To the point, I recommend Stephen Stigler’s new book Casanova’s Lottery to anyone interested in the history, economics, ethics, and politics of modern-day lotteries. Among other things, Stigler not only traces the history of the French Loterie, the first large-scale commercial lottery in history, he also examines the mathematics of risk, including the epic back-and-forth debate over the “maturity of chances” or so-called gambler’s fallacy, and the politics of legalized gambling generally. For me, however, the most fascinating part of Stigler’s book is, Why do people even bother to buy lottery tickets? Unless you can somehow rig the drawing in your favor (see here, for example), the expected value of a lottery ticket will always be less than the cost of that ticket. For his part, Stigler revisits two possible answers. One is that people are just plain stupid: “the lottery is a tax on stupidity” (p. 202). Another explanation resides in the subtle difference between expected value (a mathematical concept) and expected utility (a psychological one): the psychological value of even a small chance of winning an enormous jackpot is worth more than the cost of a ticket (see especially pp. 203-207). Either way, aren’t lotteries just another form of legalized theft? Less than 50% of all ticket sales of the Illinois Lotto, to mention just one egregious example, goes to actual prizes (see pp. 189-190)!
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