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 2:45 PM EDT, Thu April 17, 2014
Michael Bloomberg and Shannon Watts say Americans are ready for sensible gun laws, but politicians are cowed by the NRA. Everytown for Gun Safety will prove the NRA is not that powerful.
updated 9:28 AM EDT, Thu April 17, 2014
Ruben Navarrette says Steve Israel is right: Some Republicans encourage anti-Latino prejudice. But that kind of bias is not limited to the GOP.
updated 7:23 PM EDT, Wed April 16, 2014
Peggy Drexler counts the ways Phyllis Schlafly's argument that lower pay for women helps them nab a husband is ridiculous.
updated 12:42 PM EDT, Wed April 16, 2014
Rick McGahey says Rep. Paul Ryan is signaling his presidential ambitions by appealing to hard core Republican values
updated 11:39 AM EDT, Wed April 16, 2014
Paul Saffo says current Google Glasses are doomed to become eBay collectibles, but they are only the leading edge of a surge in wearable tech that will change our lives
updated 2:49 PM EDT, Tue April 15, 2014
Kathleen Blee says the KKK and white power or neo-Nazi groups give haters the purpose and urgency to use violence.
updated 7:56 AM EDT, Wed April 16, 2014
Sen. Sheldon Whitehouse and Rep. Henry Waxman say read deep, and you'll see the federal Keystone pipeline report spells out the pipeline is bad news
updated 7:53 AM EDT, Wed April 16, 2014
Frida Ghitis says President Obama needs to stop making empty threats against Russia and consider other options
updated 5:29 PM EDT, Tue April 15, 2014
Peter Bergen and David Sterman say the Kansas Jewish Center killings are part of a string of lethal violence in the U.S. that outstrips al Qaeda-influenced attacks. Why don't we pay more attention?
updated 12:41 PM EDT, Tue April 15, 2014
Danny Cevallos says families of the passengers on Malaysian Airlines Flight 370 need legal counsel
updated 11:23 AM EDT, Mon April 14, 2014
David Frum says Russia is on a rampage of mischief while Western leaders and Western alliances charged with keeping the peace hem and haw
updated 7:56 AM EDT, Mon April 14, 2014
Most adults make the mistakes of hitting the snooze button and of checking emails first thing in the morning, writes Mel Robbins
updated 1:54 PM EDT, Mon April 14, 2014
David Wheeler says as middle-class careers continue to disappear, we need a monthly cash payment to everyone
updated 7:55 AM EDT, Mon April 14, 2014
Democrats need to show more political spine when it comes to the issue of taxes.
updated 11:55 AM EDT, Mon April 14, 2014
Donna Brazile recalls the 50th Anniversary of the Civil Rights Act as four presidents honored the heroes of the movement and Lyndon Johnson, who signed the law
updated 9:17 AM EDT, Mon April 14, 2014
Elmer Smith remembers Chuck Stone, the legendary journalist from Philadelphia who was known as a thorn in the side of police and an advocate for the little guy
updated 2:56 PM EDT, Sun April 13, 2014
Al Franken says Comcast, the nation's largest cable provider, wants to acquire Time Warner Cable, the nation's second-largest cable provider. Should we be concerned?
updated 11:22 AM EDT, Fri April 11, 2014
Philip Cook and Kristin Goss says the Pennsylvania stabbing attack, which caused grave injury -- but not death, carries a lesson on guns for policymakers
updated 3:06 PM EDT, Fri April 11, 2014
Wikipedia lists 105 football movies, but all too many of them are forgettable, writes Mike Downey
updated 10:32 AM EDT, Fri April 11, 2014
John Sutter and hundreds of iReporters set out to run marathons after the bombings -- and learned a lot about the culture of running
updated 12:49 PM EDT, Fri April 11, 2014
Timothy Stanley says it was cowardly to withdraw the offer of an honorary degree to Ayaan Hirsi Ali. The university should have done its homework on her narrow views and not made the offer
updated 10:16 AM EDT, Fri April 11, 2014
Al Awlaki
Almost three years after his death in a 2011 CIA drone strike in Yemen, Anwar al-Awlaki continues to inspire violent jihadist extremists in the U.S, writes Peter Bergen
updated 9:21 PM EDT, Fri April 11, 2014
David Bianculli says Colbert is a smart, funny interviewer, but ditching his blowhard persona to take over the mainstream late-night role may cost him fans
updated 1:31 PM EDT, Thu April 10, 2014
Rep. Paul Ryan says the Republican budget places its trust in the people, not in Washington
updated 5:28 PM EDT, Thu April 10, 2014
Aaron David Miller says Obama isn't to blame for Kerry's lack of progress in resolving Mideast talks
updated 11:22 AM EDT, Mon April 14, 2014
David Weinberger says beyond focusing on the horrors of the attack a year ago, it's worth remembering the lessons it taught about strength, the dangers of idle speculation and Boston's solidarity
updated 12:32 PM EDT, Thu April 10, 2014
Katherine Newman says the motive for the school stabbing attack in Pennsylvania is not yet known, but research on such rampages turns up similarities in suspects and circumstances
updated 2:39 PM EDT, Wed April 9, 2014
Wendy Townsend says the Rattlesnake Roundup -- where thousands of pounds of snakes are killed and tormented -- is barbaric
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT