWO DOLLARS) on a powerball ticket and the utility of that two dollars is literally zero for me. So utility can clearly be different than monetary value. But I do get to enjoy contemplating what it would be like to win for a day while I do work, and the utility of that huge life changing amount is more massive than the dollar amount of winning would be. So to me, while the probability is miniscule, the outsized utility I’d assign to a large lump sum versus the underweighted utility to me of $2 makes it a winning proposition.
Are steaks a tax on stupid people because they could buy a healthy meal with equal nutritional value for less and there’s little investment value to it? No. People spend money where they will, nobody here is calling the lottery an investment. I just wish non-lottery players would get over chiding people that kick in $2 when the jackpot gets high.
In other words, at some point, if the utility is high enough under some subjective criteria, I don’t think you can look at it on a probability adjusted valuation.
Would you risk $5 if the pay out were umpteen billion instead? Sure, of course you would.
To me there is little or no difference between $300 million and billions from a practical stand point.
That would assume that you have increasing marginal utility to money at high extremes, which is unlikely…
The only real argument is that you get thrills from owning the lottery ticket. So fine, if that’s the case.
The lottery is not the “only” way to boost tax revenue, but we still have gas tax, income tax, etc. And this is a way to gain tax revenue off of people who are willing and wish to voluntarily participate. Some places do charity raffles, should we demonize those too? How is this hypocritical? In many states that participate, gambling casinos exist in one form or another.
And for the record there are in fact such things as taxes that support education only or other designated causes. It does not all go to the same place. See revenue backed municipal bonds for one form of example.
If it were a 0.01% payout, then maybe. If it’s 0.00000000000000001% payout, then no.
Well, I’m telling you for a matter of fact I do have an increasing marginal utility for money at high extremes. So unlikely or not, as me, I can say that is definitely a fact. Would you like to correct me on my personal utility?