When the Mega Millions jackpot went over $600 million in early April, people waited in long lines to buy a ticket, giving them a one-in-175 million chance of winning the grand prize. With such slim hopes of striking it rich, why do people play? Charles Clotfelter ’69, Z. Smith Reynolds Professor of public policy, law, and economics and coauthor (with public policy and economics professor Philip Cook) of Selling Hope: State Lotteries in America, responds:
Economists don’t like lotteries because they are a terrible investment. Out of every dollar players spend on state lotteries, only about 60 cents ends up back in their pockets, in the form of prizes, with the rest going for operating expenses and revenue for the state. Yet surveys reveal that more than half of adults do play the lottery at least once a year, and a small minority of players bet heavily.
One explanation given years ago by two economists is that those who gamble, unlike the majority of us who are risk-averse and buy insurance to protect us from risk, actually seek out opportunities to take a chance.
Another, and I think more persuasive, way of looking at lottery play is simply as another form of entertainment. No one expects playing a video game or going to a movie to be a good investment. We should think of playing the lottery in the same way. Viewed as just one more form of entertainment, lotteries are no more irrational than any number of leisure activities. To be sure, gambling often has the element of superstition, with many bettors playing lucky numbers or otherwise believing that their behavior can influence their chance of winning. And state lotteries sometimes encourage this kind of magical thinking, using such messages as, “Don’t let your number win without you.”