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SEPTEMBER 26, 2008

Tickets to nowhere
Nudge Vegas The Gambler's Fallacyvenn diagram



"Subjective Relative Income and Lottery Ticket Purchases"

Given that the fortunes of our state-run lotteries are inversely proportional to the state of our economy, it’s no surprise that America’s lotto kiosks are currently reporting heretofore unheard-of earnings. And yet, the average lottery’s 53 percent rate of return — that is, for every $1 you wager, you get about half a buck back — is far worse than what you’ll find at any slot machine (most slots are required to return at least 75 percent of wagered money). Meant to fund public schools and other worthy government projects, those scratch-off tickets are also a de facto tax on the poorest and least educated among us.

Why are those with very little money most likely to spend what they have on the lottery? Recently, scientists at Carnegie-Mellon asked people to list their income on a scale that began at “less than $100,000” and moved upward from there, thereby instilling distinct feelings of financial insecurity in anyone making less than six figures a year. Next, participants were given $5 and the choice of keeping it or spending it on lottery tickets. Primed to feel poor, they became much more likely to purchase a lottery ticket than participants who’d been asked to plot their income on a scale that began at just $10,000 a year. In other words, state lotteries are an especially vicious circle: We play the lottery because we feel poor — and more of us feel poor when times are tough — but squandering our money on Moneyball ensures that we stay poor, and purchase yet another lottery ticket we really can’t afford.

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