On the economics of gambling

There's a saying, the lottery is a tax on the stupid.

I have thought about this and come to a conclusion.

No, no it's not.

The underlying assumption is that you have a reasonable habit, say once a week.

The marginal happiness of having the extra $10 in your bank account is negligible, even non-existent.

But on the off shot that you win a big pay-off, that will significantly impact your happiness.

When office pools come into play, there is an even bigger psychological motivation.

Let's look at insurance, clearly E[X] is less than 100%, otherwise State Farm wouldn't be in business. But no one would tell you that insurance is a stupid tax.

That $10 is psychological insurance. That all your coworkers won't hit the $21 million and leave you all alone. Because that'd suck.