Why We Want To Win the Lottery

We last looked at lottery winners during November.

Now we need an update.

Winning the Lottery

Yesterday, we found out the name of the gentleman that won the November 8th $2.04 billion Powerball jackpot. In addition, the Altadena, California Mobil gas station owner that sold him the ticket got $1 milllion.

The lottery gives economists the ideal opportunity to study whether money elevates our self-reported well-being. They can look at how we adjust to our wealth and then quantify the impact. Their results can affect public policies and personal decisions.

In a 2018 paper, three economists collected data on 3,362 lottery winners in Sweden. Looking at their well-being for 5 to 22 years after the lottery event, the researchers reported that recipients did not squander it nor have a decrease in their well-being. More precisely, they calculated the impact of $100,000 on happiness, overall life satisfaction, financial life satisfaction, and mental health.

These were the results:

Our Bottom Line: Wealth and Happiness

Hearing that money matters, we can form some societal and individual conclusions. As a nation, we can say that elevating people’s income is a valid goal. Then, indiviudally, the Swedish study’s results could validdte the tradeoffs required by the pursuit of wealth.

We should add though that even playing the lottery brings us happiness. The behavioral economics idea of probability neglect explains why we ignore the infinitesimal chance–1 in 292,201,338– of winning. Somewhat irrationally, we pay no attention to the teeny chace of wining because it makes us feel so much better. Meanwhile, in Lecture 6 of Great Courses/Behavioral Economics, we are told that our personal response to an event matters. When a terrorist event becomes more vivid, for example, we imagine more of a probability that it will happen.

Similarly, with the lottery, until we lose, we have such fun imagining life as a billionaire. .And now, we have the confirmation that, contrary to the conventional wisdom, winners do not waste all they won.

My sources and more: While most of today’s discussion was based on this NBER paper, we also referred to this CBS article for the 2022/2023 Powerball facts. Then, this econlife post had some other lottery stories and here, we looked at money and happiness.