Mega Millions
The lottery can be played in all sorts of ways, but is it a logical venture, or simply as many snooty individuals put it, "a tax on the poor." The snooty people feel that only poor people play the lottery because they aren't smart enough to realize the probability of them winning (approximately 175 million in one) is so unlikely, their average payout is a net loss. But is that always true?
NO!
The Mega Millions drawing on March 30th 2012 his hit an all-time high jackpot of 540 MILLION DOLLARS! This means the average payout on a $1 ticket is actually $1.07 dollars, that's a 7% average gain! But based off of numbers, why would you still play if the probability is so low? You need to get all five numbers right and in correct order, and the Mega ball! Truth be told, the game of the lottery is the possibility of winning, not the realistic thought of it. The minds of Americans have been toyed with as they published some large past winners as rags to riches stories, suckering in people who wish to make a quick fortune. For example: http://jobs.aol.com/articles/2012/01/09/clerical-workers-win-lottery-for-the-second-time/
is an article to entice people to not only play in hopes of scooping up a large sum of money, but for those who have defied the odds and won to keep sinking their money into the lottery. So are we all making an investment or paying a tax?
Investment?
Tax?
You tell me!
Are you going to play the lottery on March 30th?
Are you going to spend 175 million to buy every combination and assure your victory and the potential of a cool 95 million dollar profit.....assuming nobody else wins?
I want to hear your opinions, if you decide it's with the gamble, maybe you will be the extremely lucky individual taking home MILLIONS UPON MILLIONS of dollars.
With the theoretical payoff of buying one lottery ticket being higher than the price of a ticket, the logical choice seems to spend one's entire net worth purchasing tickets. However, speaking from an economist's point of view, the rational person would not engage in such an activity because there is something known as a value premium. Think of it this way: a fashionista might be willing to pay $1,000 for a pair of high heels (even if she doesn't have high income), but another person might think the purchase is grossly irresponsible. That is to say, the personal -value- of the shoes is vastly different to each individual; the first values it more than her $1,000, which is why she'd be willing to give up her $1,000, while the second would hold on to her cash. The same can be said of any asset, be it a gaming console, backpack, or meal.
ReplyDeleteBack to the point: suppose the dollar value of all one's assets, including his house, car, bank account, etc. totals $800,000. The reason why it seems ridiculous to sell all of that to buy lottery tickets is that the personal -value- of sanctuary, transportation, and insurance is far higher than the sum of their parts and therefore not worth sacrificing for the probability of winning. Essentially, the dollar value of most peoples' personal value on their assets is far greater than $1.07 per dollar; it is for this reason the logical person still feels guilty purchasing a ticket with a positive payoff-to-price ratio.
After reading this blog post and also Richard's comment, I agree that entering the lottery is not worth it. From an economic standpoint, though different than the one Richard discusses, rational consumers like instant gratification. For instance, if you offer someone a 100 dollar bill today, or promise them 110 dollars next year, they will most likely pick the 100 dollar bill today. Besides the factoring in of inflation (which I won't go into), this shows how as consumers with a certain amount of disposable income, we like to buy today to get today--> not to get tomorrow or in years from now. While the mega lottery offers the potential for a large large amount of money in the future, the chances are low and there is almost never any gratification from spending this money- thus it seems completely like more of a tax than an investment. While sometimes rational consumers do invest large amounts of money, they normally do so with a large interest rate and a large probability that they will get all of their money plus some back in the future. Since the mega millions again only presents a small chance that they will get their money back, why play?
ReplyDeleteNot to mention American's money that gets paid in doesn't all end up in the jackpot, a large portion goes to the state governments. According to this source (http://www.huffingtonpost.com/2012/03/31/mega-millions-winning-ticket-maryland_n_1393151.html) Americans spend 1.5 BILLION dollars on lottery ticket in hopes of lucking out on their 175 million to on odds and taking home a record 640 million dollars. Richard and Ali, you're both right, there is no sense in playing a game you're bound to lose, it's not a casino where the odds are against you, and it's virtually impossible to win, playing in a casino some games allow you to control the outcome, and others that don't are rigged in a manner in which the odds aren't immensely against you, only slightly, in which the casino relies on large quantities of gambling to make large profits in the long run. The lottery is more of a joke than playing any kind of slot machine because those are rigged to let you win a little so you don't walk away with similar attitudes/ points of view like ours are of the lottery.
ReplyDeleteAll math aside, there proved to be three winning tickets sold. So if all three end up presenting their ticket, they will have to split the jackpot. However, according the The Washington Post, nobody has yet turned in a winning ticket. They said if nobody wins this round of the lottery, we could be looking at a billion dollar payout. But, a McDonald's employee Mirlande Wilson, is said to have a winning tickets but is yet to turn it in. Just imagine going from flipping burgers at a fast food restaurant to being able to own several McDonald's. Going from minimum wage to a record lottery winner, her story is amazing. Sounds like a great movie idea? With the movie she will be receiving, this would be in my list of "things to go when I win the lottery". Will keep you guys posted on any updates on those other two winning tickets.
ReplyDeleteZach, what ended up happening with the other two tickets?
ReplyDeleteThis is the most recent information I could find about the winning tickets (http://content.usatoday.com/communities/ondeadline/post/2012/04/3-maryland-public-school-workers-to-share-big-lottery-prize/1#.T4R77OxSQmY). Three Maryland school employee each bought 20 tickets, and decided if one of them won, which one did, they would share the winnings. There did show to be two other winners, one claiming to be the McDonald's employee that Zach spoke about. As this is a very exciting and amazing thing for these people, it does not account for the other million suckers that invested their money into the lottery. While there did indeed prove to be three winning tickets sold, that is a very small amount out of the millions of people that put their time and money into winning the lottery. This is not to say that I don't think I would ever play the lottery, but I do see it as tax, an extra cost with almost never any gratification. I essentially do not see it worth it to constantly play the lottery. Yes there are few great inspiring stories, but key word is FEW. I see the lottery as just false hope, and another way for the government to eat people's money.
ReplyDelete