Mar

30

 The MegaMillions Jackpot is now $476 million. The odds of winning the jackpot are about 1:175 million. The odds of breaking even are about 1:74. This is a record jackpot for this game, and close to a record jackpot for any lottery game. The jackpot value is based on an annuity value over about 26 years. The cash value jackpot is "only" about $341 million. Some food for thought:

1) The odds of winning are the same whether the jackpot is $1 million or $1 Trillion. Presumably the odds of sharing the jackpot increase with the size of the jackpot (as more people play), but this is unknowable in advance. Hence at some point, it makes sense for every rational personal to "play" … but what is that point? (I've written about this subject previously.) Is it a jackpot of $500 million or $5 Billion or ???

2) If one structures the purchase inside of a tax exempt foundation, the payout can be tax free.

3) It is unclear to me whether a donation to the US Government (to pay down the deficit) would be tax free, as the Govt isn't a 501c(3) non-profit.

4) At what point does the jackpot stop attracting interest because of the tree-growing-to-the-sky problem? For example, there is some chance that the jackpot could just keep growing and growing and growing. Can the jackpot reach $15 Trillion and be the size of the entire US GDP? Could the Megamillions jackpot become a BLACK HOLE for the economy … sucking all liquidity into it???

5) If you won the jackpot, what would be the first thing that you do? (For me, it's call my Tax Attorney. For other people, it might be to call their Divorce Attorney.)

Just some things to think about …

Leo Jia writes:

People in my city (perhaps across the nation as well) have developed secondary betting systems on lotteries. People buy the official tickets, but instead of waiting for the official win, they bet on the numbers amongst themselves. With those, local groups can have totally separate win/loss chances to themselves. Guess they are tired of the extremely low chance of winning the official lottery. But the secondary systems do make the official lotteries significantly more popular. 


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5 Comments so far

  1. Penn State Clips on March 30, 2012 2:08 pm

    I’m reminded of the old adage that lotteries a tax on people who are bad at math.

  2. Don Chu on March 31, 2012 7:04 pm

    “The Babylon Lottery”
    by Jorge Luis Borges, from The Garden of Forking Paths

    Wiki’s plot summary:
    http://en.wikipedia.org/wiki/The_Lottery_in_Babylon

    The story describes a mythical Babylon in which all activities are dictated by an all-encompassing lottery, a metaphor for the role of chance in one’s life. Initially, the lottery was run as a futuristic lottery would be, with tickets purchased and the winner receiving an unspecified reward. Later, punishments and larger monetary rewards were introduced. Further, participation became mandatory for all but the elite. Finally, it simultaneously became so all-encompassing and so secret some whispered “the Company has never existed, and never will.”

    A further interpretation is that the Lottery and the Company that runs it are actually an allegory of a deity or Zeus. Like the workings of a deity in the eyes of men, the Company that runs the Lottery acts, apparently, at random and through means not known by its subjects, leaving men with two options: to accept it to be all-knowing and all-powerful but mysterious, or to deny its existence. Both theories have supporters in this allegory.

    In many other books, Borges dealt with metaphysical questions about the meaning of life and the possible existence of higher authorities, and also presented this same paradoxical vision of a world that may be run by a good and wise deity but seems to lack any discernible meaning. This view may also be considered present in The Library of Babel, another Borges story.

    Borges makes a brief reference to Franz Kafka as Qaphqa, the legendary Latrine where spies of the Company leave information.

    The magnificent beginning to the story:

    The Babylon Lottery
    Jorge Luis Borges

    Like all men in Babylon I have been a proconsul; like all, a slave; I have also known omnipotence, opprobrium, jail. Look: the index finger of my right hand is missing. Look again: through this rent in my cape you can see a ruddy tatoo on my belly. It is the second symbol, Beth. This letter, on nights of full moon, gives me power over men whose mark is Ghimel; but it also subordinates me to those marked Aleph, who on moonless nights owe obedience to those marked Ghimel. In a cellar at dawn, I have severed the jugular vein of sacred bulls against a black rock. During one lunar year, I have been declared invisible: I shrieked and was not heard, I stole my bread and was not decapitated. I have known what the Greeks did not: uncertainty. In a bronze chamber, faced with the silent handkerchief of a strangler, hope has been faithful to me; in the river of delights, panic has not failed me. Heraclitus of Pontica admiringly relates that Pythagoras recalled having been Pyrrho, and before that Euphorbus, and before that some other mortal. In order to recall analogous vicissitudes I do not need to have recourse to death, nor even to imposture.

    I owe this almost atrocious variety to an institution which other republics know nothing about, or which operates among them imperfectly and in secret: the lottery.

    The prizes and forfeits of the Babylon Lottery … and their frightful escalations:

    My father related that anciently - a matter of centuries; of years? - the lottery in Babylon was a game of plebeian character. He said (I do not know with what degree of truth) that barbers gave rectangular bits of bone or decorated parchment in exchange for copper coins. A drawing of the lottery was held in the middle of the day: the winners received, without further corroboration from chance, silverminted coins. The procedure, as you see, was elemental.

    Naturally, these “lotteries” failed. Their moral virtue was nil. They did not appeal to all the faculties of men: only to their hope. In the face of public indifference, the merchants who established these venal lotteries began to lose money. Someone attempted to introduce a slight reform: the interpolation of a certain small number of adverse outcomes among the favored numbers. By means of this reform, the purchasers of numbered rectangles stood the double chance of winning a sum or of paying a fine often considerable in size. This slight danger - for each thirty favored numbers there would be one adverse number - awoke, as was only natural, the public’s interest. The Babylonians gave themselves up to the game. Anyone who did not acquire lots was looked upon as pusillanimous, mean-spirited. In time, this disdain multiplied. The person who did not play was despised, but the losers who paid the fine were also scorned. The Company (thus it began to be known at that time) was forced to take measures to protect the winners, who could not collect their prizes unless nearly the entire amount of the fines was already collected. The Company brought suit against the losers: the judge condemned them to pay the original fine plus costs or to spend a number of days in jail. Every loser chose jail, so as to defraud the Company. It was from this initial bravado of a few men that the all-powerful position of the Company - its ecclesiastical, metaphysical strength - was derived.

    And the ominous rise to malevolent omnipotence, dark secrecy and purposed misdirection of the lottery Company (much like latter-day monolithic ecclesiastical Church institutions, or perhaps, modern Central Banks):

    But it must be recalled that the individuals of the Company were (and are) all-powerful and astute as well. In many cases, the knowledge that certain joys were the simple doing of chance might have detracted from their exellence; to avoid this inconvenience the Company’s agents made use of suggestion and magic. Their moves, their management, were secret. In the investigation of people’s intimate hopes and intimate terrors, they made use of astrologers and spies. There were certain stone lions, there was a sacred privy called Qaphqa, there were fissures in a dusty aqueduct which, according to general opinion, lead to the Company; malign or benevolent people deposited accusations in these cracks. These denunciations were incorporated into an alphabetical archive of variable veracity.

    Incredibly enough, there were still complaints. The Company, with its habitual discretion, did not reply directly. It preferred to scribble a brief argument - which now figures among sacred scriptures - in the debris of a mask factory. That doctrinal piece of literature observed that the lottery is an interpolation of chance into the order of the world and that to accept errors is not to contradict fate but merely to corroborate it. It also observed that those lions and that sacred recipient, though not unauthorized by the Company (which did not renounce the right to consult them), functioned without official guaranty.

    And Chance and Error, thus legitimized, embeds itself with all its distortions:

    Under the beneficent influence of the Company, our customs have become thoroughly impregnated with chance. The buyer of a dozen amphoras of Damascus wine will not be surprised if one of them contains a talisman or a viper. The scribe who draws up a contract scarcely ever fails to introduce some erroneous datum; I myself, in making this hasty declaration, have falsified or invented some grandeur, some atrocity; perhaps, too, a certain mysterious monotony . . .

    Our historians, the most discerning in the world, have invented a method for correcting chance. It is well known that the operations of this method are (in general) trustworthy; although, naturally, they are not divulged without a measure of deceit. In any case, there is nothing so contaminated with fiction as the history of the Company . . .

    A paleographic document, unearthed in a temple, may well be the work of yesterday’s drawing or that of one lasting a century. No book is ever published without some variant in each copy. Scribes take a secret oath to omit, interpolate, vary.

    The Company, with divine modesty, eludes all publicity. Its agents, as is only natural, are secret. The orders which it is continually sending out do not differ from those lavishly issued by imposters. Besides, who can ever boast of being a mere imposter? The inebriate who improvises an absurd mandate, the dreamer who suddenly awakes to choke the woman who lies at his side to death, do they not both, perhaps, carry out a secret decision by the Company? This silent functioning, comparable to that of God, gives rise to all manner of conjectures. One of them, for instance, abominably insinuates that the Company is eternal and that it will last until the last night of the world, when the last god annihilates the cosmos. Still another conjecture declares that the Company is omnipotent, but that it exerts its influence only in the most minute matters: in a bird’s cry, in the shades of rust and the hues of dust, in the cat naps of dawn. There is one conjecture, spoken from the mouths of masked heresiarchs, to the effect that the Company has never existed and never will. A conjecture no less vile argues that it is indifferently inconsequential to affirm or deny the reality of the shadowy corporation, because Babylon is nothing but an infinite game of chance.

    http://evans-experientialism.freewebspace.com/borges02.htm

    [Kafka as Qaphqa, the legendary Latrine, is hilarious; and just one of the many offhand Intertextual references Borges embeds in his stories with his ’sly distortions’ of historical writings and their authors. Borges, after all, is the foremost disciple of “Worlds within Worlds” literature in the tradition of Cervantes and the Don Quixote.]

  3. Sam GIlbert on April 2, 2012 10:37 pm

    Leo Jia, can you elaborate a bit on the lottery side games you allude to? Thanks!

  4. Acetrader on April 3, 2012 11:54 am

    RE Penn State Clips on March 30, 2012 2:08 pm
    I’m reminded of the old adage that lotteries a tax on people who are bad at math.

    true…but what is also true is that someone does win…my co workers brother won 20mm 15 years ago….why him? why not me? buy a ticket and see….

  5. douglas roberts dimick on April 6, 2012 7:40 pm

    Albeit entertainment value of the lottery, if the level of public attention and intensity of government sanction as apparent here with state sanctioned gambling was redirected to economic productivity, our country would be ensuring more favorable odds in the geopolitical game of global economics.

    dr

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