24 PLAYING THE LOTTERY IS NOT AN ECONOMIC STRATEGY

Adam Smith talks of man’s delusions that make him underestimate the chance for loss and over-estimate the opportunity for gain. He offers proof of this by saying, ‘That the chance of gain is naturally over-valued, we may learn from the universal success of lotteries.’ Some things never change!

DEFINING IDEA…

Money never made a fool of anybody: it only shows them up.

~ ELBERT HUBBARD, WRITER, ARTIST AND PHILOSOPHER

Smith writes, ‘The soberest people scarce look upon it as a folly to pay a small sum for the chance of gaining ten or twenty thousand pounds; though they know that even that small sum is perhaps twenty or thirty per cent more than the chance is worth.’ In other words, smart people don’t think of the Lottery as a legitimate use of their capital toward wealth creation.

Considering that 70% of adults play The National Lottery on a regular basis, one can only assume that there aren’t many ‘sober’ people in the UK. According to organisers Camelot, sales of lottery related products total around £100 million a week! Apparently the total yearly sales of National Lottery products are greater than the combined annual sales of UK firms CocaCola®, Warburton Bread, Walkers Crisps, Hovis Bread, Cadbury Dairy Milk, Nescafé, Andrex, Lucozade, Kingsmill Bread and Robinson’s Soft Drinks!

Most people would assume that any horse at odds of a 100:1 was a donkey and wouldn’t warrant any serious consideration as the potential winner. Yet on the faintest whiff of hope millions of people pour their hard-earned cash into the Lottery, which by the organisers’ own admission, has odds of up to 13,983,816:1! With the British Government making £24 for every £1 Camelot achieve in profit, no wonder Lottery tickets are considered by many to be the ‘tax on stupidity’.

However, lotteries have been around a long time. Foolishness or eternal optimism, it’s open to debate. The first signs trace back to the Han Dynasty (between 205 and 187 BC). In Europe, the Roman Empire held lotteries for amusement but it wasn’t until 1434 that the Dutch created the first public lottery and this didn’t reach the UK until 1566. Lottery funding has helped finance everything from the Great Wall of China to the Sydney Opera House.

On the up-side, £25 million is generated for good causes every week. According to Camelot, ‘More than 300,000 individual awards have been made across the UK in the biggest programme of civic regeneration since the 19th Century - that is an average of 103 lottery grants for every single postcode district!’ Smith concludes that, ‘There is not, however, a more certain proposition in mathematics than that the more tickets you adventure upon, the more likely you are to be a loser.’

HERE’S AN IDEA FOR YOU…

Take a few moments to work out just how much you spend on lottery products each week and multiply that average out for a year. Does the figure surprise you? What else could you buy with that money? Consider halving the amount you spend and putting the savings in a piggy bank that can’t be opened. Then you have at least one guaranteed windfall every year.