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I am a statistician and I buy lottery tickets

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Re: I am a statistician and I buy lottery tickets

#71

Post by jopt »

paulsutter wrote: post #16

Insurance has an interesting comparison to lottery tickets. In a lottery ticket, the expected return is usually about 50%. Which is exactly the same as insurance (the premium is about double the expected payout). Yet people regard insurance as prudent, and lottery tickets as foolish. Me included (as long as its a risk you cant easily cover). But our explanation, that "Lottery tickets are foolish because they have a n…

With insurance, you're already subject to the risk. With lottery you choose it.

Re: I am a statistician and I buy lottery tickets

#72

Post by JoeAltmaier »

graeme wrote: post #70
paulsutter wrote: post #22

Earlier quoted context omitted.

By analogy - if a person thinks "spending $5 has no impact on my life, but winning $10M will", is that really any different from our justification of insurance? (I agree with you - thats the same way I view insurance. Yet I view lottery tickets as silly, but I can't clearly articulate why).

The cumulative impact of a lifetime of spending $5 per week is much less than winning a lottery. Most people can sustain a $5 per week hit, especially if they get the mental benefits described by the parent article. There are better things to spend $5 on, but it's not a huge deal either way - as long as you stay out of the addictive/compulsive zone. The losses covered by insurance are very impactful. Most people can'…

Hm. Most people collect on insurance for very-sustainable costs - drug benefits, dental for checkups, routine visits to the doctor. Where do those fit into this argument?

Personally, I would like insurance that pays only for large expenses. I know its a sucker game to pay insurance; since the insurance companies profit I must be losing. But 'group insurance' is not something I can change.

Re: I am a statistician and I buy lottery tickets

#73

Post by jopt »

Ironballs wrote: post #33

Kari Enqvist, a professor of cosmology, said something very insightful in an interview about gambling in general: "Insurances yield a peace of mind and lotteries yield dreams, the values of which cannot be measured in mere terms of probabilities or money." In my view, lottery tickets are not meant to be rationally justifiable, nor should they be required to be. Yet, I don't fancy the idea of committing to such vain p…

Meanwhile, the people who sell you the lottery ticket act completely rationally. Funny---it's still lottery tickets, but when the odds are in your favour the hope is no longer needed.

Re: I am a statistician and I buy lottery tickets

#74

Post by dsego »

jere wrote: post #55
shrikant wrote: post #14

Earlier quoted context omitted.

Interesting you should say that. Richard Feynman on education in Brazil: http://v.cx/2010/04/feynman-brazil-education ..and the associated HN discussion: http://news.ycombinator.com/item?id=2483976

I loved Surely You're Joking Mr. Feynman! But to be fair, it was written nearly 30 years ago. I would hope things have gotten better since then.

Wow, I had never read this piece before, but it exactly describes the croatian school system. Kids & students just memorising information. Even the teachers don't explain what something means, because they also went through school memorising stuff.

Re: I am a statistician and I buy lottery tickets

#75

Post by glomph »

paulsutter wrote: post #22
afhof wrote: post #18

Earlier quoted context omitted.

Unless you can sustain a $100,000-$300,000 loss before you have have paid into the insurance pool more than that amount, it makes sense. If you had gobs of money, then it wouldn't make sense for you to have insurance. (preconditioned on insurance being a profitable business, etc.)

By analogy - if a person thinks "spending $5 has no impact on my life, but winning $10M will", is that really any different from our justification of insurance? (I agree with you - thats the same way I view insurance. Yet I view lottery tickets as silly, but I can't clearly articulate why).

Insurance significantly reduces the possible (or significantly likely) variance in a persons financial well-being. This comes at a cost in total wealth that is worth while because it brings the chance that one would vary into territory where the money one has is not enough for basic utility. Insurance on the other hand increases the variance (meaning the slight increase in expected value comes at a cost) at the other end of the spread in a way that does not guarantee any kind of minimal utility. Minimal utility is more important than huge potential diminished returns.

Re: I am a statistician and I buy lottery tickets

#76

Post by lazyjones »

brianwillis wrote: post #11

Looking back, there seems to be a correlation between the times in my life when I've bought lottery tickets, and the times in my life when I've felt hopeless. If I ever feel trapped by circumstances, depressed, lost, or I don't have optimism for the future, the less logical part of my brain will somehow rationalise the remote chance of winning millions as a perfectly justified excuse for buying a ticket. The author o…

Even though you do actually buy a sense of hope, it makes you worry more about missing an opportunity to win ("if only I had bought a few more tickets"). So it goes both ways and personally I feel happier by ignoring these (statistically - mostly false) hopes.

(OTOH I still need to worry about key employees winning the lottery, but that's another sad/cynical story.)

Re: I am a statistician and I buy lottery tickets

#77

Post by outworlder »

jere wrote: post #55
shrikant wrote: post #14

Earlier quoted context omitted.

Interesting you should say that. Richard Feynman on education in Brazil: http://v.cx/2010/04/feynman-brazil-education ..and the associated HN discussion: http://news.ycombinator.com/item?id=2483976

I loved Surely You're Joking Mr. Feynman! But to be fair, it was written nearly 30 years ago. I would hope things have gotten better since then.

Not really, at least, not consistently.

"Thus, it must be possible for some people to work their way through the system, bad as it is."

It is possible.

When my young brother asked me about how electrical generators worked (which is, by itself, an unusual question), I had an idea. I hooked up a DC motor to a LED and started cranking it, and he could see the LED lighting up, however faintly. Only then I tried to explain roughly how it worked - that little demonstration kept him interested. And he could explain it later, on his own words.

He didn't grow up to be a scientist, but he thinks like one. I like to think that those little 'scientific' experiments of our youth had something to do with it.

Re: I am a statistician and I buy lottery tickets

#78

Post by ced »

brianwillis wrote: post #11

Looking back, there seems to be a correlation between the times in my life when I've bought lottery tickets, and the times in my life when I've felt hopeless. If I ever feel trapped by circumstances, depressed, lost, or I don't have optimism for the future, the less logical part of my brain will somehow rationalise the remote chance of winning millions as a perfectly justified excuse for buying a ticket. The author o…

Evolution is often all-or-nothing --- no one produces "half a child". This is especially true of men, if you believe the 40-80 figure [1]: 40% of men have descendants vs 80% for women. We are the descendants of A) successful people [2] and B) unsuccessful people who took a big gamble (winning the lottery; robbing a bank; crossing the ocean to find better opportunities) that made them wealthy enough to reproduce.

[1] I'm not sure I do.

[2] Obviously - "successful" here basically means "had children". Evolution is a tautology.

Re: I am a statistician and I buy lottery tickets

#80

Post by jimrandomh »

Interesting that he claims this lottery has positive expected value, but I don't think it's true. He forgot about income tax. This is one of the standard tricks for making lotteries look better (or less bad) than they really are. (The other common trick is paying an annuity instead of money, and advertising its nominal value instead of its actual value, which is substantially greater. This one doesn't seem to be doing that, though).
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