On Lottery Tickets
I’ve often seen the issue of lottery tickets crop up on LessWrong and the consensus seems to be that the behaviour is irrational. It highlights for me a confusion that I’ve had about what it means for something to be “rational” and I’m seeking clarification. I think it might be useful to break the term down into the distinction I learnt about here, epistemic and instrumental rationality.
Epistemic rationality—This seems to be the most common failure of people who play the lottery. It might be an overt failure of probabilistic reasoning like someone believing their chances of winning to be 50-50 because they can imagine two potential outcome. Maybe they believe that they’re “due” to win some money as they commit “the gamblers fallacy”. Or it might be a more subtle failure resulting from correct knowledge of probability, but a fundamental inability to represent that number we call “scope insensitivity”. I think in the cases where these errors are committed, no-one would argue that these people are being “rational”.
However, what if someone had a perfect knowledge of the probabilities involved? If this person bought a lottery ticket would we still consider this a failure of epistemic rationality? You might say that anyone with perfect information of these probabilities would know that lottery tickets are poor financial investments, but we’re not talking about instrumental rationality just yet.
Instrumental rationality—Now we’re talking about it. The criteria for rationality in this case is, acting in a way that achieves your goals. If your goals in buying a lottery ticket are as one dimensional as making money, then the lottery is a (very) poor investment and I don’t think anyone else would disagree. Here is where I start getting confused though, because what happens when a lottery ticket satisfies goals other than financial gain? It is conceivable that I could get more than $5′s worth (here meaning my subjective and relative sense of what money is worth) of entertainment out of a $5 lottery ticket. What happens here? I hope you can see the more general problem that arises if you’d answer “It’s still instrumentally irrational”.
I’m not arguing that the lottery is a good idea or that it’s socially desirable. I think that it does tend to drain capitol from the people that can least afford it. If you’ve argued the idea of the lottery to death, pick a different example, it’s the underlying concept I’m trying to tease apart. I suppose it boils down to the idea that if an agent makes no instrumental or epistemic errors of rationality, and buys a lottery ticket, can that be irrational?
I’ve never been sure whether lottery tickets are a completely irrational choice for poor people—it what they really need is life-changing amounts of money, and they see no hope of accumulating much of anything by saving (too many emergencies and close associates with urgent needs), then a lottery begins to make sense, possibly even for buying moderate luxuries with a small win.
The relation between personal wealth and personal utility is a complicated one, so your observation obviously has some merit. Ad-hoc extreme example: if I owe someone ten billions by next week or they will kill me, and I have no hope of escaping or borrowing the money, spending all of my little money on a lottery is rational since nothing else has the sky-high potential ROI I need (my function here hovers around a flat zero utility, for up to 9999999999 money).
Is the situation of poor lottery players sufficiently similar? My guess tends towards ‘no’. Yes, the poorer you are the harder it is for you to ‘normally’ raise yourself to a decent standard of living—but since lottery tickets usually have a fixed nationwide price (unlike other comfort goods like alcohol and drugs), there is also the matter that the poorer you are the bigger the sacrifice you are making to buy those tickets. And I think that the latter factor outweighs the former.
Also, keep in mind that if we’re discussing what is rational for someone to do, observations to the effect that “but they don’t think like that” are beside the point—if they hold wrong ideas because of their environment/education/whatever, they’re still wrong ideas.
Why do you think that similar situations do not happen in real life? Real people have been killed for not paying their debts.
Sure, but they’re extremely rare exceptions—the overwhelming majority of lottery players are not indebted to murderers (and a significant chunk of those who do, I suppose, still have much better options available e.g. run to the police accepting whatever prison sentence may await them).
EDIT: Rephrased the question in the preceding comment to make it clearer that I was thinking of ordinary lottery players.
Now I agree.
You’re better off saving the same money (unless it’s literally your last money and you can only buy a ticket, and won’t be in similar situation later on a regular basis, in which case you should contribute that money to Poor People’s Last Money fund actually to more efficiently allocate them for your risk-seeking preferences).
You don’t understand how difficult it can be for poor people to save money. They may not have access to banks. They may not have a safe place to conceal money. They could theoretically save a few dollars a week for a year and buy something nice instead of buying lottery tickets, but emergencies would trump the project.
In a recent NPR piece about micro-finance, the point was made that poor people in third world countries frequently want/need a place to store money at least as much as they need a chance to borrow. Presently, they may be storing their savings as animals (which can die) or jewelry (which can be stolen).
This may be more about psychological issues, but I remember an NPR interview with an ex-bank robber. The interviewer asked what you’d do with thousands of dollars (tens of thousands?) you’d stolen, with an implication that you’d save it somewhere. (In a bank?) She and the ex-robber had trouble understanding each other, but I think (and I speak as a fairly middle-class person) that from the bank robber point of view, that’s the sort of money you spend. Storing it isn’t even something to imagine.
When I look at what I’ve just written, it’s clear that I’m conflating several different sorts of situation, and probably don’t have enough information. On the other hand, the Poor People’s Last Money Fund doesn’t exist, and would probably be hard to organize, though something of the sort exists informally as mutual aid.
Should the emergencies trump this project? Should the fund be given away for the emergencies? If it should, then it’s good to have it. If it shouldn’t, then it remains intact.
You are getting dangerously far into the No True Scotsman territory, although of course your point is valid where it does apply.
No, she’s not—you’re assuming things about poverty that simply aren’t the case. This list may be useful in thinking on the matter.
Noteworthy:
“Poverty” may nicely compress many details, but isn’t particularly useful in this instance, as we are discussing the specific point of technical ability (as opposed to psychological feasibility, desirability of implementing such a plan, etc.) of a hypothetical rational low-income person to accumulate money in some form. It’s not that impossible a requirement to make considerations depending on it irrelevant. Creative solutions exist: you can probably hide cash under a tree stump of something.
If you haven’t already seen it, you might want to check out Lotteries: A Waste Of Hope by Eliezer Yudkowsky, which probably influences a lot of Less Wrong contributors on this topic.
I did see it, I would have linked it in the opening sentence but I couldn’t seem to make it happen with the tags.
I believe top-level posts use HTML—link text is the syntax to use.
You should endeavor to overcome this difficulty.
It certainly is concievable and in the world of your thought experiment buying a lottery ticket would in fact be rational. However such things don’t exist in reality. People who buy lottery tickets don’t do so because of entertainment value but because of a hope they would win. That’s connotaionally implied by the term “lottery ticket”. And therefore it’s correct to use it as an example of common rationality failure.
A more realistic somewhat rational reason to buy lottery tickets would be when the gains of the lottery company are used to fund charitable projects and someone would reason that buying a lottery ticket increases the jackpot and thereby makes the lottery ticket more attractive to a lot of irrational people and thus increase the gains for the charity.
Eh?
Suppose Sam plays the lottery because when Sam buys a $5 lottery ticket, Sam enjoys the period until the drawing quite a lot.
Yes, you’re right, this is entirely because Sam hopes the ticket will win, but the fact remains that Sam does enjoy it: Sam can indulge in pleasant fantasies about being a billionaire, etc.
Now, you may argue that the only reason Sam enjoys it is because Sam is being irrationally hopeful, and I would agree. If Sam were more rational, Sam would not enjoy buying the ticket so much. (I would say the same thing about many forms of entertainment.)
But I think that’s orthogonal to the OP. Given that Sam enjoys it, one can ask whether it makes sense to spend $5 for that enjoyment, the same way one can ask whether it makes sense to spend $5 for a bottle of wine.
Are you really claiming that there are no Sams in the real world? Or have I misunderstood you?
That’s an interesting difference on the word “enjoy”. If we use “enjoy” as synonymous to “activating our pleasure center” and buying a lottery ticket does that cheaper than using drugs, then Sam does enjoy buying a lottery ticket. But that would be more like wireheading than what I would think of as “actual entertainment”.
I would think of wireheading as clearly irrational and going to the opera when you genuinly enjoy it as clearly rational. Maybe the border between them isn’t that clear cut but I think of buying lottery tickets to indulge in fantasies about being rich as more on the wireheading side.
I would suggest as a test to distinguish the two whether you would also enjoy merely talking about the thing. Would Sam enjoy talking about buying lottery tickets and the suspense until the numbers are drawn or would he only enjoy talking about what he would do when rich? He won’t get the latter with lottery tickets. But if someone enjoys talking about opera, he will get what he wants when going to an actual opera.
I am not sure I understand what you mean by “actual entertainment.”
I have been in situations where I realized that this thing that I’ve been doing, ostensibly for entertainment purposes, is no longer entertaining and has not been for some time. For example, I’ve been playing a video game but haven’t actually been enjoying it for a while.
That’s more or less the referent I have for something not being actual entertainment, while still being sufficiently entertainment-like to deserve the label. (Dropping an anvil on my foot is also not actual entertainment, but it would be very strange to describe it that way.)
I’ve never wireheaded, but given my understanding of the idea I would call it actual entertainment. Whether it’s a rational thing to do or not is a whole other question: that depends on its costs (including long-term opportunity costs).
It seems very strange to me that my judgment of whether Sam actually enjoys buying a lottery ticket should depend on whether there are cheaper entertainments available. Ditto going to the opera. I would agree that doing either when there are other things with lower costs that Sam enjoys more is imperfectly rational, but I would say that whether Sam actually enjoys them or not doesn’t depend on that.
The “talking-about” test seems odd to me… there are many activities I enjoy that I don’t necessarily enjoy talking about. Are you claiming that I therefore don’t actually enjoy the activities, I just think I do?
(I’m also not sure why you think Sam won’t enjoy talking about buying lottery tickets, necessarily, though I agree that it seems plausible that Sam would not.)
one of my motivations for accumulating resources is the ability to wirehead myself if things look to be going down the drain.
Can you expand on what you mean by “things go down the drain,” here?
sharp, large decrease in standard of living.
I am having a hard time coming up with a scenario in which a sharp, large decrease in my standard of living makes wireheading a more sensible thing for me to do.
I do sympathize with the urge to do it even if it isn’t sensible—ditto the urge to drink habitually, have unprotected sex with strangers, faff about on the Internet while at work, or shoot myself in the head—but I can’t quite grasp that as a long-term plan, either.
The fraction is really not very large. Camelot (the lottery operator in the UK) has in fact been specifically enjoined from stating or implying that buying a lottery ticket meaningfully contributes to charity.
LotteryWest runs the West Australian lottery and the fraction they donate to charity is enourmous, so that’s a generalisation that does not necessarily hold true everywhere.
The question you’re examining (which I’d phrase as “I know what a lottery ticket is. Knowing that, do I want to buy it?”) is something that I don’t think falls exactly under epistemic nor instrumental rationality—I personally call it “volitive rationality”, the skill of correctly analysing your utility function, which is a necessary step after you’ve taken your model of external reality (epistemic r.) and before you proceed to figure out which chains of future events (instrumental r.) will lead to the outcomes you want more.
I should probably try making a post about it, now that there’s a Discussion section for such a not-fully-fleshed-out idea.