A lottery is a tax on the stupid
If I had a dollar each time that phrase was mentioned, I think I would be rich enough to not need a lottery win ever!
Anyways, it is absolutely true that, mathematically speaking, buying the lottery is mostly negative EV (Expected Value). The EV ranges from 0.3 (30 cents on the dollar) for a fresh jackpot all the way to 0.9 (90 cents on the dollar) for record breaking jackpots.
But here’s the thing..
Consider the cost of going to the movies. You wait in line to buy the ticket, discuss with your friends how amazing the movie is going to be, recap the prequel, wait in line to buy popcorn, wait for the movie to start along with a bunch of commercials….3 hours later, debate about why it sucked!
Do people ever say, watching movies is a tax on the stupid!?? Never because
you are paying for the experience!
Same could be said for lotteries! Imagine a $20 ticket you pay into a group lottery for a near record jackpot. The -EV for this lottery is around 80%. Therefore, $16 is going to the hypothetical pot and $4 is your calculated loss. However, the entire planning of the group lottery, dreaming big, anticipation of the big day…is all part of the fun. For a mere $4 ticket to participate in that? Sometimes…Gladly count me in!