Dalex64
Dalex64 
Joined: Feb 10, 2013
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June 18th, 2014 at 10:38:38 AM permalink
I don't think you can completely separate the lottery from being a tax issue.

In my state, a certain percentage of the revenue from the lottery has gone towards the educational system. The tax-generated revenue to the educational system is reduced, since their budget is being covered in part from lottery revenue. So, you have shifted the burden of paying for the educational system from an actual tax to a tax replacement, which may be affecting a different portion of the population in various ways.

What has not happened is a bunch of bonus money to education because of lottery revenues. Total educational funding is in fact being reduced, even with lottery income.
DRich
DRich
Joined: Jul 6, 2012
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June 18th, 2014 at 10:45:36 AM permalink
Quote: Deucekies

Good luck finding a casino that'll let you bet $1,296 on the inside, much less $46,656.



The $1296 isn't a problem in Las Vegas, but the $46656 isn't going to happen.
Living longer does not always infer +EV
thecesspit
thecesspit
Joined: Apr 19, 2010
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June 18th, 2014 at 11:22:48 AM permalink
Quote: Face

Of course not. $10,000,000 in that Canadian funny money is like, what, tree fiddy in USD? ;)



Why can't I flag this post as offensive :D
"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829
MangoJ
MangoJ
Joined: Mar 12, 2011
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June 18th, 2014 at 12:06:10 PM permalink
Quote: kubikulann

If the EV argument were to be valid, then there would be no insurance company, as taking an insurance is a negative EV prospect.



Well yes. But taking insurance and playing the lottery are two different things. The first one (insurance) reduces variance on life-changing events. The second one (lottery) increases variance on life-changing events. I cannot see how you would want both at the same time.
ChampagneFireball
ChampagneFireball
Joined: May 2, 2010
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June 18th, 2014 at 12:17:48 PM permalink
Quote: MangoJ

Well yes. But taking insurance and playing the lottery are two different things. The first one (insurance) reduces variance on life-changing events. The second one (lottery) increases variance on life-changing events. I cannot see how you would want both at the same time.



Taking insurance means paying a smaller amount to get paid a larger amount in certain circumstances. Lottery is the same thing. Both are -EV, the circumstances under which they payout and the amount of -EV are the only differences. Both at the same time is perfectly consistent.
MangoJ
MangoJ
Joined: Mar 12, 2011
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June 18th, 2014 at 12:48:13 PM permalink
Sorry, I must disagree.

If your personal utility function is convex, meaning that singular large losses are worse than frequent small losses, you take insurances.
But on the same time, for a convex utility function, you favor frequent small wins over a singular large wins. Hence you would never want to play lottery.

Again, the purpose of insurance is reducing variance (yes, it is a high-variance negative EV bet, but it is anti-correlated to other loss events, which reduces overall variance). On the contrary, playing the lottery (still a high-variance negative EV bet) is not correlated to anything, so it increases your overall variance. With taxes on winnings it is even much worse.
pew
pew
Joined: Oct 6, 2012
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June 18th, 2014 at 1:25:47 PM permalink
Quote: Boz

Maybe a topic for DT but I am not sure why liberals don't complain about the lottery as is a tax on the poor as they are far more likely to play regularly than the average middle class person.

Every time someone comes up with the common sense idea of a national sales tax or such, liberals are up in arms about it being a tax on the so called "poor", never thinking about how much underground money it would get out there to pay down the debt.

Tax the "rich" more is their only answer because already paying more than 50% of your income between state, local and federal is not enough for this crew. Yet not a word about the lottery. And you wonder why liberal is such a dirty word they themselves even had to change it to "progressive"


Progressives are even worse than liberals.
JimRockford
JimRockford
Joined: Apr 17, 2012
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June 18th, 2014 at 1:27:28 PM permalink
Quote: DRich

The $1296 isn't a problem in Las Vegas, but the $46656 isn't going to happen.

The $46,656 wouldn't happen even if the casino allowed it. If I parleyed $1 into $46,656 I'd feel like a damn fool letting ride on a roulette number.
"Truth is ever to be found in the simplicity, and not in the multiplicity and confusion of things." - Isaac Newton
miplet
miplet
Joined: Dec 1, 2009
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June 18th, 2014 at 2:35:37 PM permalink
Quote: thecesspit

Why can't I flag this post as offensive :D


Try this link ;+) No clue if it will work.
“Man Babes” #AxelFabulous
kubikulann
kubikulann
Joined: Jun 28, 2011
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June 18th, 2014 at 4:03:45 PM permalink
Quote: MangoJ

If your personal utility function is convex, meaning that singular large losses are worse than frequent small losses, you take insurances.
But on the same time, for a convex utility function, you favor frequent small wins over a singular large wins. Hence you would never want to play lottery.

Is there any compelling reason why a utility function must be uniformly convex (or concave)?
As I feel it, the $2 or $5 I spend are naught compared with the amount won or repaid. This sort of means that I have a concave stretch around zero, although there is convexity further up and down.

Also, you don't take into account the time effect. The small amount is a regular payment, while the big amount is a one-time job. Would you say that it is equivalent to pay monthly premiums or a one-time lump-sum? Definitely not.
I have never seen a satisfactory model of inter-temporal utility function. Anyway, being multivariate, the notion of convexity is immediately much more complicated - probably irrelevant.

Finally, as I said, non-monetyary events cannot be measured in terms of continuous functions, let alone convex one-variable ones. In the fireinsurance case, for example,, the money repayment is to be combined with the loss of personal objects, souvenirs, maybe a loved one. Does anyone think you can compare this with the lottery case, using monetary utility functions?
Reperiet qui quaesiverit

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