Some people who buy lottery tickets argue that a lottery ticket is a small price to pay for the chance of being a millionaire.
While the expected return of the lottery ticket is negative, they place an extra value on the chance of being a millionaire, in addition to the expected return.
For comparison, suppose there is another lottery with the same negative expected return, but the maximum you can win is $5 (corresponding with a much higher probability of winning so that the expected value is the same). Then players will be less interested—because you’ve taken away the value of the chance of winning a huge sum of money.
Is it irrational to place extra value on the chance of winning more money than you could ever make in a lifetime? Perhaps not - sometimes greater success of several orders of magnitude is only possible via a gamble with a negative expected return.
I just voted myself down—I’m realizing that the topic isn’t “why do people play the lottery”. Phil Goetz is presenting one potential reason for playing the lottery. I don’t need to worry about how common that reason is; the topic at hand is to think about that reason and its relationship to rationality.
I voted you back up, because it’s a really interesting point. I take it you’re saying that they get enjoyment out holding the ticket between the buying and the drawing.
Thank you. Actually, my point was this: there is value to a gamble that isn’t measured by the expected value. The expected value argues that playing the lottery isn’t going to make them rich. But keeping the dollar isn’t going to make them rich either. At least spending their dollar playing the lottery gives them the chance of being rich.
When I made this argument I was actually thinking of impossible gambles that are made on the scale of evolution, say. For every million that make a gamble and fail, (for example, to escape an island), eventually one wins and validates the gambles of all (survives the journey and populates the continent).
I was reluctant to provide this example because I definitely don’t want to imply that it’s an evolutionary advantage or a justified sacrifice for the good of the group. (yuck) Perhaps an analogy from economics will balance -- you can demand more for an opportunity that can’t be purchased any other way.
There is at least one parallel in evolution. Many bacteria have heat shock proteins that inhibit DNA proofreading. That means that they respond to stress by increasing their mutation rate. It will probably kill them, but if the entire colony does it, it’s more likely to survive.
It’s not quite the same. If you count the payoff to the bacteria to include the lives of all its descendants, then it may still be “rational”.
But maybe it is the same. Presumably, we instinctively act in a way that counts the utility of all our descendants in our utility functions.
Some people who buy lottery tickets argue that a lottery ticket is a small price to pay for the chance of being a millionaire.
While the expected return of the lottery ticket is negative, they place an extra value on the chance of being a millionaire, in addition to the expected return.
For comparison, suppose there is another lottery with the same negative expected return, but the maximum you can win is $5 (corresponding with a much higher probability of winning so that the expected value is the same). Then players will be less interested—because you’ve taken away the value of the chance of winning a huge sum of money.
Is it irrational to place extra value on the chance of winning more money than you could ever make in a lifetime? Perhaps not - sometimes greater success of several orders of magnitude is only possible via a gamble with a negative expected return.
See Lotteries: A Waste of Hope.
I just voted myself down—I’m realizing that the topic isn’t “why do people play the lottery”. Phil Goetz is presenting one potential reason for playing the lottery. I don’t need to worry about how common that reason is; the topic at hand is to think about that reason and its relationship to rationality.
I voted you back up, because it’s a really interesting point. I take it you’re saying that they get enjoyment out holding the ticket between the buying and the drawing.
Thank you. Actually, my point was this: there is value to a gamble that isn’t measured by the expected value. The expected value argues that playing the lottery isn’t going to make them rich. But keeping the dollar isn’t going to make them rich either. At least spending their dollar playing the lottery gives them the chance of being rich.
When I made this argument I was actually thinking of impossible gambles that are made on the scale of evolution, say. For every million that make a gamble and fail, (for example, to escape an island), eventually one wins and validates the gambles of all (survives the journey and populates the continent).
I was reluctant to provide this example because I definitely don’t want to imply that it’s an evolutionary advantage or a justified sacrifice for the good of the group. (yuck) Perhaps an analogy from economics will balance -- you can demand more for an opportunity that can’t be purchased any other way.
There is at least one parallel in evolution. Many bacteria have heat shock proteins that inhibit DNA proofreading. That means that they respond to stress by increasing their mutation rate. It will probably kill them, but if the entire colony does it, it’s more likely to survive.
It’s not quite the same. If you count the payoff to the bacteria to include the lives of all its descendants, then it may still be “rational”.
But maybe it is the same. Presumably, we instinctively act in a way that counts the utility of all our descendants in our utility functions.