Scenario I: You’re walking down the street with a friend when you remember that there’s a Mega Millions drawing that night. “One second,” you say, “I’m going to stop into this store and buy a lottery ticket for $1.”
If your friend is like many people, you’ll get a haranguing about how stupid that is, about how the lotto is just a tax on the poor, the desperate, and the stupid, and how you’re much better just putting your money into a bank.
Scenario II: You’re walking down the street, and you’re feeling thirsty. “One second,” you say, “I’m going to stop into this store and buy a can of Coke.”
“Cool,” says your friend.
But really, which is the tax on the stupid, the lottery ticket or the can of Coke? Most people reflexively say the lottery ticket, as WSJ numbers guy Carl Bialik reminds us today. But consider. In the first scenario, you’re out $1, in exchange you get a brief chance to fantasize, and the very remote chance of getting rich, plus a little tension while they pull the numbers.
In the second scenario, you’re out $1, you get a brief sugar high, followed by a crash, followed by tooth decay, sugar addiction, and then obesity, if you make a habit out of it. Clearly the Coke is worse in every way. If someone asked you whether they should buy a lotto ticket every day, or a Coke every day, you’d have to suggest the lotto ticket. Its superiority isn’t even in doubt.
Probably the reason people freak out over the lotto ticket is because the presence of maths seems to make the analysis very clear, and they’re thinking about it strictly as an investment, and since there are so obviously better investments to make, the lottery ticket is dumb.
But for one thing, lottery ticket buyers probably aren’t thinking of them as investments, and really, regardless of how they view them, the fact is there are a lot dumber things you can do with $1, including buying a can full of sugar water. That’s the real tax on the stupid.
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