One of my delights in preparing my recent talk on Adam Smith‘s Wealth of Nations, a talk I’ll post in the next few days, is that I read substantial sections of the book that I hadn’t read before. Whereas I have sometimes thought his prose bogs down, I found many instances with terse, crystal-clear reasoning. A case in point is his tight reasoning on lotteries:
In order to have a better chance for some of the great prizes, some people purchase several tickets, and others, small share in a still greater number. There is not, however, a more certain proposition in mathematics than that the more tickets you adventure upon, the more likely you are to be a loser. Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets the nearer you approach to this certainty.
READER COMMENTS
epicur
Dec 24 2023 at 9:30am
Lotteries are a stupidity tax, but at least they are a voluntary stupidity tax. I much prefer them to the taxes on my productivity voted by stupid people who then turn around and waste the money.
Knut P. Heen
Dec 28 2023 at 5:27am
Lotteries may be useful if some important goods are lumpy, for example a house. Suppose your income is too low to afford a house, but you can afford an apartment and a cup of coffee every day. Exchanging the coffee for lottery tickets may make sense if you value the house highly enough relative to the apartment and the coffee. Lumpy goods implies that some of your consumption is not going to be very useful; hence, the opportunity cost of the lottery ticket may be very low. This effect is even stronger if income also is lumpy (i.e. you either work one job or two jobs rather than hours).
Herb
Dec 24 2023 at 6:31pm
I have some friends who like to sit around in the morning with their coffee and each purchase a “scratcher” ($3 to $10 each). I thank them for donating more in taxes to support poor California.
Merry Christmas
john hare
Dec 24 2023 at 9:03pm
I’ll spend $2 on a powerball ticket when the pot is over $200M. I get some enjoyment from fantasizing using the winnings. Even knowing it’s a tax on the mathematically illiterate, I get some utility. I wouldn’t get utility from buying 100 tickets.
Peter Gerdes
Dec 26 2023 at 12:36pm
Except that has literally been false for quite a few lotteries. Some lotteries have effectively relied on the fact that people randomly buying tickets will often buy the same number as other people. That’s how buying all the tickets can be an expected win.
Pemakin
Dec 26 2023 at 1:55pm
Always shocks me that Leftist’s who worry about inequality are not more upset about lotteries. After all, they are state run engines of inequality, making most people a bit poorer to make the lucky few richer.
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