Poor people spend 9% of income on lottery tickets; here's why

[Johnny Rico]

http://www.dailyfinance.com/2010/05/31/poor-people-spend-9-of-income-on-lottery-tickets-heres-why/

The Consumerist recently had an interesting post about a study that shows that poor households, with annual take-home incomes under $13,000, on average, spend $645 a year on lottery tickets, which comes to about 9% of their yearly income.

While the study is about two years old, I doubt things have changed much since then, and it got me to thinking about how I grew up. My parents never played the lottery, but I have a grandmother who did -- and probably still does -- and I had a lot of uncles and aunts who also played. One might think that would have influenced me to play, but if anything, it probably did the opposite. After all, even when I was eight years old, I could see that my uncles and aunts, despite playing the lottery every day, weren't exactly rich. And my relatives always made it clear that they knew they were on a fool's errand.

How foolish? Well, according to Powerball's website, the odds of winning the grand prize are 1 in 195,249,054.

So why do people without a lot of money play the lottery, especially if they know that the odds are against them? I have some theories, ranging from the obvious to, hopefully, the insightful.

(more at link)

Given the hype over the biggest lottery in history tonight, it seemed timely. How many tickets did you buy in the last couple of days?

(Confession: I just bought five tickets, but for what it's worth this is the first time I've bought lottery tickets in 5 years, so I'm only spending 0.002% of my income on the darn things)

[Aerows]

1. I've bought one

And I only ever buy just one at a time, probably 4 times in as many years, and only when the Powerball hits a really high payout.

Some people are gamblers, and some aren't, I guess.

[no_hypocrisy]

2. They use another standard of probability/statistics.

Here, the chances of winning are 1 in 195,249,054.

They see it as 50/50: either they win or they don't.

They like their odds better than the other one.

[cynatnite]

3. They're desperate and who could blame them?

Poverty can drive a person to do unreasonable things.

[Duer 157099]

4. Here's how I do the math:

If you don't play, there's 100% chance that you won't win.

[ecstatic]

6. That's exactly what I told my SO

as he was criticizing my decision to buy tickets tonight.

[Johnny Rico]

11. And if you do play (buying 1 ticket), theres a 99.9999995% chance you won't win.

Heck, buy 100 of them...then your chance of losing goes all the way down to 99.99995%!

(as noted earlier, I just bought 5 tickets myself)

It should also be noted that by "win" I mean "win the jackpot". You have a 1 in 40 chance of getting something.

[Duer 157099]

12. That's fine, at least it isn't 100%

I'll take small odds over no odds.

[Johnny Rico]

15. This sums it up in video form...

(again, let it be noted that I bought some tickets myself!)

[thelordofhell]

48. Jim Carrey and Lauren Holly hooked up during this film

They were married for about a year

[ecstatic]

5. On MSNBC, someone said it's easier to win the lottery than to get bitten by a shark

I rarely play, but I definitely will buy some tickets tonight!

[pinboy3niner]

13. CNN reported that you have an 80x better chance of dying of mad cow disease...

...than of winning this lottery. Between the two, though, personally I'd choose the lottery ticket.

[Blue_Tires]

18. The analogy I once read was:

Winning the lottery is statistically like going to a poker table in Las Vegas and being dealt five consecutive straight flushes, then leaving the casino and meeting five consecutive people on the street who have the same birthday

[Johnny Rico]

30. I just did the math...that's *way* more unlikely.

...being dealt five consecutive straight flushes, then leaving the casino and meeting five consecutive people on the street who have the same birthday

3 x 10 to the power of 34 against.

[davekriss]

35. 10 tickets

The odds of winning the second level prize in powerball ($1 million) is about 5 million to 1. 10 tickets reduces those odds to around 500,000 to 1, which is better than the odds of being dealt a Royal Flush in poker (odds are something like 659,000:1).

I used to be a regular poker player. I've been dealt 2 Royal Flushes in my lifetime (and many straight flushes and 4 of a kind). It happens. So occasionally I take a $10 flyer out on a million buck payout, then dream of winning the hundred million+ payout for a few days.

The interim dreaming of what we'll do with the money if we win is highly therapeutic!

[laundry_queen]

47. Exactly.

When I was a kid, in my school there was a kid whose parents won the lottery. Twice, a year apart. $1 mil each time. His mom enjoyed playing. (the second time they gave away a bunch to charity) Then a few years ago, a friend of my parents won also. There have been a few people in my town (small town) who have won. It becomes a possibility in your mind if you've seen it happen, I suppose.

I play, I'd say regularly, but not every single week. Maybe once a month or if the jackpot gets really big. Mostly I stick to smaller games with smaller prizes but better odds. I agree, the dreaming of what you'd do with the money is part of the fun.

[LanternWaste]

7. Sometimes I think that the hope of winning a jackpot is more plausible

Sometimes I think that the perceived hope (however slight) of winning a jackpot is more plausible to many people in dire economic straights than the perceived hope of winning a living wage in our current economic model.

That being said, last night I was sorely tempted to purchase a lottery ticket... never have before-- never even had the thought of it, in fact, the three times I've been to Vegas, gambling has been the one thing I never done. I didn't buy the ticket of course, but I've been unable to completely shake that place my mind was in last night.


(My grandfather lost a literal fortune playing the ponies in his middle days, and impressed upon me during my own youth the extreme negligence of gambling of any kind.)

[wickerwoman]

8. It's a little thrill in a boring daily slog.

I've never bought a lottery ticket but I buy a snickers bar most days to get over the late afternoon slump and it works out to about the same amount ($2 or so a day).

Most people spend at least that (and some quite a bit more) to have something to look forward to at the end of a long day of work. That's about the same cost as seeing a movie or eating in a chain restaurant once a week.

And who's to say the pleasure or the lasting benefit of one is much more significant than another?

[Marrah_G]

9. I will be buying 5 after work

Hell, someone has to win and it's nice to daydream for a few minutes about not being poor. I know the chances of winning are very, very slim.

[nadinbrzezinski]

10. When it gets up there

Knowing the odds, we buy a couple bucks, miscommunication, we bought five each...oh well.

If we should win, (fat chance, got hit by lightning already while in the car) I know what we will do. Nieces and nephews have school paid to.

[DefenseLawyer]

14. I'm buying one

What the hell. I'll be at the gas station anyway and I have a buck.

[guitar man]

16. I bought a couple this time

We've had the lottery here about 6-7 years now. a while back I hit a powerball ticket for $35. If I had to guess I'd say I about broke even for all the tickets I've bought since we've had the lotto.

[notadmblnd]

27. Some people have luck with the numbers. I don't play, but when my husband was alive he did

he spent about 100.00 a week on midday and evening lottos. He would get up in the morning and sit down with his numbers (I called it doing his cyphering) and have his coffee. Once, his numbers came in 5 days out of 7, The biggest jackpot being about 1200.00.

But I would say that by the end of the year, the losing lottery tickets that we saved, cancelled out any of the taxes on his winnings. Which means that he really only broke even.

[guitar man]

39. I've never had much luck at anything

Thats why I rarely buy tickets. I do have a silly dream though, I'd like to own Abbey Road Studios. Can't think of any other way to get it lol

[notadmblnd]

44. you see that dark could up there?

It follows me where ever I go.

[guitar man]

45. Yup

I seem to have one too

[HooptieWagon]

17. 9% ?

It seems to me $645 is a bit less than 5% of $13000.

[Johnny Rico]

21. Perhaps $13000 is the maximum income to be considered "poor",

and the 9% figure takes the average income of "poor" people into account...which would be less than $13000.

[ellisonz]

24. Well you know...

Poor people are poor only because of their bad choices! If only they would embrace the Protestant work ethic more and stop being so shiftless they would be rich like Johnny Rico here who is obviously a very industrious sort.

Also, I can't access the study to see their data and you're right, the math is off.

[Ikonoklast]

33. ....and this is the entire point of this little exercise.

Bet those poor people spend a larger percentage of their income on booze, too, than a typical millionaire.

[ieoeja]

46. 650.00 / 13000.00 = 0.05 = 5%

Or multiply 13000 x 0.05 and you get 650.

Or figure 5% is $5 out of every 100. There are 130 hundreds in 13000. So 130 x 5 = 650.

Let's get metric on this shit. 10% is one tenth of something. 1/10th of 13000 is 1300. 5% is half of that. 1300 / 2 = 650.

[mathematic]

49. So eager to slam the OP you fail to read his post right above you that explains the math

1. The study considered households with income under $13k
2. The average amount spent was $645
3. This is 9% of the average income of these households.

CONCLUSION:
The average income for households with income under $13k is $7170 (=$645/.09)

Math literacy is fundamental.

[mathematic]

53. I DID say "eager" didn't I?

Stay classy.

[geardaddy]

52. lmao

zing.

[dmallind]

29. net income

Me? I buy $10 worth when it gets into the big numbers. Done so last 3 times and will tonight. I probably spend $150/year on tickets - and know full well the odds of it being anything more than a license to daydream are minuscule.

But I understand statistics. I use them daily. And people can get too dismissive of a priori probabilities. Sure the jackpot odds are well into nine figures, but consider this for a moment. If you go into a restaurant or bar this weekend of anything but the most limited appeal in anything beyond a tiny isolated hamlet, look around. Try and work out the odds of those people you see and only those people you see being there, out of everyone who has ever visited or considered it, all the options they had for food/beer, and all the times it's been open. Nine figures disappears pretty quickly, and yet nobody bats an eye. Mundane events are often spectacularly improbable if you had to estimate their likelihood in advance. Probability functions collapse after the event, and somebody(s) will eventually inevitably win, probably tonight.

Those nine figure probabilities happen every couple of weeks or so in the normal course of lotteries themselves. Not only are many many millions of tickets sold even on normal days let alone today, but people often look at probabilities as if you need to try 195MM times to see a 1/195MM chance occur, when it is just as likely (1/195MM of course) to happen on the 1st try, or 41st or whatever.

[muriel_volestrangler]

31. The average income for all households with less than $13,000 will be well under $13,000

Only the top of the group earn $13,000; some $12,000, some $11,000 etc.

[indepat]

19. I also just bought five lottery tickets, the first in several years, and wonder if anyone

else thinks they too will win.

[leftyohiolib]

20. i play b/c someone WILL win this pot of money and i want that person to be me although

i think that in these lotteries the most you should be able to win would be 1million with multiple winners instead of 1 person taking all. a 20 million pot should have 20 1million dollar winners. on edit obviously i dont mean that someone will win on this drawing but eventually someone will get this money

[Johnny Rico]

22. They wouldn't have nearly as many people playing if that was the case.

People are excited by the big win...a mere million dollars wouldn't get people as worked up.

[leftyohiolib]

34. yeah you might be correct didnt think of that b/c id crap myself if i won 1million

but i guess thats just me

[DefenseLawyer]

23. My pet peeve when the lottery gets a large jackpot

There's always one guy who sees the worst in everything that says "Well sure they say it's 300 million but really after taxes it's ONLY 200 million!" I always want to punch that guy. Maybe it's just me.

[Posteritatis]

41. It definitely isn't. (nt)

[NoGOPZone]

43. Please don't punch him. It sounds like my brother. nt

[HiPointDem]

25. Those with lots of money invest in the stock lottery; those with smaller resources play the numbers.

[muriel_volestrangler]

26. Anyone know where the $645 statistic comes from?

The link goes to a blog, which goes to another blog, which mentions a paper which did an experiment about how people approach buying; but it's not clear the 9% claim comes from the paper (which you have to pay to see in full, anyway).

Given there must be a lot of poor households who don't do the lottery, it seems really high. I want to check if it actually means, for instance, that, of sub-$13,000 households that do play a lottery, $645 is the average spent. I haven't been able to find a source, so far. Anyone know?

[Marr]

28. I like to think of the lottery as a tax on people who can't do math. /nt

[JonLP24]

32. I personally won't play

because of the probability. If I ever went to a casino I would avoid things like slots and go for more winnable games like sports betting. That isn't to say I haven't wasted away my money on other things, which I most certainly have. I bought 2 scratch tickets in my life, one was a loser so I bought another to try to win my money back, failed and stopped there.

Another theory which doesn't just apply to poor is there is an addiction factor that is very real. It isn't about winning or losing but the "rush" when the gamble is in place.

[Cirque du So-What]

36. For many of them, it's the only chance of becoming wealthy they see

They've come to see the Horatio Algerian 'American Dream' as nothing more than a cruel joke.

[HughBeaumont]

56. +100

The hope of winning millions, however remote, is more than any hope of retiring under the "American Scheme". Can't get blood from a stone . . .

[ileus]

37. I normally spend about 5 a year on

Average...

[Speck Tater]

38. With those odds that's a ticket a week for four million years.

Or four tickets a week for only a million years before you would have a 50/50 chance of winning once.

[MrBig]

40. You could guarantee a victory

Just buy a ticket that covers each possible combination. You'd spend $195,249,054 which, with the size of this jackpot, would net you a profit. Unless, of course, you aren't the only winner and have to split the winnings with someone else.

So...would you take that risk? You know you'd win the jackpot, but you'd only make money if no one else had the numbers. (And yes, its assuming you have $195,249,054 lying around to buy every combination)

[Posteritatis]

42. A small group of people did that with a lottery about ten years back, if I remember correctly. (nt)

[Johnny Rico]

54. It would be a bad investment.

I believe I saw a lottery official state that there was an estimated 95% chance that one or more people would hit the right combination, given the massive sales of the last few days.

[Codeine]

50. Math is hard.

?w=490

People who fail to understand probability pay the price.

[stockholmer]

55. +1000000

This report examines cost risk analysis methods and recommends practice and policy
changes to utilize subjective opinion for improving the quantification and use of uncertainty
in cost estimation:

http://www.rand.org/pubs/technical_reports/2007/RAND_TR410.pdf

[Viking12]

57. It was pointed out when these figures were first publciized that the reporting sucks...

The study referenced DOES NOT actually support the claims of 9% of income spent on lottery tickets.
The premise is false, thus, the resulting discussion is meaningless. It's just re-packaged rightwing welfare-queen rhetoric.

Haisley, E., Mostafa, R., & Loewenstein, G. (2008). Myopic risk-seeking: The impact of narrow decision bracketing on lottery play. Journal Of Risk & Uncertainty, 37(1), 57-75. doi:10.1007/s11166-008-9041-1

[muriel_volestrangler]

58. I did ask about that in #26

The abstract of that study doesn't mention it, but I couldn't see if it was mentioned somewhere inside. Have you anything that does point out the '9%' is made up, incorrectly calculated, or whatever?

[Viking12]

59. The "9%" an unwarranted extrapolation from a footnote in the study.

I don't have time to go through it right now, but if you message an e-mail address, I can forward a copy of the paper.

[Ron Obvious]

60. Remember the lottery in Orwell's 1984?

Orwell's 1984 had an interesting take on the lottery that's not entirely dissimilar to our situation. It's a way of the ruling party to keep control over the plebs. If the plebs think they can win big, it makes them a little less dissatisfied with their lot, and thus less likely to rise up.

[slampoet]

61. If you believe this story,

you might as well play the lotto.

[sudopod]

63. I lol'd nt

[guardian]

62. I probably spend $20 per year

on lottery tickets. Though I did buy two tickets for this last big Mega Millions drawing. I'm always amazed when I see people buy $10-$20-$50 worth of tickets at one shot.