[dpark]

> the poor who are least well equipped to understand

Is there some actual evidence that poor people are under the impression that they have a meaningful chance of winning significant money the lottery?

I see this line a lot and it’s extremely patronizing. I’m not even pro lottery but this “poor people are too dumb to understand” does not strike me as a sound argument.

[dfxm12]

This article looks at lotto sales. I understand it doesn't address the assertions brought up about why people buy tickets, but maybe it still interesting in the context of this conversation.

https://archive.is/kY7U6

[dpark]

For sure, lottery revenues are disproportionately drawn from the poorest.

[gottorf]

It's more that poor people have worse impulse control and higher time preference[0], which contribute to the behavioral outcome of spending money on lottery tickets despite the EV being negative.

[0]: If we're splitting hairs, we should specify that having poor impulse control and higher time preference are the base causational factors that make it more likely for someone to be poor, buy lottery tickets, engage in criminality, etc. etc.

[dpark]

Sorry, is there evidence for this?

I don’t have any trouble believing that there is some slice of poor people that this is true about. But I kind of doubt that holds in general.

[gottorf]

Are we disagreeing about the definition of "poor people"? I'm not sure why someone would find it so hard to believe that the poor, especially the long-term poor, have character traits that are not conducive to lifting themselves out of poverty.

On that same vein, there is no particular evidence needed to convince someone that people who share the characteristics with me of not being very tall or particularly athletic have a terribly poor chance of making it in the NBA.

But here is one study[0] which found, interestingly, that although a higher time preference (that is, preferring the present over the future) is correlated as expected with wealth, it is not significantly correlated with current income. Put another way: in the modern world where opportunities are varied, anyone, even people with poor impulse control and high time preference, could earn high incomes, but you only become wealthy (i.e. escape poverty) over time through putting aside some of that income to save and invest.

Back to the American setting, "heavy hitters" of the lottery spend about $2500/yr[1]. If you instead put $200/mo into the S&P 500 over ten years, you'd be sitting on over $55k. Time under the curve matters greatly. The same personality traits that make someone prefer buying scratchers instead of investing for their future are the ones that keep them poor. I would have thought this to be self-evident.

[0]: https://pmc.ncbi.nlm.nih.gov/articles/PMC7392281/

[1]: https://elmwealth.com/lottery-fallacy/

[dpark]

> I'm not sure why someone would find it so hard to believe that the poor, especially the long-term poor, have character traits that are not conducive to lifting themselves out of poverty.

This is real close to just “poor people deserve to be poor”.

> On that same vein, there is no particular evidence needed to convince someone that people who share the characteristics with me of not being very tall or particularly athletic have a terribly poor chance of making it in the NBA.

Ah, but here you’re talking about physical traits. What physical traits make someone poor?

We don’t say everyone who fails to make it to the NBA fails because they are lazy.

> Back to the American setting, "heavy hitters" of the lottery spend about $2500/yr

I only skimmed the article, but this seems to all be made up. They say “we estimate” multiple times with no clarity on how they make these estimations. None of their estimations seem to even matter to their thesis that buying lottery tickets is a poor financial strategy, which is maybe why they don’t put much rigor into their estimates.

The economist adults says adults in the poorest zip codes spend an average of $600 on lottery tickets. I don’t know know that balances out to households nor whether it’s 90% spending $667 or 25% spending $2400 each.

https://archive.is/kY7U6

Your investment math also seems pretty far off. Those numbers appear to assume a 15% return from the S&P 500, a number I’ve never heard a financial advisor recommend.

> The same personality traits that make someone prefer buying scratchers instead of investing for their future are the ones that keep them poor. I would have thought this to be self-evident.

Interestingly there are a number of other “self evident” causes of poverty depending on who you ask.

Lottery tickets being disproportionately purchased by poor people also does not mean all poor people buy lottery tickets. If that article you quote is reasonably correct and the poor ticket-buying household is spending 2500 on tickets, that means there are a lot of poor non-ticket-buying households in order for the numbers to work out. Why are those people poor?

[gottorf]

> This is real close to just “poor people deserve to be poor”

No, I'm saying that there are reasons why some people stay poor. My further implication is that it isn't for the most part because society is keeping them down.

> Your investment math also seems pretty far off. Those numbers appear to assume a 15% return from the S&P 500, a number I’ve never heard a financial advisor recommend.

It was based on an initial $100 investment followed by a monthly $200 investment into the S&P 500 (as an alternative destination for the $2500/year claimed by that study that some high spenders put that much into the lottery) applied over the actual past 10 years of performance[0].

Prudent financial advisors would of course tell you not to count on 15% CAGR forever, but my example was based on real results that anyone could have obtained by consistently buying boring index funds instead of lottery tickets! There's no trickery here.

> that means there are a lot of poor non-ticket-buying households in order for the numbers to work out. Why are those people poor?

In discussions about the poor, we all should distinguish between those who happen to be poor at any given moment, and those who are poor their whole lives, or even over generations. My comments about the character traits of the poor only apply to the latter.

[0]: https://testfol.io/

[dpark]

> My further implication is that it isn't for the most part because society is keeping them down.

There are many reasons why the poor tend to stay poor. For the most part, society does not actively “keep them down” but we are certainly structured in a way that makes it hard for impoverished individuals to climb up. The notion of saving money is foreign when you can’t even pay all of your bills.

The retreat to lottery tickets is an escape, not an investment strategy. And as already pointed out, while lottery revenues are disproportionately drawn from the poor, this does not mean all poor people are buying lottery tickets. Someone poor buying 2500/year of lottery tickets is not the norm.

> my example was based on real results

Fair. I didn’t realize you were actually using the actual last 10 years of the S&P500.

> My comments about the character traits of the poor only apply to the latter.

And I argue that this is reductionist. No different than someone who insists that the poor are only poor because the man is keeping them down. It is a multifaceted problem.

[SoftTalker]

Not too dumb, but badly educated about money (part of why they stay poor) and probabilities.

[dpark]

Poor people stay poor because it’s really hard to climb out of poverty. It’s a function of opportunity, culture, society, and a lot more stuff. Education is a factor but I am doubtful it’s the primary one, and even where it is a major factor, it’s probably more general education than specifically about money.

I feel like the “poor people don’t understand money” line of thought comes from the same people who insist that avocado toast and lattes are why millennials can’t afford housing.

[gottorf]

> it’s really hard to climb out of poverty. It’s a function of opportunity, culture, society, and a lot more stuff

I agree with you, but perhaps from the other direction. I think American society in particular gives an amazing amount of opportunity for people to climb out of poverty, or at least we used to, before we started "replacing what works with what sounded good". But we still do, for the most part.

Most of the cultural and social factors that prevent someone from lifting themselves up are self-imposed by those individual cultures and societies, and as of late, it's become verboten to call them out on it. There exist subgroups in this country where you'd indeed have to be a truly remarkable individual to claw yourself out of it into wealth. However, it doesn't have to be that way; that's a choice society made, on what grounds exactly I'm not sure, but the choice was made nevertheless.

[dpark]

> I think American society in particular gives an amazing amount of opportunity for people to climb out of poverty, or at least we used to

I agree that we are better than many places for this, but also much worse than we could be.

> Most of the cultural and social factors that prevent someone from lifting themselves up are self-imposed by those individual cultures and societies

I agree with this. There are huge social and cultural aspects of poverty.