## Lottery Loopholes and Deadly Doctors

Season 2, Episode 5

Americans have a famously low savings rate: a Harvard survey found that half of us, if faced with an emergency, couldn’t come up with \$2,000 in 30 days. Most people would rather spend than save -- and one of our favorite expenditures is playing the lottery. Last year, we spent more than \$58 billion on lottery tickets, or roughly \$200 per person. As entertainment goes, the lottery is pretty cheap – a dollar and a dream, and all that. But as an investment, it offers a dreadful return, which is why the lottery is sometimes called “a tax on stupid people.”

This episode looks at a little-known financial initiative that might help people save money while giving them the thrill of the lottery.

## Were Colonial Americans More Literate than Americans Today?

In 1776, one book, written in complex language, sold over 120,000 copies in Colonial America. That number does seem large on its own. However, to give it even more meaning, I like to convert it to an equivalent number today.

This conversion is a task for proportional reasoning---one of my favorite tools for finding meaning in the numbers that surround us. First convert 120,000 into a fraction of the U.S. population in 1776: compared to the population at the time of 2.5 million, 120,000 is roughly 1 in 20, or 5%. Today’s U.S. population is about 300 million---of which 5% is 15 million.

Fifteen million copies today! More surprisingly, Common Sense by Thomas Paine sold this equivalent in just three months. In its first year, it sold 500,000 copies, or 20% of the colonial population. Today’s equivalent is 60 million copies. On Wikipedia’s list of bestselling books, all books that have sold that many or more copies have done so over a much longer time. The shortest time is 8 years, for The Da Vinci Code; several others, such as Heidi, were published in the 19th century.

Another surprise arrives upon opening Common Sense: the sophistication of the writing and reasoning.

## Scientific Literacy Does Not Increase Concern Over Climate Change; Now Go Shout About It

A new study by the Cultural Cognition Project, a team headed up by Yale law professor Dan Kahan, shows that people who are more science- and math-literate tend to be more skeptical about the consequences of climate change. Increased scientific literacy also leads to higher polarization on climate-change issues:

The conventional explanation for controversy over climate change emphasizes impediments to public understanding: Limited popular knowledge of science, the inability of ordinary citizens to assess technical information, and the resulting widespread use of unreliable cognitive heuristics to assess risk. A large survey of U.S. adults (N = 1540) found little support for this account. On the whole, the most scientifically literate and numerate subjects were slightly less likely, not more, to see climate change as a serious threat than the least scientifically literate and numerate ones. More importantly, greater scientific literacy and numeracy were associated with greater cultural polarization: Respondents predisposed by their values to dismiss climate change evidence became more dismissive, and those predisposed by their values to credit such evidence more concerned, as science literacy and numeracy increased. We suggest that this evidence reflects a conflict between two levels of rationality: The individual level, which is characterized by citizens’ effective use of their knowledge and reasoning capacities to form risk perceptions that express their cultural commitments; and the collective level, which is characterized by citizens’ failure to converge on the best available scientific evidence on how to promote their common welfare. Dispelling this, “tragedy of the risk-perception commons,” we argue, should be understood as the central aim of the science of science communication.

## More Depressing News on America's Financial Literacy (or Lack Thereof)

I've written on the woeful state of Americans' financial literacy a few times in the past. There is probably no academic researcher more attuned to the problem than Annamaria Lusardi of Dartmouth. This week's NBER e-mail blast describing the latest crop of economics working papers includes nine papers; of those, four are written or co-written by Lusardi on this topic.

Among the highlights (or, I should say, lowlights); the bolding is mine:

This paper examines Americans' financial capability, using data from a new survey. Financial capability is measured in terms of how well people make ends meet, plan ahead, choose and manage financial products, and possess the skills and knowledge to make financial decisions. The findings reported in this work paint a troubling picture of the state of financial capability in the United States.
The majority of Americans do not plan for predictable events such as retirement or children's college education. Most importantly, people do not make provisions for unexpected events and emergencies, leaving themselves and the economy exposed to shocks.

## Credit-Card Agreements as Literature

Credit-card agreements seem to get longer and longer. Why? Planet Money explains some of the factors, which range from the necessity for less legalese to Congressional reforms.

## James Surowiecki on Financial Illiteracy

Financial education for all.

## Economics for (and by) 10th Graders

An economics primer written by 10th graders.

## Financial (Il)Literacy Among the Young

We blogged a while back about the sad state of financial literacy in this country. This has been diligently investigated by Annamaria Lusardi and Olivia S. Mitchell, who insert a few financial questions in government longitudinal surveys. Here's an example.

## Is Teaching Financial Literacy a Waste of Time?

Not long ago, I wrote about the sad state of financial literacy in the U.S., and how some people, like Annamaria Lusardi of Dartmouth, are proposing widespread education to fix the problem. But in a brief Money magazine Q&A, Lauren Willis, who teaches financial-products regulation at Loyola Law School, says that’s a waste of time. […]

## Are We a Nation of Financial Illiterates?

Let’s begin with two questions: 1. Do you consider yourself financially literate? 2. If so, how did you get that way? And now, a third question: 3. How important is widespread financial literacy to the health of a modern society? Before you answer the first question, take this little quiz, borrowed from the website of […]