Five myths about the lottery

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George Loewenstein, a professor of behavioral economics at Carnegie Mellon University, has conducted research on the motives that drive people to play the lottery.Get more news about 彩票包网开版,you can vist loto98.com

Lotteries have been with us for most of recorded human history, dating back at least to the Han Dynasty in China, when proceeds may have helped finance the Great Wall. They were also present at the very start of this country, when King James created a lottery to raise money for the new settlement at Jamestown, Va., in 1612. The dream of drawing a lucky number still has an allure: About half of Americans said in a 2016 Gallup poll that they’d bought a state lottery ticket within the past year. Many myths surround these games of chance — and their winners and losers.
It seems intuitive: The higher the potential winnings, the more sense it makes to spend a few dollars to try your luck. Writers in outlets from Forbes have claimed that when the Powerball winnings reach a certain threshold, the expected value - the payout times the probability of winning - exceeds the price of the ticket.

But even aside from the infinitesimally small chance of winning, lotteries with huge jackpots aren’t as good as they look. First, the jackpot is paid out as an annuity, which decreases its net present value; if you choose to take it as a lump sum, you’ll get only about 60 percent of the advertised prize. Second, winners pay serious taxes on their payout (close to 50 percent in total, depending on the state). Finally, with a huge jackpot, so many people are playing that there is a very good chance that more than one winner will have to share the prize: The likelihood of sharing would be about 50 percent for a $500 million jackpot,and it goes up from there. As a result, the expected value of playing actually decreases as jackpots get very large.

Another thing to keep in mind: Powerball and Mega Millions jackpots have gotten much larger in recent years because both lotteries reduced the odds of winning. In 2015, Powerball added more numbers to the drawing, dramatically decreasing the chance of winning the jackpot, from 1 in 175 million to 1 in 292 million. The odds of winning the Mega Million jackpot are even lower: approximately 1 in 302 million. Famously, you’re more likely to experience a wide range of other scenarios, such as being hit by lightning or by an asteroid.
Even knowing the odds, it’s tough to dispel the notion that hitting the jackpot would wipe away money issues. A fifth of Americans believe that winning the lottery is the most practical way for them to accumulate large savings, according to a 2006 survey by the Consumer Federation of America. More recently, a 2019 survey conducted by the investment app Stash found that about 40 percent of respondents, including 59 percent of millennials, think that winning the lottery could be a good way to fund retirement.

But research shows that winning significant prizes is not the ticket to easy street. When a team of economists tracked the fortunes of financially distressed people in Florida who had won the lottery, they found that within three to five years, the winners of big prizes (between $50,000 and $150,000) were equally likely to have filed for bankruptcy as the small winners, and the groups had similarly low savings and levels of debt. According to the National Endowment for Financial Education, about 70% of people who win a lottery or receive a large windfall go bankrupt within a few years.