Rationality of Playing the Lottery

Sometimes seemingly irrational things, like recessions, may actually be a result of perfectly a rational decisions. The lottery is no different:

Why do people play the lottery? On the one hand, the answer is obvious enough: We’re happy to spend $3 for approximately 15 seconds of irrational hope, for the pleasure of thinking about what might happen if we’d suddenly won millions of dollars. While most players know they won’t win – the odds are a joke – the latex coated ticket is a cheap permission to daydream, to think about the possibility of a better life.

So we pay a couple of dollars to dream big. Seems harmless, until you consider who plays:

Not surprisingly, those without lots of money are more interested in such escapist pleasures. As I note in my recent Wired article on the statistician Mohan Srivastava, state lotteries have become a deeply regressive tax. On average, households that make less than $12,400 a year spend 5 percent of their income on lotteries.

Those who most want to escape the reality of their finances play the lottery. Sadly, that lottery helps to keep them in their real financial problems. Sounds like we need a savings lottery.