The press and the streets in the U.S. are buzzing today about the world record $640 million lottery jackpot that will be drawn tonight at 11pm in Atlanta, GA.
This excitement is an example of what economists call “skewness.” The odds of winning have been quoted as 175 million to 1 — yet all of us are hoping to be that one. We explained the irresistible appeal of skewness (and the lottery) in our Freakonomics Radio podcast “The No-Lose Lottery.” In that episode, we also introduced a new financial product called Prize-Linked Savings accounts — an idea that utilizes skewness to encourage saving. We also explained why lottery commissioners would probably hate it.
Stephen Dubner explained on CBS This Morning why we love the lottery so much: