In case you’re thinking of running out for a MegaMillions lottery ticket in the few hours left before tonight’s drawing: If you drive one mile to buy your ticket, your chance of being involved in a fatal accident on the way is about 8 times as great as your chance of winning the jackpot.
I’d better buy at least eight tickets then.
Are the odds of a fatal accident higher today?
I have to go out to 7-11 for some munchies anyway. I guess that buckling my seatbelt is about as silly as buying a handful of lottery tickets.
Lotteries are not investment, they are entertainment.
Lottery syndicates at work, and lottery tickets at home provide shared topics of conversation and opportunities to socialise with people you may not have that much in common with.
You win whether you win or not.
It’s like Darwin said, “You can’t win if you don’t play”.
there is entertainment value in lotteries ben, I will cede you that point. unlike other kinds of private gambling, however – lotteries tend to be ‘controlled’ by the state therefore, the price of a ticket isn’t affected by free market pressures. you lose extra in a state controlled gambling environment, even if you win. the ‘rake’ isn’t paying for just the folks to run the ‘house’ – there are even greedier fatcats taking a cut above them.
lotteries are ignorance tax, for the most part.
that being said, I almost always buy a ticket when visiting my family. we only get pull tabs and bingo here. next time I think I will just burn a dollar and see if I find that to be more or less entertaining.
Maybe the next Vocabulary Lesson post could address the meaning of “the dismal science.” :-)
If you are a young adult and put your Obamacare monthly premium on one spin of the Roulette Wheel, putting the proceeds in an index fund until age 65, and pay your own medical bills in the interim, you will retire a multimillionaire for sure. And playing Roulette is a hell of a lot more entertaining than paying insurance premiums. And you can’t leave your Obamacare to your heirs if you should happen to die.
I think it was Greg Mankiw who suggested that it would make more sense to teach probability and statistics to high school kids than to teach them geometry. I’d go for that. Might cost the state money, though.
Steve, would someone who drove a mile to get the lottery ticket violate the von Neumann-Morgenstern axioms?
Let’s say assuming that people value their lives at 10 million dollars.
Bad math argument in favor of buying a ticket:
Your chances of winning the lottery with one ticket are around 200 million to one.
Your chances of winning the lottery without buying a ticket is zero
Therefore, buying a single lottery ticket as opposed to not buying one increases your odds of winning the lottery by roughly infinity.
#12 Kirk – this is exactly the reasoning behind a great many “health scares”.
#8 – don’t get this one. Are you suggesting a monthly bet on roulette with that month’s Obama-care payment? Over time that would even out to slightly less that the total of the payments. If you mean putting it all on a single spin, then you probably leave with nothing – no proceeds to invest.
So you’re telling me there’s a chance?
@Harold #13
If I understood Jimbino’s comment correctly, each month the hypothetical young adult would be betting, on a single roll of the Roulette Wheel, an amount equal to what he might otherwise have payed toward an Obamacare insurance premium. Whenever he wins, which would be slightly less than half the time, those funds would be invested in an indexed fund.
The result would be an indexed fund which has a slightly lower expected future value than another hypothetical fund into which the young adult simply invests the Obamacare premium without gambling.
But for some, perhaps the Roulette Wheel adds valuable excitement which outweighs the hit to the expected future value…?
#15. “which would be slightly less than half the time” I imagine putting it all on a single number to increase the tension. Same expected return, I think – except there will be longer to wait until you start getting index linking.
However, this is pretty much how all insurance works, is it not? Most people would end up better off if they saved the premium against the expected losses. Some would end up slightly better off, but a few would end up catastrophically worse off, and it is this risk you mitigate with insurance. Also you may have inadequate discipline to carry out what you recognise is a sensible plan to save the premiums, even though that new [insert object of desire here] is calling to you.
P(D) = 8*P(W), so assuming a $5 million life time earnings, then expected winnings from driving to buy a single ticket (assuming the worst case scenario) are
-$5M*P(D) + $550M*P(W) =
P(W)*($550M-$40M) =
P(W) = $510M
Looks like a winner to me.
roystgnr #5 — :)
“If I understood Jimbino’s comment correctly, each month the hypothetical young adult would be betting, on a single roll of the Roulette Wheel, an amount equal to what he might otherwise have payed toward an Obamacare insurance premium. Whenever he wins, which would be slightly less than half the time, those funds would be invested in an indexed fund.”
Seems to me the correct analogy for a young adult would be to bet on a single number. The whole point of getting young adults into Obamacare is that they tend to not need medical care, right? It’s the “Whenever he wins, which would be slightly less than half the time” that is the problem here – you’re assuming betting on red or black which is in no way analogous to the events and probabilities facing a young adult.
Harold – “this is pretty much how all insurance works, is it not?”
Well what you desscribed would apply to actuarially fair insurance too, however here we’re talking about a particular subgroup for whom the premium is *systematically* designed to be high. So I would argue they stand to gain more than half the time by either investing or wagering it instead.
your chance of being involved in a fatal accident on the way is about 8 times as great as your chance of winning the jackpot.
No, MY chance of being involved in a fatal accident is not necessarily whatever is indicated by aggregate data and associated averages. The latter approach to probability assumes randomness akin to, say, who wins the lottery. I may be a much more careful driver than average (including defensive driving) and/or have a route less conducive (than average) to a fatal accident and/or have a more protective vehicle than average, etc.
The discussions comparing Roulette Wheels, Obamacare and insurance have one major fallacy: Obamacare (as with most health insurance) is not insurance. It is not shared risk as insurance should be, since it provides payments for the routine, the regular and the certain. There is a component of insurance, but we have left pure health insurance behind long ago.
Losing the distinction between health care and health insurance is a primary part of the problem.