In many places, lotteries are the only legal form of gambling. And even then, only the government is allowed to run them. This may be because lottery profit margins are often 30 percent or more. Casinos average about 5 percent. Lotteries are the worst possible deal for gamblers.
Why do people still play lotteries, then? It’s because humans have an inherent cognitive bias to overestimate the odds of success, and underestimate the odds of failure. This is a useful cognitive defect, because it encourages risk-taking. It was evolutionarily useful back in our hunter-gatherer days. And it remains so today; there would be far less entrepreneurship if people saw odds more clearly. But there are drawbacks. Lotteries are among them.
I didn’t know there were state-run lotteries in 1776, but apparently there were, because Adam Smith explains what a bad deal they are in The Wealth of Nations:
The world neither ever saw, nor ever will see, a perfectly fair lottery; or one in which the whole gain compensated the whole loss; because the undertaker could make nothing by it. In the state lotteries the tickets are not really worth the price…
Many people think that buying more tickets improves one’s odds of winning. But Smith saw that this was not a wise strategy:
There is not, however, a more certain proposition in mathematics, than that the more tickets you adventure upon, the more likely you are to be a loser. Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets the nearer you approach to this certainty.
(Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 124-25.)
Here’s a letter I sent recently to The New York Times:
May 14, 2010
Editor, The New York Times
620 Eighth Avenue
New York, NY 10018
To the Editor:
Your May 12 article “With Obama, Regulations Are Back in Fashion” (page A15) asserts that the Bush administration had a “deregulatory agenda.” If that is true, then President Bush failed miserably in executing it.
His administration added 31,634 new regulations to the books, and repealed hardly any. The cost of complying with federal regulations exceeded $1 trillion for the first time on Bush’s watch. 587,321 new pages were added to Federal Register during the Bush years.*
Even the regulation-intensive Obama administration is passing new regulations at a pace nearly ten percent slower than President Bush.
Contrary to the article, the Bush administration was the best friend regulators have had in a generation or more.
Ryan Young
Warren T. Brookes Journalism Fellow
Competitive Enterprise Institute
Washington, DC
*All data from Wayne Crews, Ten Thousand Commandments.
David Boaz makes an excellent point about media coverage of President Obama’s health care proposal:
The media tendency to refer to the defeat of a big-government scheme as “failure” reflects a possibly unconscious bias toward government action.
Well put. Why not make it conscious, then? Call it truth in advertising.
An objective media would be nice. But we are unlikely to ever see such a thing. Even the very best reporters are human. And humans are biased. Different people are biased in different ways, of course. But objectivity is still a fiction. Being open about this ugly truth could do much to reduce public confusion.
If readers have a clearer idea of what exactly they’re reading, they can run the articles through their liberal and conservative B.S. filters as needed, and more easily get to the heart of the matter.
Few readers seem to bother so long as the liberal Washington Post and conservative Washington Times continue with their objectivity charades. Bias can be harmful and misleading, true. But denying it only avoids the problem. Let’s tackle it instead.
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