Alabama state representative Cam Ward has a post up at Doc’s Political Parlor outlining the paltry sum that education lotteries across the country actually contribute to education budgets.  His data seems to come from a recent New York Times article.

Personally, I have no moral convictions against gambling.  I have been to a casino, twice actually, and a dog track once.  I frequently buy a lottery ticket (that’s right, a single ticket, read on).  But I have the good sense to know that the odds are on the house.  I work too hard to just give my money away by playing a game whose outcome is entirely outside of my control.  I’ll admit that going to a casino can be entertaining and, if you are responsible, that you can have a fun evening for the same cost as going to a concert or the theater.

When it comes to lotteries - or most forms of gambling for that matter - let’s be frank about what they are: a tax on stupidity (I take no credit for that phrase).  Go to any gas station that sells lottery tickets and observe who is buying dozens of dollars of scratchers.  Hint: it’s not the upper middle class.  It’s the poor.  Freely handing over their limited money in the futile hope that they can hit the big one.  They actually think that is the best avenue to “success”.  (Author’s note: I personally don’t relate success with wealth)

I mentioned that I frequently buy a single lottery ticket.  The reason is all mathematical.  If you don’t have a ticket your chances of winning are 0% - not too good.  If you bought a single Powerball ticket your odds of winning the grand prize are a whopping 1 in 146,107,962 (0.0000000068%).  You have a much better chance of becoming an astronaut (1 in 12,100,000).  However, I look at the percent increase of the odds of winning for that first ticket purchase, which is the previously mentioned vanishingly small number divided by zero.  This is an undefined number, but depending on your mathematical sophistication, it can be interpreted as infinity if you take the limit from the positive direction.  That means that the first ticket gives you an infinitely better chance of winning than no ticket.  I like those odds.

However, subsequent tickets yield much less marginal return (infinitely less, actually).   If you have two tickets then your odds of winning are 2 in 146,107,962 - or twice as much as when you only had one ticket.  Not bad, but not anywhere near the infinite improvement in your odds that the first ticket bought you.  The third ticket only improves your odds 1.5 times over the second ticket.  It keeps going downhill from there.

Now there is some entertainment value in the hope that a lottery ticket represents.  But, price that hope accordingly and don’t blow $100 on tickets just because the jackpot is high.

I have actually pledged to myself (and here it is in writing) that if I were fortunate enough to win with my one ticket that I would keep a very small amount of the prize money, probably less than 5%.  I strongly believe that coming into money that you did not earn has a harmful effect on your life and I don’t want to invite misery upon myself.  I’d pay off my mortgage set up college funds for the kids and that is about it.  I wouldn’t quit working because I enjoy my job and I want my kids to have a positive, hard working role model.  Plus, if I gave the lion’s share to charities then I could effectively shield it from the government’s reach and put it to good use.

Regular readers know that I have a narrow view of what government should and should not do - and lotteries most certainly don’t fall within their purview.  Quite honestly I see a conflict of interest.  The state is charged with educating children.  Simultaneously the state, well some states, funds some portion of that education with revenue that is predicated on people making very poor economic decisions.  If the state churned out graduates who were knowledgeable about probability and basic personal finance that very revenue stream would diminish.  Better to churn out idiots so that they can maintain or expand the education establishment (jobs program).

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This entry was posted by Brian on Monday, October 8th, 2007 at 4:19 pm and is filed under Alabama, Government, Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Please note the copyright policy.