Skip to main content

The big swindle: In lotteries, the poor are the biggest losers

By David R. Just
updated 5:52 PM EST, Wed December 18, 2013
STORY HIGHLIGHTS
  • At least two people will share the $648 million jackpot from Tuesday's Mega Millions lottery
  • Most who play know they have little chance of winning anything
  • Just: Lottery playing by poor a Hail Mary investment strategy, a ray of hope among the hopeless

Editor's note: David R. Just is Associate Professor of Behavioral Economics at Cornell University's Dyson School of Applied Economics and Management and an expert on how psychology and economics influence how people make choices.

(CNN) -- With at least two winners sharing a prize of more than a half-billion dollars, Tuesday's Mega Millions lottery may have drawn more players than any previous drawing.

But they may be the lucky ones, in more ways than you think.

Related: Woman is Georgia winner of $648 million Mega Millions jackpot

Most of those who play know they have little chance of winning anything. Ever. And most of them probably can't afford to play, anyway.

Prof. David R. Just
Prof. David R. Just

Still, they line up to place their dollars on the counter, all for a snowball's chance at an instant miracle, even as that miracle has gotten harder to attain.

Lotteries and games of chance such as the Mega Millions, or more traditional casinos, have come in vogue among politicians seeking to raise revenues without raising taxes.

This seems like a net win all around — players receive the entertainment of playing and we all enjoy the benefits of higher funding for schools or other public works.

Unfortunately the reality is not so rosy.

Related: You won the big one -- now what?

Those in poverty or near poverty not only are more likely to play the lottery than those with greater means, they also spend a larger percent of their money on average on these games of chance.

Some have argued that this may not be such a bad thing if the poor basically play the lottery as a cheap form of entertainment.

However, when we look for the telltale signs of entertainment behavior, they are absent.

We don't see evidence that changes in the availability or price of other entertainment, movies for example, lead to changes in lotto purchases.

Rather, we find there are big jumps in lottery purchases when the poverty rate increases, when unemployment increases, or when people enroll on welfare.

Lottery playing among the poor is a Hail Mary investment strategy — a small ray of hope among the hopeless.

But this false hope is, by design, an attempt to lure the emotional decision-maker. Recent changes in the Mega Millions lottery have reduced the chances of winning in order to increase the size of the jackpot.

By changing the range of the six possible numbers drawn -- from between 1 and 56 to between 1 and 75 -- the already improbable odds of 1 in 176 million have diminished to a virtually impossible 1 in 259 million. Fewer big winners means larger jackpots, more hype and more players.

And more money for the lotteries.

You won the lottery! What's next
At least 1 winning ticket sold in Calif
Psychiatrist: Lottery fever is good

Related: $800 million in lottery prizes unclaimed

Such changes have occurred as the lottery commissions have become expert in swindling players out of their money. Humans aren't particularly good at dealing with risks and gambles. We tend to believe that rare events are more common than they truly are.

Moreover, we don't discern between small changes in very low probabilities. Thus, few will have noticed that the odds of winning the lottery reduced from 0.000000006 to 0.000000004 for any given ticket.

But our eyes are drawn to the steadily increasing prizes—prizes that are now designed to eventually exceed $1 billion. Such astronomical amounts draw in even those who consider themselves very prudent.

When the prizes get this large, many start to rationalize the purchase of a ticket. In the end, there are few who win money, and many who simply lose a few dollars with nothing to show for it.

But those few dollars add up.

For example, the average annual per capita spending on lottery tickets in Massachusetts is nearly $800. That is $800 being spent for every man, woman and child in the state. That is more than six times the average per capita food stamp benefit. Some of this $800 goes to schools, constituting about 1-2% of school budgets in many states.

The majority of this $800, however, goes to a very small number of lucky winners who take home what seems like infinite wealth that is sure to change their life forever. Or not so much.

Related: No lotteries in these 7 states

Approximately one third of lottery winners will declare bankruptcy. This happens primarily because new winners are so unfamiliar with the magnitude of the money they have won, that they simply overestimate the purchasing power. How could I ever need to budget when I have several hundred million in the bank?

The overwhelming majority of lottery winners don't believe they are better off for having won. One study finds that recent lottery winners have lower levels of happiness than do those who have recently become quadriplegic.

Apparently, winning the lottery is not what the hype would have you believe. Personally, I would probably prefer an $800 tax.

Follow us on Twitter @CNNOpinion.

Join us on Facebook.com/CNNOpinion.

The opinions expressed in this commentary are solely those of David R. Just.

ADVERTISEMENT
Part of complete coverage on
updated 1:33 AM EST, Thu December 25, 2014
Danny Cevallos says the legislature didn't have to get involved in regulating how people greet each other
updated 6:12 PM EST, Tue December 23, 2014
Marc Harrold suggests a way to move forward after the deaths of NYPD officers Wenjian Liu and Rafael Ramos.
updated 8:36 AM EST, Wed December 24, 2014
Simon Moya-Smith says Mah-hi-vist Goodblanket, who was killed by law enforcement officers, deserves justice.
updated 2:14 PM EST, Wed December 24, 2014
Val Lauder says that for 1,700 years, people have been debating when, and how, to celebrate Christmas
updated 3:27 PM EST, Tue December 23, 2014
Raphael Sperry says architects should change their ethics code to ban involvement in designing torture chambers
updated 10:35 PM EST, Tue December 23, 2014
Paul Callan says Sony is right to call for blocking the tweeting of private emails stolen by hackers
updated 7:57 AM EST, Tue December 23, 2014
As Christmas arrives, eyes turn naturally toward Bethlehem. But have we got our history of Christmas right? Jay Parini explores.
updated 11:29 PM EST, Mon December 22, 2014
The late Joe Cocker somehow found himself among the rock 'n' roll aristocracy who showed up in Woodstock to help administer a collective blessing upon a generation.
updated 4:15 PM EST, Tue December 23, 2014
History may not judge Obama kindly on Syria or even Iraq. But for a lame duck president, he seems to have quacking left to do, says Aaron Miller.
updated 1:11 PM EST, Tue December 23, 2014
Terrorism and WMD -- it's easy to understand why these consistently make the headlines. But small arms can be devastating too, says Rachel Stohl.
updated 1:08 PM EST, Mon December 22, 2014
Ever since "Bridge-gate" threatened to derail Chris Christie's chances for 2016, Jeb Bush has been hinting he might run. Julian Zelizer looks at why he could win.
updated 1:53 PM EST, Sat December 20, 2014
New York's decision to ban hydraulic fracturing was more about politics than good environmental policy, argues Jeremy Carl.
updated 3:19 PM EST, Sat December 20, 2014
On perhaps this year's most compelling drama, the credits have yet to roll. But we still need to learn some cyber lessons to protect America, suggest John McCain.
updated 5:39 PM EST, Mon December 22, 2014
Conservatives know easing the trade embargo with Cuba is good for America. They should just admit it, says Fareed Zakaria.
updated 8:12 PM EST, Fri December 19, 2014
We're a world away from Pakistan in geography, but not in sentiment, writes Donna Brazile.
updated 12:09 PM EST, Fri December 19, 2014
How about a world where we have murderers but no murders? The police still chase down criminals who commit murder, we have trials and justice is handed out...but no one dies.
updated 6:45 PM EST, Thu December 18, 2014
The U.S. must respond to North Korea's alleged hacking of Sony, says Christian Whiton. Failing to do so will only embolden it.
updated 4:34 PM EST, Fri December 19, 2014
President Obama has been flexing his executive muscles lately despite Democrat's losses, writes Gloria Borger
updated 2:51 PM EST, Thu December 18, 2014
Jeff Yang says the film industry's surrender will have lasting implications.
updated 4:13 PM EST, Thu December 18, 2014
Newt Gingrich: No one should underestimate the historic importance of the collapse of American defenses in the Sony Pictures attack.
updated 7:55 AM EST, Wed December 10, 2014
Dean Obeidallah asks how the genuine Stephen Colbert will do, compared to "Stephen Colbert"
updated 12:34 PM EST, Thu December 18, 2014
Some GOP politicians want drug tests for welfare recipients; Eric Liu says bailed-out execs should get equal treatment
updated 8:42 AM EST, Thu December 18, 2014
Louis Perez: Obama introduced a long-absent element of lucidity into U.S. policy on Cuba.
updated 12:40 PM EST, Tue December 16, 2014
The slaughter of more than 130 children by the Pakistani Taliban may prove as pivotal to Pakistan's security policy as the 9/11 attacks were for the U.S., says Peter Bergen.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT