LESSWRONG
is fundraising!
LW
$

Comment Permalink

Robin_Hanson218y70 Response to previous version

The problem is not the claim that lottery tickets are usually a bad investment; the problem is the claim that they are always a bad investment. What if I have a portfolio of dreams requiring varying levels of investment and realism, and I think I want a lottery ticket to be one small part of my portfolio. Can you really be absolutely sure that I am wrong, no matter who I am or what my circumstances?

See in context

Overly Convenient Excuses

94 Lotteries: A Waste of Hope

by Eliezer Yudkowsky

13th Apr 2007

2 min read

94

The classic criticism of the lottery is that the people who play are the ones who can least afford to lose; that the lottery is a sink of money, draining wealth from those who most need it. Some lottery advocates, and even some commentors on Overcoming Bias, have tried to defend lottery-ticket buying as a rational purchase of fantasy—paying a dollar for a day’s worth of pleasant anticipation, imagining yourself as a millionaire.

But consider exactly what this implies. It would mean that you’re occupying your valuable brain with a fantasy whose real probability is nearly zero—a tiny line of likelihood which you, yourself, can do nothing to realize. The lottery balls will decide your future. The fantasy is of wealth that arrives without effort—without conscientiousness, learning, charisma, or even patience.¹

Which makes the lottery another kind of sink: a sink of emotional energy. It encourages people to invest their dreams, their hopes for a better future, into an infinitesimal probability. If not for the lottery, maybe they would fantasize about going to technical school, or opening their own business, or getting a promotion at work—things they might be able to actually do, hopes that would make them want to become stronger. Their dreaming brains might, in the 20th visualization of the pleasant fantasy, notice a way to really do it. Isn’t that what dreams and brains are for? But how can such reality-limited fare compete with the artificially sweetened prospect of instant wealth—not after herding a dot-com startup through to IPO, but on Tuesday?

Seriously, why can’t we just say that buying lottery tickets is stupid? Human beings are stupid, from time to time—it shouldn’t be so surprising a hypothesis.

Unsurprisingly, the human brain doesn’t do 64-bit floating-point arithmetic, and it can’t devalue the emotional force of a pleasant anticipation by a factor of 0.00000001 without dropping the line of reasoning entirely. Unsurprisingly, many people don’t realize that a numerical calculation of expected utility ought to override or replace their imprecise financial instincts, and instead treat the calculation as merely one argument to be balanced against their pleasant anticipations—an emotionally weak argument, since it’s made up of mere squiggles on paper, instead of visions of fabulous wealth.

This seems sufficient to explain the popularity of lotteries. Why do so many arguers feel impelled to defend this classic form of self-destruction?²

The process of overcoming bias requires (1) first noticing the bias, (2) analyzing the bias in detail, (3) deciding that the bias is bad, (4) figuring out a workaround, and then (5) implementing it. It’s unfortunate how many people get through steps 1 and 2 and then bog down in step 3, which by rights should be the easiest of the five. Biases are lemons, not lemonade, and we shouldn’t try to make lemonade out of them—just burn those lemons down.

¹See Po Bronson, “How Not to Talk to Your Kids,” New York, 2007, http://nymag.com/news/features/27840.

²See “Debiasing as Non-Self-Destruction.” http://lesswrong.com/lw/hf/debiasing_as_nonselfdestruction.

HopeProbability & StatisticsSuperstimuli

Frontpage

94

The Third Alternative

Mentioned in

166Be Happier

99Relevance Norms; Or, Gricean Implicature Queers the Decoupling/Contextualizing Binary

75Perpetual Motion Beliefs

61Living in Many Worlds

Load More (5/12)

New Comment

74 comments, sorted by

oldest

Click to highlight new comments since: Today at 11:16 PM

Some comments are truncated due to high volume. (⌘F to expand all)Change truncation settings

[-]Doug_S.218y30 Response to previous version

It's an uncommon viewpoint, but one could, perhaps, justify the purchasing of lottery tickets as a "donation to charity" of sorts; the money goes to support the activities of the government that runs the lottery, which is (hopefully) going to use that money for good purposes. As a financial investment, though, lottery tickets are generally a bust; I suspect you'd do better playing slot machines at a Las Vegas casino. (There's the complication of rollover jackpots, but they don't have to matter here.)

Speaking of "wealth without effort"..... (read more)

0taryneast14y

Have you considered working as a video-game tester :)

3Luaan12y

Don't be silly, that's a terrible job...

0[anonymous]13y

I understand you! Currently I am working though, and hating it. It was stimulating and interesting for a few weeks, but after that I've hated it. I find it considerably better then death though! There is the time between shifts inf nothing else ;) My general plan now is to work as little as possible without unduly mooching off of someone else (did that a while, doesn't feel all that good in the end...). Currently I'm on an extended holiday (two months) and after that I'll begin working only about half time... My long-term plan though is to find something that I'd like to do anyway and make it support me: My dad is a photographer, and sort of did that: I'm not into that, but I'll find something. probably academic, but right now I really don't know. Anyway. Good luck! Edit: I don't really feel this way anymore. I guess I grew up a little bit.

1JSolitude12y

Although I do agree with the arguments of the writer concerning the odds, it is an article clearly written from the viewpoint of someone who belongs to the (upper) middle class, probably academically trained and with a reasonable payed job or peers or family who are financially supportive. The article lacks to identify the reasons (which ARE rational) of (mostly) lower class income people to play the lottery. As an excercise in empathy for the writer I do put forward the following scenario's: Suppose you are stuck in a dead end boring job or no job scenario, living from health care, etc. Although most educated people believe this is a situation they will not encounter in their lifetime, this situation has increasingly become real for an increasing amount of people. One might blame the world economy for this or one might blame the players who have finally been dropped out or have chosen to drop out of the rat race. May it be to poor education at a younger age, traumatic experiences, simply having the wrong education for the current playfield, being sacked at an older age, having no available finances to support further education, a lack of intelligence or simply spiraling down the road of depression due to a lack of chances or being stuck in a debt one can never recover of in a lifetime... these are all scenario's in which the player on the Lotto actually rationally pays for the soothing dream of a better (financial) future. A future that will not happen if one would not win the lottery. One might even say playing the Lotto is the same as religion. The one who plays is still a 'believer'. The player plays for hope. Despite the odds being stacked mile high against winning the Jackpot, one believes he or she might win it. It's the same as praying: by praying one hopes to find support in a supernatural being who might forsee in a better future of the believer. Sure, the person might save some money not playing the Lotto, but these savings will not be able to serio

5Desrtopa12y

There are other ways for a low income person to strike it rich. More people may find it believable that they'll strike it rich in the lottery than, say, write the next big novel, but that doesn't mean that the lottery is their most realistic avenue to wealth.

4jeronimo1965y

Necroing because that seems an often expressed sentiment I oppose strongly to: Was that a fully general excuse for stupid behaviour on behalf of poor people, or are you just happy to meet me? I wonder, would this be used for gambling only, or could it also cover drug abuse, alcoholism, crime? Spare me the pity party. Reality doesn't care about sob stories - it doesn't matter how much in debt you are, how unfortunate your circumstances and how great your need - you are not going to win the lottery. Shielding people from this fact is not doing them any favours. Edited: the first sentence was needlessly rude and confrontational, also spelling.

[-]Robin_Hanson218y70 Response to previous version

[-]Andrew218y20 Response to previous version

Robin,

I think the concern is not with people who buy the occasional lottery ticket for fun but with addicts who gamble away a large proportion of their available money.

[-]Matthew_C18y20 Response to previous version

I haven't defended people who spend large amounts of money on lottery tickets, clearly that is a disfunctional behavior.

But I have and do defend small-time purchase lottery tickets (at least up to $104 a year, that gets you one powerball ticket for each drawing). If someone wants to daydream about becoming a millionaire for much less money than daydreaming about hollywood stars in movies on a regular basis, I cannot call that a sin.

[-]TJIC18y30 Response to previous version

It seems to me that folks have all sort of utility functions that I do not. ...yet, we accept "entertainment" as a legitimate line item in a budget. If you enjoy going to the theater, but do not enjoy playing the lottery, what is the standard by which you can judge someone who has the reverse preferences as behaving stupidly ? If we look at the marginal cost of various entertainments (cable TV, buying hardcover books, etc.), playing the lottery isn't noticeably more expensive than any of the others.

Is there more to the attack on the lottery than mere classism?

More here.

2Carinthium14y

Would somebody really buy a lottery ticket if they were 100% sure they were not going to win?

2A1987dM13y

I have paid to play video games when I was 100% (minus epsilon) sure I wouldn't win any money, so...

4JoshuaZ14y

Yes. Genuine concern for those not in my class. They are spending a tremendous amount of money on the lottery. Moreover, if you spend a small amount of time talking to people it is clear that they are playing not just for entertainment but often for a misguided understanding of probability. You'll hear people calling it "an investment" or saying that they "need to win sometime" or "eventually I'll win. I've lost so much. Now's my chance" or use religious feelings or sometimes statements by preachers that they are about to get wealth, etc. etc. The lottery is a method by which the upper classes tax the lower classes without the lower classes realizing they are being terribly taxed.

[-]Rukasu18y30 Response to previous version

I think you shouldn't just focus on the monetary outcome.

If you play a game for 4$ (winning 1Mio.$ with a probability of 1/500'000) whiches fair value would be 2$. So playing this game is rational if the thrill and the dream of beeing rich (as the non-monetary benefit of the game) is valued more than 2$ (a coup of coffee), which is very likely.

I can think of two biases that might cause an irrational decision for lotteries:

People tend to overweight small probabilities, so they calculate with a too large expected value.

Another problem might be, that people a... (read more)

[-]Robin_Hanson218y30 Response to previous version

Andrew, would potatoes chips be a "waste of taste", if some people eat too much of them? Is TV a "waste of time", if some people watch too much? Can we say that there is more of a tendency to buy too many lottery tickets than to do too much of any other thing one can do too much of?

[-]Nick_Tarleton18y10 Response to previous version

TJIC, it might come from incomprehension of how playing the lottery actually has any entertainment value. I certainly have a hard time understanding this, as I fantasize about being rich already. Then again, I've never played the lottery so I don't know just how much it would change those fantasies.

1A1987dM11y

Data point: I do find grabbing a ticket, picking six numbers, submitting the ticket, and waiting to see how many of my numbers get drawn fun enough for me to spend €1 on that once or twice a year.

[-]michael_vassar18y150 Response to previous version

I think that the problem with the lottery as entertainment is that it is only entertaining due to your cognitive deficiencies. If a person understood how likely winning actually was, playing wouldn't help them to dream of riches. OTOH, many (most?) people also take pleasure in pure conformity. I suspect that most occasional lottery players are in this class. They enjoy buying the tickets because they know that many other people buy them and therefore that buying lottery tickets is "fun". In most cultures, though possibly not in the contemporary culture of young Americans, this preference seems likely to be stable under reflection.

My feeling that it is appalling is thus simply the result of clashing utility functions and due to the tyrannical term in my utility function that values others valuing what I do and not valuing what I don't independent of any instrumental value to my other goals. Reflection suggests that there is also an opposing "diversity favoring" term in my utility function, and that the activation of these terms is significantly determined by my own drives towards cultural conformity, which when examined activate other terms indirectly and w... (read more)

[-]mtraven18y-30 Response to previous version

There is a big difference between zero chance of becoming wealthy, and epsilon. Buying a ticket allows your dream of riches to bridge that gap.

I'm not a fan of lotteries, but I don't understand how you can apply the rubric "bias" to their value, since nobody can measure the value of entertainment or distant hope for another. Just measuring the expected cash value is ridiculously reductive.

BTW, for the ultimate in bad reasoning about probabilities, see here.

4[anonymous]11y

As I see it, Eliezer is not applying the term "bias" to the value of lotteries, rather, to people's own evaluations of how likely they are to win. These evaluations are scope insensitive, as is the first sentence of your comment, as Eliezer points out in the follow-up post. It is a separate question whether it is good that people are scope insensitive, or that people play the lottery. Eliezer says no:

[-]Eliezer Yudkowsky18y210 Response to previous version

TJIC wrote: If you’ve got something that costs $1/day and takes 5 minutes of work to deliver more joy to the average person than a lottery ticket, go off and sell it. If you actually sell it, then you’re right. If you either can’t come up with such a product, or can’t succeed in selling it, then you’re wrong, and your product is less pleasing. Either way, don’t call the consumer stupid. His job is just to like what he likes.

Let's get one thing straight: I think people should have a right to be stupid and, if they have that right, the market's going to respond by supplying as much stupidity as can be sold.

The customer is not always right, either factually or morally. Customers do stupid things. If you can exploit it better than anyone else, come up with an even better superstimulus, you may be able to drain even more money from them, but that doesn't make it right.

In this case, the customer is shooting their own foot off emotionally, not just financially. Do you think that our fantasies have no effect on us? Do you think that dreaming has no consequences that depend upon the dream? I doubt I'd be recognizably the same person if my parents hadn't been science-fiction fans. Y... (read more)

[-]TGGP518y10 Response to previous version

The customer's job is not just to like what he likes. Generally, if you want to know what your job is, you can ask your employer (who will respond "What have I been paying you for?"). We could take a somewhat-Lockean position that none of us truly own ourselves but have merely been entrusted with the duty of managing ourselves on behalf of God, but I would wager most on this blog do not believe in that "God" fellow, and if he did exist they might still be inclined to ignore his commands they found objectionable. I can only conclude that the customer has no job as customer other than the he/she gives him/herself.

[-]Telnar18y20 Response to previous version

Doug S.,

I don't know how to work around the time inconsistency of your preferences, but if you look time consistently at the span of your life with a relatively low discount rate (since you're likely to live many years regardless of what you do now), the best way to minimize the number of years that you will need to work is to accumulate assets in the short run while finding ways to keep your expenses low over both the short and long run.

It's entirely realistic for you to be able to retire after 10 years of work (and perhaps even fewer) if you can keep you... (read more)

[-]HalFinney18y20 Response to previous version

Another problem with lotteries is that people tend to overestimate how much happier they will get if they become rich. They confuse the great happiness of becoming rich with the modest happiness of remaining rich. This would make them over-invest in lotteries. It would also make them over-invest in other activities that could lead to wealth, such as starting businesses.

I suspect that this same bias shows up in other areas as well. Losing weight is great but remaining thin is only good. Achieving your life goals is wonderful but having achieved your goals is just OK. These factors conspire to make us try harder to improve our circumstances than is perhaps deserved.

[-]Eliezer Yudkowsky18y70 Response to previous version

If the goal is actually to get epsilon hope, then let there be a lottery with one expected payout every five years, awarded at a Poisson-random time. You buy in once, and lo, at any minute you could receive a phone call saying you're a millionaire! It would still be a malinvestment of dreams but at least the epsilon hope would be financially cheaper. But this just gets us back into the lottery being a scam, not a service.

[-]mtraven18y40 Response to previous version

The goal of players may be to get epsilon hope, the goal of lottery providers is obviously to coax as much money out of the hopeful as possible. It's just like any other market in that regard.

[-]Andrew218y00 Response to previous version

Robin,

You ask, "would potatoes chips be a 'waste of taste', if some people eat too much of them? Is TV a "waste of time", if some people watch too much? Can we say that there is more of a tendency to buy too many lottery tickets than to do too much of any other thing one can do too much of?"

I think much of your question is better addressed to the Eliezer, who wrote the original entry with the "waste of hope" phrase. In any case, if someone buys so many lottery tickets that it interferes with other aspects of life (e.g., not b... (read more)

[+]Kevembuangga18y-50 Response to previous version

[-]Richard_Hollerith18y50 Response to previous version

playing this game is rational if the thrill and the dream of beeing rich is valued more than 2$

Rukasu, I believe that having feelings about winning the lottery is an even bigger waste than the $2 because feelings are a scarce resource of the mind which can always be turned to a fruitful plan. In other words, since there are always many ways to get a thrill, always choose a way that can positively impact reality.

[-]HalFinney18y20 Response to previous version

I have a personal story related to this - it's not quite the lottery but it's similar.

My sister-in-law and her husband won a million dollars on a TV game show back in the 1980s. (And then they promptly got divorced.) It turned out that the million is paid as $40,000 per year for 25 years. After the divorce she has received $20,000 per year. Ironically if she just lived off her winnings she would be barely above the poverty line, even though the show made a big deal about how she was now a "millionaire". Instead she and her (new) husband both work, and the extra $20,000 a year is a nice addition to their income. It runs out in a couple of years.

2TobyBartels14y

Had she tried to borrow against her future guaranteed winnings? Maybe she was a millionaire! (Not if it was exactly a million of course, since the time delay must reduce the total to below the nominal amount.)

[+]Kevembunagga18y-50 Response to previous version

[-]Richard_Hollerith18y10 Response to previous version

Kevembunagga, I believe every person should do his best to discern what is positive. Yes, I tend to agree that the more you impact reality the more you increase entropy, but the potential entropy of the Universe is truly huge (mostly macrostates being a Universe with a few really massive black holes); it seems to me that time will run out before the ability to keep on increasing entropy will.

[-]Kevembuangga18y-20 Response to previous version

RH : I believe every person should do his best to discern what is positive.

Of course but the consensus is not obvious.

the potential entropy of the Universe is truly huge

We certainly are not going to exhaust the potential entropy of the whole universe (though some seem intent on that...) but we can locally exhaust all the potential within reach and by this very fact compromise our access to more "distant" potential.

[-]Richard_Hollerith18y00 Response to previous version

Indeed, the consensus is not obvious. (Even if it were, it might be wrong: majorities are not always correct.)

[-]Richard_Hollerith18y10 Response to previous version

Doug S: you could convince a doctor that you have a physical or mental illness that prevents you from working, and then apply for Supplemental Security Income. If your application is successful, you would recieve a very small but very reliable income (currently about $650 a month) plus health insurance (Medicaid). I assume you are American. I mention this because you seem very young and might not know this already. It is of course unethical to depend on the taxpayer for your living unless you really have no other choice.

[-]anonymous317y00 Response to previous version

Some data on gaming the system (gambling) i.e. not following a value investing model.

$500B/yr wagered into national lotteries
10M compulsive gamblers in USA > # of alcoholics
The USA was founded on monies attained from a state\national lottery: The revolution in the 1700's financed by similiar methods: Washington DC was financed by a lottery
From 1790 to 1860 24 of 36 states sponsored government-run lotteries. 1894 it was banned. Reintroduced by State of New Hampshire in 1964, now there are 38 states with state-sponsored lotteries
over 500 casinos

[-]Tim_Tyler17y100 Response to previous version

Re: Seriously, why can't we just say that buying lottery tickets is stupid?

Buying a lottery ticket is not stupid - under some conditions.

Say you have two cents, and can't afford your train fare home (which is one stop away). If you can gamble those two cents in a game of chance, you may be able to convert them into a whole train fare.

The conditions of being stuffed - unless you have a lot of money - may not be that uncommon: so many people may be inclined to gamble this way.

[-]yrff_jebat14y00 Response to previous version

I don't want to conclude that lottery might be rational, but I don't think it is self-evident that the right way for deciding between different probability distributions of utility is to compare the expectation value. We are not living a large number of times, we are living once (and, even if we did, bare summated value would neglect justice).

2RobinZ14y

It's not self-evident, no, but it can be shown under some reasonable assumptions. If you don't play according to expected utility, then you take the risk of being convinced to do something silly, like buying one lottery ticket for a high price, swapping it for a second ticket, and then selling your new ticket for a lower price. P.S. Welcome to Less Wrong! You may already have read these, but just so you know: the About page and FAQ are both very handy to new users, and the 2010 Welcome Thread is a good place to introduce yourself formally if you so desire.

[-]Carinthium14y-20 Response to previous version

Isn't the obvious conclusion that it would be best for the world if lotteries were banned in as many countries as possible?

0David_Gerard14y

Only if you don't consider other effects. People like gambling, and making gambling illegal consistently has the effect of driving it underground and funding organised crime. If you don't have something like a lottery, people come up with equivalents themselves. There appears to be a demand for gambling of all sorts; making it illegal doesn't make the demand go away.

[-][anonymous]14y130 Response to previous version

you're occupying your valuable brain with a fantasy whose real probability is nearly zero - a tiny line of likelihood which you, yourself, can do nothing to realize.

I have fantasies where I have superpowers and join the X-Men. I fuel these fantasies by reading comic books -- they cost a lot more than a dollar and it takes me much less than a day to read each one, so in this way, fueling my superhero fantasy is even stupider than fueling a millionaire fantasy by buying the occasional lottery ticket. And the likelihood of the superhero fantasy coming true doesn't just approach zero, it actually is zero. Does that make reading comic books a form of self-destruction? If not, how is it different from buying a lottery ticket every so often? What about sexual fantasies about getting with Jamie Bamber or Felicia Day--are these stupid and self-destructive too, or are they just harmless and pleasant indulgences?

The idea you lay out here--that the lottery-ticket fantasy would necessarily crowd out other, more realistic ideas for wealth generation--seems contrary to the way brains actually work. If the lottery-ticket fantasy fires often, wouldn't that strengthen rather than inhibit the area... (read more)

[-]lymen14y70 Response to previous version

Huh... the thought occurred to me recently.

Just like in the torture versus dust specks post earlier, people might prefer that one person benefits extremely instead of all of them benefiting a small amount. While they might not be the ones to win the lottery, someone else will, and by joining in, they're helping to keep the lottery alive a bit longer.

I admit that I'm relatively new to these concepts so I apologize in advance if my post is a bit scatterbrained or in the wrong post, but it's just a thought.

Just like how people would prefer for 3^^^^3 people t... (read more)

0TobyBartels14y

This is rational if utility vs money is concave, which it can easily be for small amounts of money. Tim Tyler touched on that above. But I'm one who would clearly prefer torture to dust specks, so don't trust me.

1lymen14y

Ooh, right, I didn't see that post, thanks!

3endoself14y

It's good that you are trying to learn and that you posted. There are misconceptions, which I will proceed to pick apart in extreme detail :), but, if I do this well, you will learn something and come to a deeper understanding of the concepts. While the lottery would accomplish that preference, it is not the best way to do so. By being a game of chance, lotteries may only be run by the government, so some of the money that would go to the one person goes to the government instead. While people might also prefer that the government has money, they could donate to the government (or to a charity) separately. Also, bundling the two things into one action fixes the ratio between the amount of money given to each. This is neutral if fixed at the desired ratio and of negative utility if fixed at a suboptimal ratio. It would only be considered good to most people if the people who want a lower rate of lottery tax are few enough that they cannot start their own lottery-like system, so they are forced to pay the higher taxes desired by the rest of the ticket buyers in order to play. Also, the person that benefits is randomly selected. Would it not be preferable to chose someone with above-average need for the money? Even if the ticket buyers would not think so, surely they could think of some criteria that is better than random . In general, the lottery shows no signs of being optimized for this preference. Since you're new here, you may not have read http://lesswrong.com/lw/hu/the_third_alternative/ . I highly recommend it. Since people would think that buying a lottery ticket that they knew would not be able to win would be ridiculous, we can tell that none of these considerations are what matters. People buy lottery tickets because of the benefit to themselves and, since this is irrational in all but the few cases where utility is concave up in money (and people's participation in the lottery does not depend on how well it conforms to a certain concave up utility funct

0lymen14y

Ahh, right. Thanks for that point. I forgot you can't have hidden motivations if they're not conscious. Also, I've read the third alternative article but I'm not really seeing what you were trying to say by posting it. My original thought was that when you have a choice between torturing a person for fifty years or letting 3^^^^3 people experience a dust speck in the eye, I'd pick the 3^^^^3 people getting the dust speck. However, from an outsider's standpoint, would you rather give 3^^^^3 people a penny or one person a billion dollars (you're not included in either party). I for one might decide to give the billion dollars because at least it has some value (I'm not really happy about giving 3^^^^3 people one penny each, even if 3^^^^3 pennies is worth a lot more than a billion dollars).

0endoself14y

The point of the third alternative is that an action is not good because it is preferable to some "default action", but because it is preferable to all possible actions that you can think of. If it is rational for some people to buy lottery tickets, it is because it is the best use of their money, not because it is better than saving. If there is a more efficient way to accomplish the same goals, than rational people would not buy lottery tickets. What percentage of people would have a major life change because of a single extra penny? A tiny fraction, but multiply that number by 3^^^^3 and you can do vastly more good than by giving one person $1 billion. I'm not quite sure what you mean in your first sentence. People can and do have hidden motivations that they are not consciously aware of depending on the definition of motivation.

0Will_Sawin14y

If a penny has no value, and another penny has no value, and a third penny has no value, .... then 100 billion pennies must have no value.

1Desrtopa14y

But the utility of a penny is not necessarily the same as one hundredth of the utility of a hundred pennies. If you distribute a great deal of money by giving many people a single penny, you may have disbursed less utility than if you gave a fraction of that money all to one person.

-1Will_Sawin14y

If I give one person X amount of money, I can do this N times for N different people, producing on average U(X) utility each time. If I give N people X/N amount of money, and do this N times for the same N people, I must be producing, on average, the same U(X) of utility, since I have produced the same result with the same number of iterations. Do you expect: 1. That the first person I give money to will benefit more than the average person? or 1. That the first penny I give people will benefit less than the average penny? If so, why?

1Desrtopa14y

The second. It's not controversial that the marginal utility of money decreases when you've got a lot of it. Another dollar is worth less to a millionaire than a beggar. But you also have a lot more than a hundred times as many purchasing options with a dollar than with a penny, so I think it's likely that the utility of money is described by an S curve.

2Will_Sawin14y

This would make sense if everyone started with $0, or an exact round number of dollars, which seems like an odd scenario. However, if that's your assumption, I agree with you.

3Desrtopa14y

I suppose I incorporated that assumption without really thinking about it. Now that you mention it, that would be a pretty odd situation. Depending where on the the curve the slope levels off, it might still result in greater utility to give one person a lot of money than to distribute the same amount of money in one cent units to very many people, but if you assume that a majority of the people are already middle class, that's probably not the case.

2orthonormal14y

I think the confusion here is more of a sorites paradox than anything about expected utility. You can't imagine a single extra penny changing anyone's outcome, but you can imagine it for a hundred extra pennies. I think that's a mistaken intuition; for instance, you could be about to buy something small, realize you're a few cents short, and either cancel the transaction or use the "Take a Penny" jar; but the probabilities of doing either will actually change (for social reasons) depending on whether you're, say, 3, 4 or 5 cents short of the total. It's rather like the way that being one more second late out the door can either get you to the office at the exact same time, or twenty minutes later, depending on the bus schedule.

0Desrtopa14y

Utility clearly isn't linear with money, but I think you're probably right that that intuition had something to do with my drawing the conclusion I did.

[-][anonymous]13y00 Response to previous version

Aren't video games an even bigger waste of hope?

[This comment is no longer endorsed by its author]Reply

1Viktor Riabtsev6y

I'd say there are mental patterns/heuristics that can be learned from video games that are in fact useful. Persistence, optimization, patience. I won't argue there aren't all sorts of exciting pitfalls and negatives that could also be experienced; I would just point at something like Dark Souls and claim: "yeah, that one does it well enough on the positives".

[-]Blackened12y00 Response to previous version

I'm still not convinced that I shouldn't buy lottery tickets.

Assume a hypothetical situation. There's a lottery right next to where I study/work. Also, I realize how silly it is to actually expect to win the lottery after buying a lottery ticket, so I can't use this as a source of positive emotions, even if I want to. However, buying lottery tickets let me engage in certain social situations, which just barely outweigh the time wasted for them (but not the money) - alternatively, you can instead assume that it takes me 0 seconds to buy a ticket and later t... (read more)

0Vaniver12y

The response I would make is that you're not buying a lottery ticket; you're buying a social interaction ticket, and that can be rational. Given the "waste of hope" message, though, hypothetical you should think long and hard about whether that social interaction is positive.

1Blackened12y

However, we assume that the social interaction itself isn't enough to justify my ticket. Let's say it's just a warm greeting and a short small talk with someone I find sympathetic, but probably won't play a decisive role in my future. And I'm buying the ticket, because I rationally know that I might win the lottery (despite that I find it so unlikely that I don't actually expect it). I have only included the social interaction to offset the wasted time.

1Vaniver12y

Ah, now I see what you're trying to get at. You might be interested in reading about VNM utility maximization and prospect theory. The first basically says "let's come up with an imaginary score that we give to potential futures, such that that we can do expected value calculations over probabilistic gambles between those potential futures, and the EV calculation will be correct by definition." This is generally recommended as a good way to make decisions (at least, it clarifies what the difficult parts are- but beyond focusing your attention may not make them easier). The second asks how various descriptive biases coexist, and comes up with a model that has three deviations from risk-neutral VNM but fits how many humans actually behave.

[-]buybuydandavis12y10 Response to previous version

Unsurprisingly, many people don't realize that a numerical calculation of expected utility ought to override or replace their imprecise financial instincts, and instead treat the calculation as merely one argument to be balanced against their pleasant anticipations—
The process of overcoming bias requires (1) first noticing the bias, (2) analyzing the bias in detail, (3) deciding that the bias is bad, (4) figuring out a workaround, and then (5) implementing it.

EY is just wrong in one respect. People enjoy pleasant anticipations. It's perfectly instrumen... (read more)

0khafra12y

On the other hand, if visualizing winning the lottery does no harm to your actual goals, it may be better than visualizing success at your actual goals.

0buybuydandavis12y

My second point was about opportunity cost - the time you spend on dreams that do no harm is time that could be spent on dreams that provide some benefit.

[-]tunesmith12y00 Response to previous version

For powerball to have an Expected Value of 1, the individual take-home jackpot would have to be about $313,124,412 for the lump sum, after taxes. (Which, assuming average state income tax rates, corresponds to an advertised jackpot of roughly $805,000,000 AND assumes the jackpot doesn't have multiple winners, which at that level is pretty unlikely.) Of course, since it's a risky bet, you don't want to blow your whole bankroll on lottery tickets even if the EV is above 1. That's where the Kelly Criterion comes in. According to the easy version of the Kel... (read more)

[-]WressLong9y00 Response to previous version

You describe the millionaire daydream as a sink. That could be reframed as an opportunity cost. The same as any short-term v. long-term gratification, the time spent daydreaming may create an opportunity cost wherein the preoccupied brain isn't investing in some other opportunity that could lead to higher returns in the future, such as your technical school example. This simply restates that the costs of the lottery ticket are the lost marginal utility of the dollar which could have been spent on, or invested in something else, plus the opportunity cost... (read more)

[-]Arun Gupta6y-20 Response to previous version

Various industry and government estimates tell us that Americans watch an unbelievable 8 hours of TV every day. Even if this a gross overestimate, what is the cost of a few days of lottery fantasy compared to that?

21point7point45y

You might want to cite the "8 hours of TV a day" bit - if you look into houses' living room windows, you won't see TVs blaring through anywhere near a third of them. (note: this experiment is not endorsed by the author) In response to your main question: being unproductive isn't a good reason to be more unproductive.

[-]Sjlver6y50

Someone once told me that the odds of winning the lottery are smaller than the odds of dying before the draw. Thanks to this insight, lottery tickets have become a kind of "memento mori" for me, and I'm no longer tempted to buy any.

2[comment deleted]2y

Moderation Log

74Comments