Rolling Jubilee is a better idea than the lottery
Yesterday there was a reporter from CBS Morning News looking around for a quirky fun statistician or mathematician to talk about the Powerball lottery, which is worth more than $500 million right now. I thought about doing it and accumulated some cute facts I might want to say on air:
- It costs $2 to play.
- If you took away the grand prize, a ticket is worth 36 cents in expectation (there are 9 ways to win with prizes ranging from $4 to $1 million).
- The chance of winning grand prize is one in about 175,000,000.
- So when the prize goes over $175 million, that’s worth $1 in expectation.
- So if the prize is twice that, at $350 million, that’s worth $2 in expectation.
- Right now the prize is $500 million, so the tickets are worth more than $2 in expectation.
- Even so, the chances of being hit by lightening in a given year is something like 1,000,000, so 175 times more likely than winning the lottery
In general, the expected payoff for playing the lottery is well below the price. And keep in mind that if you win, almost half goes to taxes. I am super busy trying to write, so I ended up helping find someone else for the interview: Jared Lander. I hope he has fun.
If you look a bit further into the lottery system, you’ll find some questionable information. For example, lotteries are super regressive: poor people spend more money than rich people on lotteries, and way more if you think of it as a percentage of their income.
One thing that didn’t occur to me yesterday but would have been nice to try, and came to me via my friend Aaron, is to suggest that instead of “investing” their $2 in a lottery, people might consider investing it in the Rolling Jubilee. Here are some reasons:
- The payoff is larger than the investment by construction. You never pay more than $1 for $1 of debt.
- It’s similar to the lottery in that people are anonymously chosen and their debts are removed.
- The taxes on the benefits are nonexistent, at least as we understand the taxcode, because it’s a gift.
It would be interesting to see how the mindset would change if people were spending money to anonymously remove debt from each other rather than to win a jackpot. Not as flashy, perhaps, but maybe more stimulative to the economy. Note: an estimated $50 billion was spent on lotteries in 2010. That’s a lot of debt.