Americans Spend More On Lottery Tickets Than On Movies, Video Games, Music, Sports Tix And Books Combined

Tyler Durden's picture

It's that time of the year again: with both the Mega Millions and the Powerball lotteries accumulating jackpots greater than $350 million, countless Americans - mostly those in lower income groups - are splurging on lottery tickets, hoping to get rich quick.

Unfortunately for virtually everyone, it will never happen: the odds of winning both (or either) are absolutely staggering, a bit worse than 1 in 75.6 quadrillion, or 1 in 75,648,252,765,957,300 to be precise. On a percentage basis, one only has a 0.000000000000000013% chance of holding both winning tickets. Putting these odds in context, they are about 6,000 times worse than the odds experts have calculated of being killed by a meteorite strike -- at the same time you're being attacked by a shark. The odds of winning "only" one jackpot are not much higher: the Powerball winning odds are 1 in 292 million, while those for Mega Million are slightly better: 1 in 259 million. 

Here is an even more stunning statistic: in 2016, Americans spent more than $80 billion on lottery tickets last year, more than they spend on movies, video games, music, sports tickets and books - combined.

Some enjoy mocking American stupidity: "If you buy both tickets, you've doubled your odds of winning," said Ben Auerbach, lead data strategist for Allstate, which technically is correct; the odds are still pretty much zero.  Auerbach, who said he never buys lottery tickets himself, calculated the very long odds of a double win not for work but because "it's fun to do this rather than run numbers about premiums and insurance."

Still, for many Americans in the declining middle class and growing lower class, this remains the only hope of success: "You see more people in line buying both tickets when both games are over $300 million," Jeff Lenard, spokesman for National Association of Convenience Stores, whose members sell about two-thirds of the nation's lottery tickets told CNNMoney.

Yet while for actuaries the numbers above may be a joke, across the US they are another example of what is has become a social tragedy.

As ConvergEx' Nicholas Colas previously explained, "Lotteries essentially target and encourage lower-income individuals into a cycle that directly prevents them from improving their financial status and leverages their desire to escape poverty.  Yes, that’s a bit harsh, and yes, people have the right to make their own decisions.  Even bad ones…  Also, many people tend to significantly overestimate the odds of winning because we tend to assess the likelihood of an event occurring based on how frequently we hear about it happening.  The technical name for this is the Availability Heuristic, which means the more we hear about big winners in the press, the less uncommon a big payday begins to seem." Call it that, or call it what one wishes, the end result is that the lottery is nothing but society's perfectly efficient way of, to use a term from the vernacular, keeping the poor man down while dangling hopes and dreams of escaping into the world of the loathsome and oh so very detested "1% ers". Alas, the probability of the latter happening to "you" is virtually non-existant.

Full explanation from Convergex' Nick Colas on how and why Americans are lining up in lines around the block to... pay more taxes.

What Seems To Be Is Always Better than Nothing

Summary: American adults spent an average of $251 on lottery tickets.  With a return of 53 cents on the dollar, this means the average person threw away $118 on unsuccessful lotto tickets – not a great investment.  So why are we spending so much?  Well, lotteries are a fun, cheap opportunity to daydream about the possibility of becoming an overnight millionaire (or in this case billionaire), but on the flip side people tend to overestimate the odds of winning.  Lower-income demographics spend a much greater portion of their annual earnings on lottery tickets than do wealthier ones

Since lotteries are state-run, that effectively means that the less affluent pay more in taxes (albeit by choice) than broadly appreciated.  And even winning the lottery doesn’t guarantee financial success.  More than 5% of lottery winners declare bankruptcy within 5 years of taking home the jackpot.  Despite their drawbacks, though, lotteries are no doubt here for the long haul – in states that have lotteries, an average of 11% of their total revenues come from lottery ticket sales, and the number is even as high as 36% in 2 states (West Virginia and Michigan).
 
Consider the following credit-card-advertisement style sequence of statistics:

  • Lottery ticket sales in the US in 2010:  $59 billion
  • Average spending per person:  $191
  • Average spending per adult:  $251
  • Chance at hitting the jackpot:  (Apparently) priceless.

I have never bought a lottery ticket and honestly don’t even know how.  And as far as I’m aware, I don’t know anyone who spends north of 200 bucks a year playing the lotto.  The only lottery my friends play is the NYC marathon lottery, where they’re gambling for maybe a 1 in 13 chance to fork over $255 for the privilege of slugging out 26 miles through the city’s streets.  Not quite hitting the jackpot in most people’s minds.

But someone, somewhere is buying all those tickets.  In Massachusetts, where the lottery is more popular than in any other state, people spend an average of $634 a year on Mega Millions, Powerball and the like.  Delaware comes in at number 2 with $504 spent per person, while Rhode Island ($469), West Virginia ($388) and New York ($357) round out the top 5.  North Dakota brings up the rear with per capita lottery spending of $34.  You can see the full list in the table following the text.

It’s difficult to pinpoint exactly who is investing so much money in a product that provides poor returns, but numerous studies show that lower-income people spend a much greater proportion of their earnings on lotteries than do wealthier people.  One figure suggests that households making less than $13,000 a year spend a full 9 percent of their income on lotteries.  This of course makes no sense – poor people should be the least willing to waste their hard-earned cash on games with such terrible odds of winning. (http://www.dailyfinance.com/2010/05/31/poor-people-spend-9-of-income-on-...).

Why bother?  Well, one answer is obvious enough and applies to just about everyone who plays.  For a buck (now $2 for Powerball) we have a cheap opportunity to daydream what could happen if we suddenly won millions of dollars.  But lotteries return 53 cents to the dollar.  So why are poor people irrationally buying tickets when the probability of winning is so slim?  One study by a team of Carnegie Mellon University behavioral economists (Haisley, Mostafa and Loewenstein) suggests it isn’t being poor but rather feeling poor that compels people to purchase lotto tickets.

By influencing participants’ perceptions of their relative wealth, the researchers found that people who felt poor bought almost two times as many lottery tickets as those who were made to feel more affluent.  Here’s how they did it:

  • Participants were asked to complete a survey that included an item on annual income.  One group was asked to provide its income on a scale that began at “less than $100,000” and went up from there in increments of $100,000.  It was designed so that most respondents would be in the lowest category and therefore feel poor. 
  • The other group, made to feel subjectively wealthier, was asked to report income on a scale that began with “less than $10,000” and increased in $10,000 increments.  Therefore most participants were in a middle or upper tier.
  • All participants were paid $5 for participating in the survey and given the chance to buy up to 5 $1 scratch-off lottery tickets.  The group who felt wealthier bought 0.67 tickets on average, compared with 1.27 tickets for the group who felt poor.

Lotteries essentially target and encourage lower-income individuals into a cycle that directly prevents them from improving their financial status and leverages their desire to escape poverty.  Yes, that’s a bit harsh, and yes, people have the right to make their own decisions.  Even bad ones…  Also, many people tend to significantly overestimate the odds of winning because we tend to assess the likelihood of an event occurring based on how frequently we hear about it happening.  The technical name for this is the Availability Heuristic, which means the more we hear about big winners in the press, the less uncommon a big payday begins to seem.  

Not that hitting the jackpot is guaranteed to substantially improve the winner’s life.  Economists at the University of Kentucky, University of Pittsburgh and Vanderbilt University collected data from 35,000 lottery winners of up to $150,000 in Florida’s Fantasy 5 lottery from 1993 to 2002.  Their findings are as follows:

  • More than 1,900 winners declared bankruptcy within 5 years, implying that 1% of Florida lottery players (both winners and losers) go bankrupt in any given year, which is about twice the rate for the broader population.
  • “Big” lottery winners, those awarded between $50,000 and $150,000 were half as likely as smaller winners to go bankrupt within 2 years of their win, however equally likely to go bankrupt 3 to 5 years after.
  • 5.5% of lottery winners declared bankruptcy within 5 years of bringing home the jackpot.
  • The average award for the big winners was $65,000 – more than enough to pay off the $49,000 in unsecured debt of the most financially distressed winners.

Lottery players tend to have below-average incomes, so they are probably less accustomed to budgeting when they receive a windfall.  There’s also a psychological term called Mental Accounting that explains how people might treat their winnings less cautiously than money they’ve worked for.  Money has come into their possession through luck, which similar to bonus payments, often induces an urge to purchase unnecessary items.

But whether you think state lotteries are awful or great, there’s another word for them: essentialIn both West Virginia and Michigan, for example, lottery sales accounted for 36% of total state revenues in fiscal year 2010, and on average state with lotteries take in 11% of total revenues in the form of lotto ticket sales.  We’ve included the full list in a table following the text.  There are still 7 states that don’t have their own lottery systems, so the national average would be lower.

A couple of closing thoughts on what this all means:

  • Don’t make investment decisions when you are feeling poor.  The study we cited earlier clearly shows that you are likely to buy more “lottery tickets” (think of that as a metaphor for any long shot investment) when you feel less affluent than those around you.
  • Lower income individuals likely pay more in “Taxes” than most economic commentators realize.  Assuming that the 80/20 rule applies to lottery participation, the bulk of that $59 billion in annual receipts likely comes from 20-25 million less affluent households.  That would be about $47 billion from this demographic, or roughly $2,400 per household.  Yes, I get the notion that this money is handed over in the hope of a payoff.  An ill-advised and mathematically unlikely hope, as it turns out.  But does that mean it doesn’t count as a societal contribution?
  • Maybe the U.S. needs a national lottery.  Yes, these games don’t necessarily encourage the best financial planning among the less affluent.  But there is no denying that playing the lottery is entirely voluntary.  There are probably some anti-gaming factions in government who wouldn’t like this approach, to be sure.  But there’s also no doubt that the Federal budget could use the money.  And, hey, you never know…

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Raffie's picture

What state was it that could not pay the lotto winnings and gave a IOU?

Coming to a state near you.

Bigly's picture

A true tax on the stupid only....

Raffie's picture

Found it - http://fortune.com/2015/10/16/illinois-lottery-us-state-budgets/

Lottery is the rich suckering the poor out of their money. Even the schools don't get their share, unless you conside 1 white board eraser their share.

VinceFostersGhost's picture

 

Gambling is a tax.....for people that can't do math.

El Vaquero's picture

It's called the stupid tax for a reason.  IMO, if you get $2 of fun off of a $2 powerball ticket, meh, whatever.  Have your $2 of fun.  But the people who use it as a retirement plan are mental.  

johngaltfla's picture

So you're saying that the $2 for the Powerball is worse or better than the future $2 investment in the other lottery ticket called SNAP?

codecode's picture

So many different ways to gamble these days...

Stuck on Zero's picture

Talk about state sponsored maximization of income inequality! The lottery is the worst.

Gardentoolnumber5's picture

Going further into debt buying lottery tickets, hoping to get out of debt. Makes a lot of sense to me. /sarc This must be a meter on the stupidity index.

I "won" the lottery 3 times and my daughter at age 5 won once. The payoffs were in the 40-70 dollar range. Then they fixed that by saying, "people want the big jackpots." A sixty dollar payout became a 5 dollar payout and a lot harder to get at that. Never played again. "Our schools win too." Always with, "It's for the chil'ren" BS.

WayPastCaring's picture

Lifetime, I've made money in the local Kansas lotteries. My winning strategy was to win lottery tickets from radio stations (usually trivia questions) and then hope one of them pays off. I've sacked probably about $200 doing this - big ticket was for $150. Naturally I didn't retire on this windfall but it was far better free-rolling than losing money.

Anyone else that actually pays for a lottery ticket and then claims it is 'entertainment' deserves what they get, which is poorer. How entertaining is it to lose weekly, year after year? Same goes for guys who won't use condoms and then get a woman pregnant, people who get obese by shovelling fast food garbage down their gullets and then are shockingly diagnosed with diabetes or drop dead of a heart attack, women who go to bars and stay after midnight getting drunk and then are surprised to find out what the consequences of that can be, people who denigrate those who succeed in school and work hard to develop new skills and then wail about how they need $15/hr for pushing a mop or flipping a burger (as a CAREER), smokers who develop lung cancer or emphysema and cart around oxygen tanks, people who drink way too much and ignore the damage they're doing to their liver, etc.

FUCK YOU ALL - you deserve everything you get because you ignored reality even after you KNEW the consequences. The worst part is not the damage they're doing to themselves, it's their entitlement attitude for most of them that's sickening, expecting others to help provide for their recoveries, usually in the form of taxpayer-supported medical care (obviously this doesn't include lottery players) or simply being a drain on the economy and taxpayers ($15 min wagers, alcholics).

Lucretius's picture

Stupid tax   . Plain and simple. Played the lottery exactly once, when the service station I worked at began selling them. Was I entertained, amused, enriched? NO, I was not, I was one dollar poorer and felt stupid for wasting a dollar.

 Same with gambling, I have no moral issues with it, I tried it once each with black jack and slots. Same results, lost money, felt stupid and was NOT entertained. Grand total for that education, $31.00

Here in AZ the motto for the various tax schemes is "you can't win if you don't play" and my reply is you can't loose if you don't play!

DocBerg's picture

Not necessarily so.  When I lived in Marxachusetts in the Greed Filled 1980s, most of my native friends played the lottery because it was the only way they might come up with the down payment for a house.  In my Connecticut Valley locale, the house prices were going up about 3% a month, while in Boston, they were going up at least twice that.  Back then it was a triumph of hope over math.  When that bubble burst, it was epic!  By then, I was back in Illinois, now that state is going down the tubes.  I must be bad luck for polities!

Umh's picture

While many people cannot do the math many more can do the math and buy chances anyway. I think there is more than a bit of willful ignorance contributing to this idiocy.

BennyBoy's picture

 

"Americans Spend More On Lottery Tickets Than On Movies, Video Games, Music, Sports Tix And Books Combined"

They know they're fucked, so why not? At least there's a chance of success, not like their real life.

mkkby's picture

Seems perfectly rational. 

Movies -- Rent for $2 instead of spending 20 bucks for a ticket/popcorn/soda to watch commercials and have phones going off all around you. 

Plus every movie and TV show has to be about dindus, and have 2 fags slobbering all over each other.  If you find that off putting (as a normal person would) do something else and starve hollyweird.

Books -- Ever heard of the library?  Spend zero.

Music -- Turn on the radio, free.  Never understood why anybody would want to own music.  Is it really worth listening to after 3-4 times?

Sports -- Crazy expensive.  Why not just hand over your whole paycheck to the violent porch apes?  Stop supporting their celebrity lifestyle and take a walk/hike/bike ride instead.

Lucretius's picture

+1, haven't been to a theater in 25 yrs or so, I hate going any where and having my shoes stick to the floor, and especially despise being around stupidity! Ever watch the monkeys clap after a movie??? Who are "they" clapping at, the screen???

Gave up TeeVee years ago, Shit coms are nauseating, all the same, men are idiots and women are calm and rational and mother over the stupid men, and as you say, there is always two fags, gotta normalize perversion!

Books, agreed, almost free used, I seldom spend more than a buck or two!

Music, I disagree. I at one time had 12 feet of vinyl, and still have about 8-900 CD's, though the majority is now digitized. I rarely ever go to the archive, there are some great on line radio stations that never advertise! KCDX.com, radiofreephoenix.com!

Sportsball has never been my bag, always struck me as rather faggy.

Lucretius's picture

Only thing on that list that I have spent ANY money on in the last 20 years is books, and I usually but them used. If I really want one and the library does not have it, I go here, very reasonable prices!

https://www.abebooks.com/

Mr 9x19's picture

good title for drama tv show

Truthoutthere's picture

I think it was Illanilloweyou.

Golden Showers's picture

I've spent exactly 44 dollars on lottery tickets in my life. I lost. But that's because I suck at life.

Raffie's picture

I played lottery years ago a few times BUT applied Liberal Logic to it so I would feel better.

Spent $10, won $1 so there for I was up $11. Libtard's motto is LOSING FOR THE WIN.

A close friend of mine won the lottery LONG ago when the default was paid out over 20 years. He won $8mil.... could not have happened to a nicer person.

Twee Surgeon's picture

You don't suck, you are being sucked, by a Leech, not a Lover. Welcome to a very big club.

The American Spirit detests this unnatural condition . This song is not about Geography. https://www.youtube.com/watch?v=LUpBSvN1a50

FreeShitter's picture

Lottery nation = Ghetto culture.

warsev's picture

Hey, a Powereball ticket is better for 'em than another bottle of Rosie.

peippe's picture

would it shock you if I told you most buy both?

cuz they do.

10mm's picture

Better take the lump sum.  Also,notice the fucking comparison with Movies, Sport shit, meaningless  monkey dick nonsense. 

10mm's picture

Group lottery. At least it cost less. 

Cluster_Frak's picture

You're gonna get taxed anyway, so why not roll the dice. 

peopledontwanttruth's picture

Some of the most miserable people I've known had money. Couldn't get enough of it, were dishonest, tighter than a frogs butt, pinched the nickel until the buffalo crapped and always worried about what they had and truly never enjoyed life.

Wouldn't ever want to be like them. They missed out on this gift of life. No one can take it with them when they die and then the real fights and personalities come out as the family is destroyed fighting over pennies.

TeddyBear's picture

Breakup this Monopoly.

This is obviously a gambling Monopoly that needs to be broken up. You talk about free enterprise there is no free enterprise when there's only one source of lottery tickets. Let capitalism take over. Joe's lottery for all.

warsev's picture

Go Powerball!!! I just love it when some sucker pays taxes for me that I would otherwise have to pay.

Byrond's picture

So the poor actually do pay taxes.

10mm's picture

Especially with 10.00 a pack smokes in NY,Philly etc. Soda Tax. Yep,poor do.

Byrond's picture

I'm sure that the silver stuff that comes off the scratch tickets is highly toxic. 

Pop3y3too's picture

Your owners thank you. May the odds be ever in your....favor.

 

 

Pernicious Gold Phallusy's picture

This article makes me so happy I could just scream. Taxing the stupid losers. How absolutely fucking wonderful.

bshirley1968's picture

So the jew banker, gov taxation crowd sucks another $80 billion out of the economy that does not go towards anything productive or meaningful.

That has GOT to be great in building a real and prosperous economy.  "Stupid is as stupid does." -Mama

83_vf_1100_c's picture

Just fucking sad. Stupidity or desperation?

  I am no better I suppose. I keep buying these white and yellow colored tokens thinking I will get rich or somehow survive the next SHTF scenario. Value keeps dropping, I keep buying. I figure my odds are better than the lotto so I got that going for me.

 

PhilofOz's picture

Lotteries were one of the smartest things our owners gave the peasants. It gave them all HOPE! Hope is a huge part of what keeps the masses from rising up against their masters!

Rick Cerone's picture

Idiots keep funding California's communists.

Emptykoolaidcup's picture

Americans love that Stupid Tax called the Lottery!

cbxer55's picture

Never bought a lotto ticket, never will. Don't even pay attention to the jackpot announcements. Have no idea how high the amount is. Just know I stand a snowballs chance in Hades of winning. So, why play? 

Salsa Verde's picture

Proof, you CAN tax people for being stupid.

bshirley1968's picture

You are so right.  They are the easiest.

hooligan2009's picture

i spend more as well..

ten bucks a week.

heh and bleh!

peippe's picture

I hate to admit this, I only buy when it's around 400 M

saw some people I know while buying tickets today for just 300 something million. So embarrasing.

DeusHedge's picture

i beg of you, i'm starving masses iunwanna have to bank in lottery tickets

Haitian Snackout's picture

So let me get this straight......over 100 years ago, they were able to calculate the amount of money to be stuffed into tha pari-mutual machines to affect the payoffs in multiple horse races so that the less played numbers came up in their numbers racket. But today, they are unable to fix a few floating ping pong balls. Even though there are literally billions at stake. And the winners are almost always people who go broke shortly afterwards. PT Barnum was ahead of his time.