Mitt Romney is not a player.
“The stupid tax just doubled.'”
—Drew Curtis’ Fark, in a typically perceptive jibe, at the announcement by Powerball officials that in order to increase the attractiveness of the multi-state super-lottery, it will be raising the levels of jackpots, lowering the odds against winning, and to make more money, doubling the cost of a ticket.
Fark. com was a guilty pleasure before I started an ethics blog, but is now a daily assignment, as Drew Curtis’s clever link collection where he simultaneously uncovers interesting news items and attaches one-line jokes to them has proven to be a rich source of ethics stories.
The various lotteries are all unethical, as state governments too cowardly to pass taxes on those who can afford it duck their duties by enticing the desperate, the poor, the gambling addicted, and, as Fark correctly notes, the stupid, to spend money they should be saving or spending on necessities. Their foolish objective, nourished by state promotions, is to buy a remote chance at a life-changing stroke of luck—which, statistics say, is more likely to ruin their lives than to fix them. The original argument for these cynical and degrading devices was that they would balance state budgets and improve the schools. You can see how well that is working out.
So, times being tough, the biggest government pocket-picking scheme of them all, Powerball, is trying to suck in more people who shouldn’t be playing and who are grossly irresponsible to waste their money, while charging them more to do it. It’s unfair to have a tax on being stupid—being stupid in the 21st Century costs too much already.
But Fark is right. That’s exactly what Powerball is.
Ethics Alarms 
“odds of winning a prize improves from 1-in-35 to 1-in-32,” yet the ticket price has doubled from $1 to $2? I am no math major, but isn’t that 1-in-64?
Great post! Cowardly is exactly the word to describe this and the spread of casinos.
Not exactly. However, you HAVE intuited the correct–and close enough–answer.
Assuming there’s only one prize (which I know is incorrect), the cost of buying enough tickets to have a better-than-50/50 chance of winning is $24 before and $44 after. To be over 95% certain of a win, it would cost $104 before and $190 after. On the basis of of the odds alone, these new changes are objectively in favor of the state and against the “customer”.
As I’ve often told family and friends, there’s a reason I don’t gamble. It’s because I have a rare condition known as expertise in mathematics.
–Dwayne
No, the odds of winning are still 1 in 32, but the expected return of your investment is a lot smaller. The easiest way to calculate this is to imagine you bought every possible lottery number. Using the published odds, under the old system you would win $54 million, but you’d have to spend $195 million on tickets for a return of 27.67%. Under the new system, you’d have to spend $350 million to win $100 million, for a return of 28.55%. Both figures should be adjusted for time-value-of-money since the jackpot is payed out over 29 years. Using the U.S. Treasury rate as a discount, both lotteries offer a return of just over 24% of your investment.
Basically, nothing has changed. Obviously, if you buy one ticket and get incredibly lucky and win the jackpot you come out way ahead, but on average, the lottery is still a miserable way to spend your money. Note that since you pay taxes on your winnings (but do not get to deduct taxes on your losses) the jackpot has to reach something like $600 million before you break even.
Oh, and don’t forget that the jackpot is pari-mutuel, meaning that if there are multiple winners, they split it. I don’t know how likely that is — it depends on the number of tickets sold per drawing — but it pushes the break-even point even higher.
The break even point also isn’t particularly useful, as the cost to reach it would definitely outside the budget of anyone that plays.
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I’ve always thought the lottery to be a tax on the mathematically inept. I am far from an expert at math but I know that much.
The stated odds to win A prize is 1 in 32, granted, but to win one at the level the discussion has been at thus far the odds are much longer. The jackpot (top prize) odds are 1 in 175,223,510. Run out as a decimal you get a 6 led by 8 zeros; You have to go out 8 places before you improve over not buying a ticket at all. The odds on winning a cool million are somewhat better, 1 in 5,153,632..