the eye of Nova's mind

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Although state lotteries, on average, return just 53 cents for every dollar spent on a ticket, people continue to pour money into them — especially low-income people, who spend a larger percentage of their incomes on lottery tickets than do the wealthier segments of society. A new Carnegie Mellon University study sheds light on the reasons why low-income lottery players eagerly invest in a product that provides poor returns.

In the study, published in the July issue of the Journal of Behavioral Decision Making, participants who were made to feel subjectively poor bought nearly twice as many lottery tickets as a comparison group that was made to feel subjectively more affluent. The Carnegie Mellon findings point to poverty's central role in people's decisions to buy lottery tickets.

[...] "State lotteries are popular revenue sources that are unlikely to go away anytime soon," said George Loewenstein, a study co-author and Herbert A. Simon professor of economics and psychology at Carnegie Mellon. "However, it is possible to implement measures that can actually benefit low-income lottery players and lead to fairer outcomes." Loewenstein noted that one such potential method for addressing income inequality, which has shown promise in other countries, is tying lottery tickets to savings accounts.

Americans are spending 55 percent of their disposable income on essentials such as housing, food, health care, energy and debt, up from a low of 48.5 percent in 1999. That leaves less money for entertainment, travel and other discretionary purchases, [Charles Schwab Corp.'s Liz Ann Sonders] said.