Monday, February 14, 2011

When I was not yet an adult, I often wondered if I have to pick up that lottery ticket at the corner of the school street. Strangely, thinking now, I wanted to have the finest juice in the world. Why? I had a peculiar instinct that juices make people strong to fight away bullies. I still do have juices and rather feel pleasant having such healthy alternatives than feel a little raise on my bi/triceps.

In any case, given the stupid I was then, it never crossed my mind why on earth lotteries are such a hit. And on the top of it, why do the poor buy up so many of those tickets. By definition, they should not. I intuitively felt because they are genuinely greedy to improve their living standards. But, I had my doubts over what they would do with the won money.

Latest research suggests the poor take a liking to lotteries as they feel poor.

“In Experiment 1, participants were more likely to purchase lottery tickets when they were primed to perceive that their own income was low relative to an implicit standard.

In Experiment 2, participants purchased more tickets when they considered situations in which rich people or poor people receive advantages, implicitly highlighting the fact that everyone has an equal chance of winning the lottery.

The study neatly illuminates the positive feedback loop of government-run lotteries. The games naturally appeal to poor people, which causes them to spend disproportionate amounts of their income on lotteries, which helps keep them poor, which keeps them buying tickets…”

So are the poor condemned to suffer this fate? Can something be done to mollify this situation?

The behavioural economist, George Lowenstein suggests:

“…states could promote and offer more games that appeal to wealthier players, such as Powerball, and not those popular with poorer players, such as instant scratch-off tickets.”

Ah! We keep on scratching those tickets and feel wealthier, while becoming lot poorer.

Lowenstein adds:

“financial institutions [can] issue investment instruments that have lottery-like qualities (for example, offered in small amounts, available at many convenient points of purchase, provide a small chance of a large upside) but offer a positive rate of return, providing the pleasure of playing the lottery without the steep cost. In many other countries “prize bonds” or other savings instruments are available that pay lottery winnings in place of, or in addition to, regular interest. Regulations in the United States have stymied the development of such offerings.”

Maybe, that is why when kids win on TV, they are given certificates to be redeemed when they grow up. But, are we the really grown-ups any better “rationally”?

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