62 Comments

If your life has negative utility, and you only defer suicide in the hopes of someday attaining positive utility, it makes sense to play the lottery. You can always kill yourself if you lose.

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Male-to-female ratio. The two great fiction franchises of the Millenials are Harry Potter and Twilight. Choose one.

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I wrote a science fiction story many years ago in which AIs used bits of new information as currency. This means information's value depends on who's buying it. You could determine its value by having the receiver attempt to predict each next bit before receiving it, and charging for twice the number that they predicted incorrectly.

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I would be interested in economist's arguments on positive and negative factors in bitcoin's total utility, especially the tradeoffs of deciding to hold onto bitcoins versus donating to charity or investing in business.

Fractional reserve banking could be possible with bitcoin, but it seems to be disabled by default, and many of the convenience reasons for it are diminished. So instead of buying and selling loans, business is more likely to take the form of selling bitcoins when you have them, in exchange for actual assets/infrastructure designed to help you get more bitcoins.

I have set aside a few bitcoins with the goal of funding cryonics research and practice down the road. Given my belief that bitcoin is valuable/likely to succeed, it makes sense. But if I am wrong, it would be a waste. Is it sensible that I recommend others do the same for their charitable goals?

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Doesn't that turn it into Pascal's Wager though? That's what I perceived Marc Geddes' position to be.

What circumstances make buying lottery tickets rational?

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Money has diminishing returns. Lottery winners generally return to their previous level of happiness months after winning. So not only is the expected value negative, the expected utility would be very negative.

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I like to think of this as passing money to alternate selves in a multiple universe scenario. Think of it. Infinitely many alternate selves will win and infinitely many alternate selves will lose but the losses are too small to be life changing while the winnings are life changing. I think everyone should buy at least one lottery ticket for a large payout in their lifetime.

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I think everyone agrees that it "can be" rational to play the lottery due to the quirks of one's utility function at the moment or even in general: after all, who's to say winning the lottery isn't in some instances a "terminal value."

But the claim wasn't the trivial claim about whether it's possible to be rational and play the lottery but that it is rational, with a few relatively weak constraints. The argument makes it rational for most of us to play the lottery.

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Then you probably are able to report that your life has improved as a result. Presumably, that hope that you will be fabulously rich really "enriches" your life. Then, you're evidence if not proof that I'm wrong: I really ought to buy lottery tickets (even if I could never bring myself to do so).

I find this truly astounding; I think we can safely assume you're not leading us on.

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Yes, it can be rational to play the lottery depending on your utility function. For example, if you have $100k and will be killed by the Mafia unless you pay them $1 million, it could be rational to spend all your money on lottery tickets.

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"To me, ridiculous false hopes are just that, and the justifications are rationalizations."

Yes, TO YOU.

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Kind of -- I'd phrase it as "negative EV is less bad if I don't notice it" (perhaps enough so to change the calculus of whether it's rational or not).

I wouldn't actually play the lottery myself. I just think that whether it is rational or not to do so depends on the specifics of the case and the dispositions and preferences of the individual.

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>Your argument probably implies that you should play the lottery. Do you?

Yes, I now buy a ticket on a regular basis.

Incidentally, a Florida woman just came forward to claim the huge powerball jackpot in the States:

http://edition.cnn.com/2013...

"Gloria Mackenzie, 84, came forward to claim the second-largest U.S. lottery jackpot, more than two weeks after the $590.5 million Powerball drawing on May 18, Florida Lottery officials announced Wednesday. She passed up a payout spread over 30 years for a somewhat smaller one-time lump sum, pocketing $370.9 million before taxes, Lottery Secretary Cynthia O'Connell said."

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They wouldn't have bought anything life changing with those small amounts, for some people the chance to win millions and the excitement/hope that provides is a more valuable commodity than anything else they could've bought with those small amounts of money.

And many will tell you so, but do you believe them? Do you think their lives improve because of this "excitement and hope"? To me, ridiculous false hopes are just that, and the justifications are rationalizations. Lottery gamblers lose more than they admit from this "non-life-changing" drain on their resources: and the life change they hope for would actually neither change their life, nor the hope for it inspire them to anything but passivity.

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Stephen Diamond

"But over an ordinary playing horizon, the outcome will be purely negative: most people will have incurred numerous small losses and no monetary gains."

They wouldn't have bought anything life changing with those small amounts, for some people the chance to win millions and the excitement/hope that provides is a more valuable commodity than anything else they could've bought with those small amounts of money.

" "It almost doesn't feel real. The lottery and penny slots are kind of the sweet spot of risk taking. They're really cheap, really inexpensive to play,but there's a big possible upside." "

It is unreal: conventional economics don't apply. You see this when people go to court to dispute ownership of a winning ticket. As if an "investment" worth 0.0001% of the winnings somehow gives you "clearly" more of a right to ownership of the winnings than an investment of 0.0000% of the winnings.

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But what about the negative expected value? It's important to realize that this only applies after you'd bought a huge number of tickets, which would normally take far longer than an ordinary human lifespan. Therefore, over an ordinary human planning horizon, it doesn't matter.

But over an ordinary playing horizon, the outcome will be purely negative: most people will have incurred numerous small losses and no monetary gains. Distrusting expected- value concepts makes playing the lottery seem even more irrational. (Disregarding small losses is a bias.)

Why do people play the lottery? Decision fatigue plays a big role. Plus, it comes with a government endorsement.

Your argument probably implies that you should play the lottery. Do you?

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