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gwern comments on Outside the Laboratory - Less Wrong
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"Now suppose we discover that a Ph.D. economist buys a lottery ticket every week. We have to ask ourselves: Does this person really understand expected utility, on a gut level?"
Tricky question. It we look purely at the financial return, the odds, then no. If we look at the return in utility, possibly yes.
Is $1 too much to pay for a couple of days of pleasurable dreams about what one would do if one won? Don't we think that such fleeing from reality has some value to the one entering such a fantasy, a suspension of the rules of the real world?
If we don't agree that that has some value then it's going to be terribly difficult to explain why people spend $8 to do to the movies for 90 minutes.
Even if that's the justification, you can do better: http://lesswrong.com/lw/hl/lotteries_a_waste_of_hope/ It's not clear that lotteries are a good use of time: you aren't thinking 24/7 about your dreams, you dream for maybe a few minutes total, and from that perspective, $1 is far too much to pay when you can, say, download a totally engrossing movie from the Internet for $0. And that argument still serves to ban more gambling than say $10 a day, which many gamblers routinely violate.