Lottery Myths

Do a search for "lottery myths" and you'll see a lot of lousy information. One article mentions "lottery myths don't do much harm", when in fact I'd argue they cost people hundreds of millions--maybe billions--of dollars a year. When fallacies are the commonplace wisdom use to make economic decisions, those decisions have a real-world impact on their pocketbook. So exploding lottery myths is important.

No less is information posted on the Public Gaming Research Institute or PGRI website by its CEO & Chairman, Duane V. Burke. The content appears to be a transcript of an appearance before Congress by Mr. Burke. Labeled "10 Lottery Myths", this page suggests common sense complaints against the lottery are false and anyone who warns people about playing lotto games are misinformed and illogical. This takes a lot of gall, but I suppose Duane Burke is playing his roll to the hilt. Anyway, I want to challenge this attempt to "debunk" a few of these so-called lottery tall tales.

Smart Enough to Avoid the Weather

Lottery Myths and FalsehoodsThe #1 myth is that you're more likely to get struck by lightning than win the lottery. This is a pretty silly argument either way, but it's a perfect chance to examine PGRI's sophistry and spin. The statement is "more likely to get struck by lightning than win the lottery", but the argument is that more people win over a million dollars on the lottery a year than "are killed by lightning". According to the National Weather Service, only 10% of the people struck by lightning are killed by the experience. The rest suffer nerve damage, memory loss, or even personality changes, since the effect messes up all kinds of bio-electric signals in the human body. Mr. Burke is twisting people's words to support his statistics, citing a physics professor who did the same.

I'll admit that the number of people winning over a million dollars is still over a thousand, while if you add in the 90-some-odd people killed by lightning and the 10 times more people injured by the experienced, it still reaching around only 900 people a year. (Though I think these numbers are pretty far off, since the NWS guesses about half that number--though many cases of lightning strikes go unreported.) Of course, that's still a false premise, since people are actively seeking to win the lottery, while most people are actively trying to avoid lighting.

The current odds of winning the Powerball lottery is 1 in 195,249,053, while the current odds of winning the Mega Millions lottery is 1 in 175,711,536. Once again, the National Weather Service calculates the odds of being struck by lightning as 1 in 1,000,000. The NWS suggests that many strikes are never recorded, so their estimated calculation (factoring in unreported cases) is around 1 in 750,000. Since just about case of a person winning the lottery is reported and usually advertised, I think we get an accurate lottery number. The fact is, billions of lottery tickets get sold a year and billions of them are losers. If as many people went outside in a lightning storm, the number of strikes would be staggering. Luckily, most people are smart enough to get in out of the weather. The dangers of the lottery are more subtle.

The Lottery Is a Tax on the Poor

People often say the lottery is a "tax on the poor", "a tax on people who can't do math", or even more starkly "a tax on fools". The lobbyist for the lottery industry gives a quick definition of what taxes are (a "compulsory payment to support government"), as if we need someone to tell us the definition of taxes. Then he goes on to mention the lottery is voluntary, as if we don't know that, either. This entirely misses the point of the quoted sayings about the lottery, which I'm guessing is the point. The lottery lures people into spending more money than they should on the hope they can get rich, when the odds of winning are so low that it's like you're handing your hard-earned money to the government for revenue purposes.

Let's leave the long odds out of the argument for a second. Plenty of casino games have progressive jackpots that are hard to win, but draws in lots of gamblers willing to take the risk. But if you go to a casino, people playing blackjack or video poker tend to get payback percentages around 99%. That is, for every $100 you wager, you can expect (on average) to get back around 99%. Craps might be around 97%, while roulette might be closer to 97% to 95%, depending on the type of roulette you play. Those slot machines I mentioned early are considered bad odds by gamblers because they often pay around 93%, though those number might dip into the 80% sometimes.

So what is the expected payback on the most state lotteries? The expected return on your investment is somewhere around 50% to 60%. For every $100 you put into the game over the course of your lifetime, the average person might expect to see around $55 returned to them...on average. Since a few lucky souls get paid out a huge return on their investment, just imagine what the expected return for everyone else.

The Lottery Targets Poor People

PGRI also says people's claim that the lottery is a tax on people who can't afford to play is a myth. The charge is that lotteries target people at the low end of the economic spectrum. Duane Burke answers this charge by saying, "what fiscally responsible company would focus its best marketing efforts on people who canít afford to buy the product?"

Once again, the PGRI's CEO is twisting words. The phrase he used was "least afford", while he suggested lower income people "can't afford" the lottery. He points to the fact that people with middle class incomes pay more money into the lottery than those in the lower income brackets, but his own numbers belie his main claim: that they don't focus marketing to low income lottery players, because they couldn't afford to play anyway. The lottery is cheap enough most anyone can play, but the salient point is whether people bringing in $200 or $300 a week should be spending 10% or 20% of their income on scratch-offs, pull tabs, and big lottery tickets.

The underlying truth of the matter is the lottery sells hope. When you buy a lottery ticket, you are buying into the hope that one single decisions changes your whole life. That is going to appeal to people from all economic classes, but to deny it's going to appeal more to people with the least income borders is dishonest.

Real Lottery Myths

Anyway, I wanted to familiarize those interested in the kind of propaganda advocates of the state lotteries (who stand to gain big money for their advocacy) use. But let's take a look at a few of the real lottery myths out there.

Lottery Myth #1 - Numbers Are Due

No matter how long it's been since a number came up in a lottery drawing, it is no more or less likely to hit than any other number in the drawing. Each and every drawing is totally separate from all other drawings. If a ball didn't come up last time, that doesn't somehow make it more likely this time to be drawn. The lottery drawing just doesn't work that way.

Lottery Myth #2 - Lucky Numbers Exist

The flip side of the previous argument is that certain number are luckier than other, perhaps because they've been drawn more often than any others in the history of a lottery. Unless you can show me a mechanical reason on lottery ball comes up more often than others, I don't accept that statement and neither should you. No number is innately any more fortunate than another.

Lottery Myth #3 - Lucky Stores Exist

A similar lotto myth to the previous fallacy is the idea that some stores are luckier than others. Some people are known to find the stores that sold the last winning ticket and buy tickets from that location, as if it's going to happen again. Again, who sales the winning lottery ticket is entirely random.

Lottery Myth #4 - Lucky People Have Better Odds

Any person buying a ticket has the same chance of winning as anyone else holding one ticket. Plenty of people who you would consider lucky have bought plenty of tickets and still never won the lottery. You have the same lousy chance of hitting the jackpot as everyone else. Take that as good news or bad news--however you prefer.

Lottery Myth #5 - Buy Tickets Right Before the Deadline

Perhaps the craziest idea is that the winning numbers are more likely to come up in the minutes and seconds before lottery sales close. I'm not sure why anyone would suggest this is the case, but you should be able to deduce this one yourself. It's absurd at face value.

Lottery Myths Explained

You'll read a lot of incorrect information about the lottery online, usually from people trying to make a buck off the lottery. If they can sell people hope, people will keep coming back time and time again. Playing the lottery can be fun and I've done it myself, but you have to be smart about things and avoid the pitfalls. Limit your spending and you should be okay. That's one thing Mr. Burke is right about: you don't have to spend crazy amounts of money on the lottery, so set a bankroll and limit your lottery budget.