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by shokwave
4987 days ago
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Insurance pays out when you lose your job or crash your car; ie, when you get unlucky. Lotteries pay out when your pick of numbers was a better pick than ten million other people; ie, when you get lucky. Economics has repeatedly suggested that the natural logarithm of dollars is an approximation of the utility of money. When you're lucky, you go from 50k to 50m. In logarithms, 10.819 to 17.727. When you're unlucky, you go from 50k to effectively 0. Which is 10.819, to negative infinity - but probably, you'll have enough to live on, so like 1 (0). So you gain almost 7 utility for playing the lottery, but lose more than 10 for not playing the insurance. (The closeness of seven and ten explains why so many uninsured people play the lottery.) |
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