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Posts Tagged ‘lottery’

How Much of Our Success Should We Claim Credit For?

Our most recent podcast was called “Would a Big Bucket of Cash Really Change Your Life?” It showed that the winners of a 19th-century land lottery did not appear to convert their windfall into intergenerational wealth. This challenges the modern argument that cash transfers are one of the most effective ways of helping a poor family escape poverty — and, therefore, as we said in the podcast, might be seen as a depressing conclusion.

Judd Campbell from Odessa, Texas, wrote in to dispute the depressing part, and offer some worthwhile commentary:

I just finished listening to the latest podcast about the Georgia land lottery in the 19th century. I actually found it not to be depressing at all.

Here’s why:

1. It would be depressing to me to know that poverty has existed into modernity, and the solution would be a simple one-time transfer of wealth. Surely, we could have figured that out by now and eliminated poverty. Clearly, the issue is more complex than that, and thus we have an excuse for not developing a solution. Yet.

2. While I don’t consider myself wealthy, I do make a healthy salary and live in a comfortable home with 4 kids. There are a couple of things that I believe about my life, that may or may not be logical or factual, but provides me comfort:

a. My financial success is not due to my parents. I did it on my own. I did grow up in a comfortable home with loving and supportive parents, my father has a master’s degree, and I appreciate what they have provided me. But in my gut I feel like I achieved my own success. This podcast was uplifting, because it seems to confirm that I am responsible for my own success.

b. On the other hand, I feel like my financial success will help my children be financially successful. Even though I don’t give my parents credit for my success, I believe that I can influence my children to be successful.


Using Lottery Payouts to Fight Tax Evasion?

Yesterday we gave an update on how attaching a lottery payout to bank accounts can help people save more money. A reader named Drew writes in about a different lottery nudge:

When I was studying abroad in China (2006) a friend told me that I should always insist on getting the receipt whenever I ate at a restaurant, because the receipts are scratch-off lottery tickets.

I didn’t think very much of it at the time (as a visitor, I didn’t think I’d ever collect any winnings), but one of the Freakonomics podcasts that talked about capturing unreported income (I think it was “The Tax Man Nudgeth“) reminded me of their ingenious system to encourage customers to demand that restaurants report their income.

I wasn’t sure if it was still going on, but this blog suggests that it still was at least a year ago. Here is an older post with a little bit more detail about the system.


With a Lottery Option, Saving Is Easier

Back in 2010, we put out a two-part podcast (Part 1; Part 2) about Prize-Linked Savings (PLS) plans, which combine the safety of a savings account with the thrill of a lottery payout. It is one of the most intriguing ideas we’ve run across in some time. Maybe not earth-shattering, but potentially an important way to help people save more money.

Now a group of scholars (including the University of Maryland economist Melissa Kearney, who was featured in the podcast) have put out a working paper (abstract; PDF) that set up experiments to determine whether a PLS plan would actually induce better savings behavior. Their answer is yes.


Michael Jordan, the Bobcats, and Running the Lottery Treadmill

The Charlotte Bobcats came into existence in 2004.  At the conclusion of the next five seasons, the Bobcats finished out of the playoffs and hence earned a trip to the NBA’s lottery.  

After all of these lottery picks, the Bobcats finally made the playoffs in 2010.  That Bobcat team – the best in franchise history – only won 44 games and failed to win a playoff game.  Nevertheless, this squad was the highlight in the brief history of this team. 

Two short years after this epic campaign (epic by Bobcat standards), Charlotte has posted the worst season in franchise history.  In fact, with a winning percentage of only 0.106, the 2011-12 Bobcats were the worst team in NBA history.

If we look at what happened to Charlotte’s roster, it is easy to see why this team became so bad so quickly.  Back in 2009-10 the Bobcats were led by the following players (Wins Produced numbers taken from theNBAGeek.com, explanation of Wins Produced offered here): Gerald Wallace, Raymond Felton, Boris Diaw, Stephen Jackson, Nazr Mohammed, and Tyson Chandler.   


A $640 Million Lottery Jackpot and a Lot of "Skewness"

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 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 for saving. We also explained why lottery commissioners would probably hate it.


John List Explains Why Lotteries Are in Fact a Good Fund-Raising Mechanism

We recently ran on a post on a reader’s query about the economics of a 50-50 fund-raiser. John List, the University of Chicago economics-of-charity wizard (related podcast here), wrote in with a comment:

The intuition of the reader is slightly off.  Although not directly a 50-50 charity drive, we have explored the efficacy of lotteries both theoretically and empirically.  As John Morgan (from Berkeley) has elegantly shown, under standard assumptions (no risk-loving or lottery-loving behavior is necessary), lotteries outperform the simple ask (what we call a VCM).  Lotteries obtain higher levels of public-goods provision than a voluntary contributions mechanism (VCM) because the lottery rules introduce additional private benefits from contributing.


A Lottery Loophole (Sorry, Now Closed) in Massachusetts

In the Boston Globe, Andrea Estes and Scott Allen write about how people have been taking advantage of a statistical quirk in the rules of an obscure Massachusetts Lottery game called Cash WinFall. A Michigan couple in their 70s, Marjorie and Gerald Selbee, spent three days buying more than $600,000 in Cash WinFall tickets from two convenience stores in Sunderland, Mass. Their timing was purposeful:

For a few days about every three months, Cash WinFall may be the most reliably lucrative lottery game in the country. Because of a quirk in the rules, when the jackpot reaches roughly $2 million and no one wins, payoffs for smaller prizes swell dramatically, which statisticians say practically assures a profit to anyone who buys at least $100,000 worth of tickets. During these brief periods – “rolldown weeks’’ in gambling parlance – a tiny group of savvy bettors, among them highly trained computer scientists from MIT and Northeastern University, virtually take over the game. Just three groups, including the Selbees, claimed 1,105 of the 1,605 winning Cash WinFall tickets statewide after the rolldown week in May, according to lottery records. They also appear to have purchased about half the tickets, based on reports from the stores that the top gamblers frequent most.


If Greed Can't Sell Your Lottery, How About Altruism?

What’s the best incentive for playing the lottery? Traditionally, state lotteries have tried appealing to our sense of greed. But Washington state is trying the novel idea of appealing to our altruistic side.


Another No-Lose Lottery

Last week, Michigan’s Save-to-Win program, the sort of “no-lose lottery” we discussed in a two-part podcast, announced its second winner. Charmain Hanners of Alpena Alcona Area Credit Union is this year’s lucky winner of $100,000.


The Price of Regret

How much would you pay to avoid regrets? A new study (gated) by psychologists Niels van de Ven and Marcel Zeelenberg finds that people are willing to forgo direct benefits in order to avoid regrets.


Cracking the Lottery Code

In Wired, Jonah Lehrer profiles Mohan Srivastava, a Toronto statistician who seemingly cracked the scratch-lottery ticket code. “The tic-tac-toe lottery was seriously flawed,” writes Lehrer. “It took a few hours of studying his tickets and some statistical sleuthing, but he discovered a defect in the game: The visible numbers turned out to reveal essential information about the digits hidden under the latex coating. Nothing needed to be scratched off-the ticket could be cracked if you knew the secret code.”


Another Idea for an IRS Lottery

It seems that Freakonomics readers aren’t the only people with lotteries on the brain. In the Harvard Business Review, Steve Martin and Paul Dolan have suggested a different kind of lottery for taxpayers.


Paying Drivers to Not Speed

A number of Freakonomics readers have alerted us to yet another novel lottery idea. As Wired reports, Kevin Richardson won Volkswagen’s Fun Theory contest for his idea.


Another Lottery Idea Worth Considering?

We recently released a two-part podcast about Prize-Linked Savings, which are typically bank accounts or government bonds that shave a bit of interest off the top and pool together that interest to award regular big cash prizes to random account holders. The idea is to offer the thrill of the lottery with the principal-retaining properties of a savings or bond account.


A Lottery for Smart People

Most lotteries are a sucker’s game. But a group of credit unions in Michigan has come up with a lottery that everyone wins. The idea is that each time a customer makes a savings deposit of $25 or more, he or she is entered into a raffle to win $400, plus a chance to win the $100,000 annual jackpot.