The Dark Side of Lottery Purchases
The lottery is a form of gambling in which numbers are drawn to determine prizes. It is a government-run activity, typically regulated at the state level. Lottery operations essentially start as traditional raffles, where the public buys tickets to a drawing that will occur in the future (often weeks or months). But then they evolve, with new games introduced to increase revenue and maintain a high level of public interest.
These expansions are driven by state governments’ desire to maximize the number of potential customers – in addition to convenience store owners, who tend to be lottery vendors; lottery suppliers, who make heavy contributions to state political campaigns; teachers, whose salaries are subsidized by lotto revenues; and state legislators, who become accustomed to supplemental revenues. They are also driven by the fact that people like to gamble, and the dangling promise of instant wealth is especially alluring in an age of limited social mobility.
But there is a dark side to all this. As a matter of principle, lottery purchases cannot be rationally justified in decision models that use expected value maximization as the guiding principle. The reason is that the expected gain from a lottery ticket purchase is less than the cost, and the cost is typically much higher than the prize itself. Purchasing a lottery ticket is, therefore, an unprofitable venture, even if you win. As a result, lottery players contribute billions to state government receipts, replacing savings they could have used for something else, such as retirement or college tuition.
