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 3:12 PM EST, Thu November 20, 2014
The plan by President Obama to provide legal status to millions of undocumented adults living in the U.S. leaves Republicans in a political quandary.
updated 10:13 PM EST, Thu November 20, 2014
Despite criticism from those on the right, Obama's expected immigration plans won't make much difference to deportation numbers, says Ruben Navarette.
updated 8:21 PM EST, Thu November 20, 2014
As new information and accusers against Bill Cosby are brought to light, we are reminded of an unshakable feature of American life: rape culture.
updated 5:56 PM EST, Thu November 20, 2014
When black people protest against police violence in Ferguson, Missouri, they're thought of as a "mob."
updated 3:11 PM EST, Wed November 19, 2014
Lost in much of the coverage of ISIS brutality is how successful the group has been at attracting other groups, says Peter Bergen.
updated 8:45 AM EST, Wed November 19, 2014
Do recent developments mean that full legalization of pot is inevitable? Not necessarily, but one would hope so, says Jeffrey Miron.
updated 8:19 AM EST, Wed November 19, 2014
We don't know what Bill Cosby did or did not do, but these allegations should not be easily dismissed, says Leslie Morgan Steiner.
updated 10:19 AM EST, Wed November 19, 2014
Does Palestinian leader Mahmoud Abbas have the influence to bring stability to Jerusalem?
updated 12:59 PM EST, Wed November 19, 2014
Even though there are far fewer people being stopped, does continued use of "broken windows" strategy mean minorities are still the target of undue police enforcement?
updated 9:58 PM EST, Mon November 17, 2014
The truth is, we ran away from the best progressive persuasion voice in our times because the ghost of our country's original sin still haunts us, writes Cornell Belcher.
updated 4:41 PM EST, Tue November 18, 2014
Children living in the Syrian city of Aleppo watch the sky. Not for signs of winter's approach, although the cold winds are already blowing, but for barrel bombs.
updated 8:21 AM EST, Mon November 17, 2014
We're stuck in a kind of Middle East Bermuda Triangle where messy outcomes are more likely than neat solutions, says Aaron David Miller.
updated 7:16 AM EST, Mon November 17, 2014
In the midst of the fight against Islamist rebels seeking to turn the clock back, a Kurdish region in Syria has approved a law ordering equality for women. Take that, ISIS!
updated 11:07 PM EST, Sun November 16, 2014
Ruben Navarrette says President Obama would be justified in acting on his own to limit deportations
updated 8:21 AM EST, Mon November 17, 2014
America will have its hands full in the Middle East for years to come, writes Aaron David Miller.
updated 11:17 AM EST, Sat November 15, 2014
Gene Seymour says it's part of our pioneering makeup to keep exploring the universe
updated 12:42 PM EST, Fri November 14, 2014
Sally Kohn says the U.S.-China agreement to cut carbon emissions is a big deal, and Republicans should take note.
updated 4:29 PM EST, Sat November 15, 2014
S.E. Cupp says the Obamacare advisor who repeatedly disses the electorate in a series of videotaped remarks reveals arrogance and cluelessnes.
updated 5:00 PM EST, Fri November 14, 2014
Reggie Littlejohn says gendercide is a human rights abuse against women, with bad consequences for nations.
updated 11:57 AM EST, Thu November 13, 2014
The massing of Russian forces near Ukraine only reinforces the impression that Moscow has no interest in reconciliation with the West, writes Michael Kofman.
updated 9:55 AM EST, Wed November 12, 2014
It takes a real man to make the moves on the wife of the most powerful man in the biggest country. Especially when the wife is a civilian major general.
updated 8:47 AM EST, Wed November 12, 2014
Proponents of marriage equality LGBT persons have been on quite a winning streak -- 32 states and the District of Columbia now allow same-sex marriage.
updated 8:58 AM EST, Thu November 13, 2014
It has been an eventful few weeks for space news.
updated 3:14 PM EST, Wed November 12, 2014
It's too early to write the U.S. off, and China's leaderships knows that better than anyone, argues Kerry Brown.
updated 1:21 PM EST, Wed November 12, 2014
"How can Jon Stewart hire you to be 'The Daily Show''s senior Muslim correspondent when you don't even know how to pronounce Salaam Al-aikum?!"
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT